It’s happening! Healthcare needs to shift into cost optimization mode with the upcoming tariffs and all the issues that we see with inflated costs and perhaps resiliency issues that may occur. Let’s face it, it is better to be proactive and start strategically planning all the steps that you hope you may not have to fully implement but more than likely will. The good news is that there are still savings beyond price that have just been sitting there and are ready for you to go after. This will be perfect for you to offset the major increases that will hit your organization’s bottom line.
“A Savings Initiative with No Plan Is a Plan for Little or No Savings”
The above adage holds true both on a single savings project and an organization-wide cost optimization. You will not save as much as you want without some form of strategic plan in place. I always say that the first thing you should do when you start a new savings initiative is to plan out everything that needs to be done from start to finish so you know where you are going and what needs to be done. Will you have all the answers up front? No, but you will have a working plan that you can share with your C-Suite and Clinical Leaders that will help them understand the unique cost optimization program that you are trying to implement.
If I were in your shoes right now, I would begin mind mapping out all of my answers to these bullets to have the systems, methods, and dynamics in place to successfully optimize my organization’s costs to meet the upcoming budget shortfalls due to tariffs and other market conditions.
Cost Optimization Plan
- Setting Your Goals and Objectives – Knowing how much you need to save is crucially important, so you will need to find this out from your CFO so that you can start to fill the gaps with major and minor savings opportunity projects. If you must save $2 million more this year, then you will need to have at least $3 million in the hopper to be analyzed. Why 33% more in the hopper? Because you may find viable savings opportunities (stay tuned for how and where) but sometimes timing and organization dynamics don’t necessarily allow the timing of implementation to align with your goals. The savings may be there, but you may have to wait 6 or 12 months to fully attain a project’s savings. It happens every day, so you will need more than the goal amount in your hopper.
- Pinpoint Your Scope – You are going to need to know exactly what is in scope and what is not in scope. Is your scope going to be all supplies and purchased services? Does it include capital reviews before spending to identify wasted dollars before purchase? Everyone is for savings until the initiative arrives at their department and then a battle ensues. Identify sacred cows up front so that you don’t waste time working on a project that may never happen. Remember, you can swing back to these if you need more savings.
- Designing/Upgrading Your Cost Optimization Process – This is not just your VA process that you have in place because if it was viably optimizing costs then you wouldn’t be in this position. Take a step back and look at how VA fits in and use it accordingly. You will need to develop a workflow of what happens when you have a savings initiative. This is not just finding a lower priced product – there is much more to this than meets the eye. We are talking about wringing the towel dry while staying within GPO contracting formulary while meeting functional requirements with reliable/quality alternatives that will gain big savings.
- Getting Your Team Ready – Your Supply Chain Team needs to be ready and trained to support these new initiatives with advanced strategies to be able to coach and support your cost optimization initiatives. Plus, this will help them believe that there truly are major savings opportunities beyond price which is normally all they see.
- Getting Your Organization Ready – Don’t ignore the rest of your organization, especially the department heads and managers who sit on your VA and Cost Optimization Teams. They need advanced training so that they understand that getting the next level of savings is not just about supply chain finding a better price.
- Developing Reporting Tools – You are going to need new tools to find savings beyond price which will come in the form of benchmarking, utilization and consumption management. The savings need to come to you and your team, which is why these tools are vitally important to the success of your cost optimization program. When you marry PO and inventory data to patient volume centric metrics and then report out with them, it will show you amazing savings opportunities you never realized were there.
If you plan out your cost optimization program proactively and start to implement it, you can get ahead of the need to find new savings when most organizations are behind the eight-ball. Plus, this does not need to be a one-time event but an ongoing process to optimize the products and services within your contract formulary to bring major savings. Start planning and saving now!
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Cost Optimization Training is More Important Than Finding Major Savings Opportunities
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