Wrap your head around this statement! Spend tells you how much you spend but it does not tell you how much you have utilized or consumed. Why is this important? Seeing spending increasing or decreasing in an area does not always equate to cost increases or savings like you would think. More than likely, it has to do with the patient volume in the category that you are analyzing. Finding savings using patient volume metrics and benchmarking with that strategy combining those metrics to spend is that missing piece.
How Do We Know with Certainty if There Are Savings Opportunities in Any Category?
Unless you are looking at spend combined with patient volumes you are not going to know for sure if there are any savings opportunities in a category or not, and if so, how much savings. You see, patient volume metrics are what drives a healthcare organization in everything from patient days to Emergency Department visits to equivalent meals served to surgical cases to Wound Care Clinic visits, and everything in-between!
This is simple, and in most areas, your budget is based on patient volume centric metrics and then projected to what they will be and the associated cost per that metric. If your patient volume is projected to be higher, your budget will be higher in a certain department or category. So, why are health systems still not embracing patient volume metrics to spend ratios and benchmarking them to come up with viable savings opportunities?
Supply Chain Tends to Only Look Through Price Goggles
Many health systems do some level of patient volume centric benchmarking and, of course, will gladly take price benchmarks every day of the week if they can get them. Interestingly, most still are not breaking down their more than 500 major supply categories and 700 additional minor categories to truly understand where they stand. Wouldn’t you want to know where significant utilization/consumption savings opportunities exist, and, just as importantly, where they don’t?
Wouldn’t It Be Helpful to Know?
Wouldn’t it be helpful to know if that big contract you are working on has major or minor utilization opportunities along with pricing opportunities? Of course you would want to know, but if you only have price benchmarks then that is as far as it goes. In this advanced technology and data-rich age, we should have the answers to both of those questions and even more. I would also like to know which of the hospitals in my health system are the best practice hospitals so we don’t have to reinvent the wheel every time we want to save but instead can just look to the best practice hospital(s) in the health system and model them.
The Good News!
The good news is that your health system is still aggressively looking for new and simpler ways to find proven savings opportunities that will power your savings engine not only for one year but for years to come! That is what putting a patient volume centric driven utilization/consumption management program in place will do. I call it the gift that keeps giving, as things change, volume changes, physicians change, policy and procedures change, plus contracts change that cause utilization/consumption savings opportunities all the time. It is better to be on top of these than to just let them happen with little or no action.
The Bottom Line
You can’t afford to keep making decisions with only half the picture. Spend data alone will never tell you the whole story. What will tell the story is spend being paired with patient volume metrics. So don’t wait for another budget cycle or contract renewal to find out you left savings on the table. Start by pulling patient volume data alongside your spending for just one or two major categories this month and see what surfaces. If you’re not sure where to begin or want help building out a full utilization/consumption management program, the kind of gift that keeps on giving, reach out and let’s find out where your health system’s hidden savings are hiding. Just email ryokl@svahsolutions.com.
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