“If you are tracking operational and price benchmarks but not clinical supply utilization, you are leaving major dollars on the table.”
Benchmarking is a fine art and science, especially when you apply it to the very complex world of the healthcare supply chain. Benchmarking is one of those tools that can tell you where you stand whether it be for optimizing performance, costs, or quality. Benchmarking should be an ongoing process that you maintain on an ongoing basis, not just when you think you need it. If done correctly and often, you can find major savings and quality improvements within your operations that you will never have found otherwise. When done extensively, benchmarking is the X-Factor in taking your savings and quality improvements to a whole new level.
Benchmarking is the Search for Best Practices
Let’s get one thing straight, benchmarking is not just comparing one organization to another or one product category to another. It is about finding the best practice organization(s) and emulating their attributes to make your own organization a best practice. This is why I call benchmarking an art and science as you are not going to find any hospital or health system that is exactly like one another, but you can find hospitals and health systems that have very similar characteristics and operating statistics. Finding those best practices can be challenging, but keep in mind that hospitals often do similar types of work. If you can identify similar characteristics and levels of intensity, you can group hospitals with similar workloads and compare their benchmarks across all categories of spending.
Benchmarking Takes the Guess Work Out of Supply Optimization
Without benchmarking, many healthcare organizations are flying blind because they cannot gauge their product/service categories. In today’s healthcare supply chain, we need to know with certainty if there are savings, quality, or performance improvements that need to happen, and if so, what are the end results after changes are made? The benchmarking types below are those areas you need to master and track on an ongoing basis.
Benchmarking for Price (1% to 3% of Total Supply Savings) – The never-ending search for the best price is the top area of benchmarking that most organizations search for. There is an advantage to knowing whether you currently have the best price or can achieve the best price on a product, service, or technology that you want to push forward. In essence, organizations may standardize their contracts and commit to set volumes, but there are so many variables within those contracts that it can be difficult to know whether you are truly optimized without benchmarking.
Clinical Supply Utilization Benchmarking (5% to 10% in Total Budget Savings) – This is the area that most organizations are reluctant to go because it is not as cut and dry as gaining the best price. This is understandable, but it does not do anyone any good by ignoring this. Remember, once you attain the best price, you can still have feature-rich products, so no matter how good your price is you will still have higher costs. You can consume more product than your peers which means you have waste or inefficiencies that need to be optimized. You can have value mismatches that require lower-cost alternatives or eliminate the product’s use all together. There are many reasons beyond the almighty price that can drive your costs higher in any given product or service category. You need to know where these are happening on an ongoing basis. Remember, use patient volume centric metrics for your product and service categories and you will win the benchmarking game every time!
Operational Benchmarking (2% to 7% Total Savings) – Some organizations run much higher in products, services, and human resources. Many of these areas are external services but they can be compared to internally run operations as well. One popular area is Food and Nutrition, which many health systems outsource. You most certainly need to be constantly benchmarking yourself and against other health systems in this area. Food costs alone have skyrocketed and thus you need to keep your finger on the pulse of those increases as well as your benchmark peers and/or system level benchmarks to constantly gauge where you should be. One thing I have always learned is that if you leave cost management up to a vendor, all costs will inevitably favor that vendor, not your organization. The only way to stop that from happening is to continually benchmark your costs in all services and operational areas.
Covering One or Two Bases is Good, but Covering Them All Is Best Practice
There are many healthcare systems that benchmark perhaps one or two of these areas that I have outlined and then sit back and say, “We benchmark!” If you are tracking operational benchmarks and price benchmarks but are leaving off Clinical Supply Utilization/Consumption benchmarks, you are leaving major dollars on the table. You can attest that you are at least doing some benchmarking, but the point here is that you need to be covering all your bases, not just one or two.
The Bottom Line is Simple: Benchmarking Isn’t a One-Time Event, It’s an Advanced Discipline
The organizations capturing the full 8% to 20% in combined savings across price, clinical utilization, and operations aren’t the ones with better luck or bigger budgets. They’re the ones who committed to benchmarking as an ongoing practice rather than a box to check. If you’re only tracking price, you’re leaving the largest opportunity, clinical supply utilization, completely untouched. Don’t wait for a budget crisis or a board mandate to start. Pick one category you haven’t benchmarked yet, pull your data, find your best-practice peers, and start closing the gap this quarter. The savings are sitting there right now, waiting for someone to go find them.
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