Although price tweaking is still a prime cost cutting tactic for most healthcare organizations, this is tantamount to just shaving the top of the iceberg which can actually limit your overall savings yield. When you consider that 79% of all new supply chain expense savings (i.e., waste and inefficiencies) are under the iceberg, isn’t it about time we reduce waste and cut these hidden costs too? To assist you with this challenge here are the top three ways we have discovered to do just that:
1. Utilization Management
Every product, service or technology has an optimum (or ideal) consumption pattern. By measuring the consumption of your commodities (trays, kits, pacemakers, custom pack, etc.) against your peers’, you will be able to identify waste, inefficiencies, misuse, misapplication, misappropriation or value mismatches in the products, services, and technologies you purchase. The next logical step is to investigate why your consumption patterns are different from your peers’.
2. Demand Management
Even though your utilization might be in line with your peers’ utilization, you also need to understand why the demand (or frequency) of the products, services or technologies you are buying is increasing. Is it because your cases, procedures, tests, etc., are increasing or has something changed in your practices? The answer to these questions will give you a clue as to the direction that you need to go and the reason for the change in your buying patterns.
3. Medical Waste Management
A recent study by Johns Hopkins showed that medical waste could be decreased by more than 30 percent solely by proper waste separation of infectious (red bags) from non-infectious waste (clear bags). This is because as much as 90% of what ends up in red bags does not meet the criteria for red-bag waste. This is an area that you need to have your value analysis team look at, since at most healthcare organizations’ medical waste management isn’t effectively being managed or controlled.
Overall, we have documented that 7% to 15% can be saved in your supply spend vs. just 1%, 2% or 3% on price alone if you decide to attack these three areas of your supply chain operations. There is nowhere else to go for double-digit savings – wouldn’t you agree?