We are all looking for the next big supply chain expense savings for our hospital, system, or IDN, now that our price savings are on life support. But too often we are looking in all the wrong places. One area where you should be looking for new and better savings is supply utilization misalignments (i.e. wasteful and inefficient consumption, misuse, misapplication, and value mismatches) in your supply streams. Here are three reasons why:
1. Price savings are at the lowest levels in decades: Our recent studies have shown that hospitals, systems, and IDNs who have the highest compliance GPO contracts are only saving one-half to one percent on their total supply budget with their new and renewal GPO contracts. Whereas, just a few years ago, these same healthcare organizations were saving two to three percent annually.
2. Hospital, system, and IDN’s standardization efforts are substantially completed: Driven by compulsory standardization to maximize your GPO contract savings, there are very few commodities that haven’t already been standardized at your healthcare organization. In most circumstances, it doesn’t make sense or isn’t practical for all of your medical devices to be standardized because of strong doctor preferences (e.g. stents, orthopedic implants, and pacemakers) on many commodities.
3. Value analysis teams have picked the ripe fruit from your vineyard: It was once very easy to discover supply expense savings at healthcare organizations when their value analysis teams were first deployed to save money. Now, years later, it’s much harder for these same VA teams to uncover new savings that were just waiting to be picked a few years ago.
The consensus of the supply chain professionals that we talk to is that it is getting harder and harder to find new double-digit supply expense savings for their hospital, system, or IDN for the above reasons. They are delighted to learn that there are more and better savings (in the range of 7% to 15%) with their utilization misalignments if they establish a Clinical Supply Utilization Management Program to seek them out.
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