December 13

The Vital Importance of Controlling Your Hospital’s Supply Chain Expenses


Everyone is into saving money, which is one of the prime objectives of supply chain management. However, a supply chain professional’s job shouldn’t end there. It is equally important to control your hospital’s supply chain expenses or all of your savings gains can be swept away, almost overnight, by waste and inefficiency in your supply streams.

Just think about this for a moment. You have just obtained a great price on pacemakers, but your surgeons continue to implant high-end pacemakers that aren’t medically indicated. This one inefficiency in your pacemaker supply stream could increase your pacemaker cost by as much as 23%. Do you see why it is equally important to control this utilization misalignment before it damages your healthcare organization’s bottom line?

If I had to pick the biggest challenge hospital supply chain professionals are facing today, it would be controlling (i.e., verifying, monitoring, trending, and reducing) the variations in your supply streams. This is because price has the smallest impact in the supply chain expense triangle (i.e., price, standardization, and utilization), while utilization has the biggest impact on your overall cost.

Hospital Supply Chain Elements of Control

Let’s breakdown the three elements of control that you should be aware of:

  • Verify Your Price Changes: You need to confirm that every new price that you have obtained actually hits your bottom line. We frequently see, for various reasons, that this doesn’t happen, though the savings have been reported as a fact to your management.
  • Monitor and Trend Your Usage: If you obtained a great price on exam gloves, but your usage per patient day jumps 24%, you have actually increased the cost of this commodity, not lowered it.
  • Reduce the Variation in Your Supply Streams: Whether you are buying exam gloves or pacemakers, there is a natural distribution of these commodities. Meaning, if you see that 80% of your purchases are at the high end (i.e., most expensive products, services, or technologies) of the spectrum, then you generally have a utilization misalignment that needs to be investigated.

Our point here is that price is just the tip of the iceberg! If you are to be successful in the healthcare supply chain of the future, you will need to control all elements of the lifecycle cost of your products, services, and technologies (i.e., consumption, misuse, misapplication, and value mismatches). Otherwise, you won’t drive the last dollars out of your supply chain expenses. In fact, you will actually increase your overall cost by ignoring the vital importance of control in your hospital’s supply chain management.

Articles you may like:

Hospital Supply Chain: The Next Wave of Savings Opportunities

Hospital Supply Utilization Management: The Cold Hard Facts

Request Demo of SVAH’s Value Analysis and Utilization Tools


healthcare supply chain, Healthcare Value Analysis, hospital supply chain, Hospital Value Analysis, supply chain, supply utilization, utilization management

You may also like

{"email":"Email address invalid","url":"Website address invalid","required":"Required field missing"}

Subscribe to our newsletter now!