December 19

The Growing Importance of Savings Validation


“By having an organization-wide savings validation program in place, you will not only find any savings that fail to materialize but you will also find areas that you have saved on.”

Let’s face it, every dollar of savings is needed for healthcare organizations to have healthy bottom lines to continue to improve the levels of care and positive outcomes. You have to take care of your biggest assets at any organization and that is your staff with competitive salaries for new hires, raises, and bonuses for current staff members. Lastly, you need to be able to invest in new technologies and build new service lines to remain competitive in this healthcare marketplace and that is only done with solid funding.

Now most healthcare organizations are non-profit around the country, but they do still need to have a healthy and profitable bottom line. They reinvest those dollars back into their organizations as well as hold some in reserve for tough times. When working on a savings opportunity and getting it implemented with the associated documented savings, it is important to have a solid follow up mechanism in place to ensure that those dollars are hitting your bottom line. Imagine doing all this work on savings and reporting them out to your Chief Financial Officer only to have them disappear altogether. This cannot happen in 2024 and beyond! Below are some ways that you can build a Savings Validation Program for yourself.

How to Build a Savings Validation Program

1. Let Software Do the Heavy Lifting – There is a lot of leg work that goes into any savings whether it be contract, standardization, value analysis, or utilization optimization. There is the initial challenge to find the savings, prove they are real, and then get the savings solution implemented. But Supply Chain must move on to the next savings opportunity and does not have the time to re-crunch the number every 60, 90, or 180 days after the fact. The solution is simple, let database driven software do the heavy lifting for you.

2. Have the Project Lead Report Back – This is not ideal, but I would highly recommend that you at minimum have the project lead report back on the savings that were implemented. For example, they could report back to you 120 days after implementation. You might experience a bit of kicking and screaming to get those project leads to start the validation reporting. Once they start to get into the flow of reporting this out then it will just be part of your process, and you will have savings validation in place.

3. Use Your Key Performance/Benchmarking System to Alert You – We do this quite often with clients when a new savings is made. We basically calculate what the cost per metric reduction is and then reduce their Key Performance Indicator/Benchmark accordingly. If the category of spending goes into the red, then you will know that the savings implemented went sideways. But you will also know if it is in the black and you will know exactly how much in the black to report back.

How Savings Validation Can Benefit Your Bottom Line

There could be more ways to track savings validation but the bottom line is that we need to have some form of after-the-fact tracking in place to ensure that you are not losing major dollars by just not looking after the final steps in a project which is short and long-term follow up. By having an organization-wide savings validation program in place, you will not only find any savings that fail to materialize but you will also find areas that you have saved on. In working with organizations on Savings Validator Systems, we have found that 46% to 64% of all savings estimates are not correct and thus need to be followed up on to ascertain exactly which way it is going for you.

This all sounds like a lot of re-work that would need to be done, but it really isn’t. If you find something that went sideways or not as planned when you implemented, you simply have to go back and revisit the implantation plan and perhaps make small adjustments. There are so many changes that go on that need to be looked after. This will be a whole new level of savings you never realized was there before. Go get it!

Below are some similar articles that you may find interesting.

Crucial Benefits of Having Your Own Automated Clinical Supply Utilization Benchmarking System

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Podcast 85 – When is the Right Time to Evaluate a Major Product or Service Category?

Request Demo of SVAH’s Value Analysis and Utilization Tools


benchmarking, healthcare supply chain, Healthcare Value Analysis, hospital supply chain, Hospital Value Analysis, savings program, savings validation, software

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