We would all like a crystal ball to predict the most important trends shaping healthcare supply chain expense management for planning purposes. As an observer of trends in our supply chain community I thought I would share the three trends I’m watching that could impact how you do business in the future as follows:
1. GPO and Local Contract Savings Are Shrinking: What has been the “primary” non-salary savings source for healthcare organizations for decades is running out of steam. Based on empirical evidence, hospitals, systems, and IDNs are saving, on average, one percent (supply chain expense budget/annual contract savings) overall on their new and renewal GPO and local contract savings in any given year. Frequently, we have been told by our clients that new or renewal GPO and local contracts are generating no savings at all. In fact, we are hearing that new or renewal GPO and local contracts are costing more than their previous contracts for the same commodities. And changing GPOs isn’t going to change this dynamic.
2. Value Analysis Teams Are Not Focused on Saving Money: Although the stated purpose of value analysis teams is to save money, the majority of VA teams today are only concentrating their efforts on vetting new and renewal GPO contracts and new product, service, or technology requests. To prove this theorem, if you would add up the added cost of new requests and contracts approved by your VA teams annually and then subtract any new savings generated for the same period, you would find that your VA teams aren’t saving any money at all. In fact, they are costing you money!
3. Lack of Interest in Savings Beyond Price™ Opportunities: I see little interest by supply chain leaders in attacking their Savings Beyond Price™ (wasteful and inefficient consumption, misuse, misapplication, and value mismatches in their supply streams) which represent 7% to 15% in new supply expense savings for any and all healthcare organizations.
The trends I outlined above are important in that they are pointing to areas of improvement in supply chain expense planning in the future. We still see savings opportunities in GPO contracts, value analysis team performance, and Savings Beyond Price™ sources that haven’t been tapped into yet by most healthcare organizations. The first step is to reimagine your savings sources by focusing on cost optimization in your GPO, value analysis, and Savings Beyond Price™ strategies.
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