Roadmapping Supply Chain In Healthcare Reform
Robert Yoki | Healthcare Purchasing News
It is easy to be overwhelmed by the changes in healthcare that are here now, planned for in the future or just being talked about.
It can often seem like there is no end to the whirlwind of rules, directives and mandates that are being thrust upon us. But this doesn't mean that we should panic or become too anxious over these changes, especially if you have a roadmap to guide you through this unfamiliar terrain.
To this end, I present four guideposts that can offer you a precise path to take in this never-ending sea of change:
1. Focus On Supply Utilization Management To Bend The Cost Curve
It's the conventional wisdom that healthcare organizations will need to shave 11 percent to 20 percent over the next few years in their operating expenses to survive. If you are like most healthcare organizations, whose price savings are 1 percent, 2 percent or 3 percent annually overall, you won't move the needle in cost reductions at your healthcare organization. Only by driving out the wasteful and inefficient utilization practices in your supply streams will you be able to bend the cost curve by as much as 7 percent to 15 percent.
In a recent AHRMM survey, even CEOs, and CFOs stated that they recognize that the future of supply chain expense management is utilization management because your vendors have no more discounts, rebates and sweet deals to give you now that their margins are shrinking, too. It's the only place left to go for double-digit savings.
2. Re-Engineer Your Value Analysis Process To Be A Money-Saving Machine
Most value analysis programs are concentrating their value analysis efforts on evaluating new or renewing group purchasing contracts. You might be surprised to hear that this isn't value analysis at all; it's price/comparison shopping. Value analysis, by definition, is the study of function and the search for lower-cost alternates. The precise formula is: Price/ Function = Best Value.
If you want to up your value-analysis game, this is the path less traveled that you need to take to make your value-analysis process a money-saving machine. It means that your value-analysis efforts need to concentrate on eliminating, substituting or modifying the functions (primary, secondary and aesthetic) of the products, services and technologies you are buying in addition to aggressively searching for lower-cost alternatives to meet those necessary functions at a lower cost.
3. Leave No Savings Opportunities Untouched That Have Been Ignored In The Past
There are still pockets of savings (operating room, laboratory, food service, laundry/linen services, purchase services, etc.) that go untouched at every healthcare organization. Now is the time to rein in these savings before they damage your healthcare organization's bottom line. No longer can you allow your department heads and managers to craft their own contracts, negotiate their own deals and refuse to look at lower cost alternatives. It is too costly, negligent and unprofitable to do so.
4. Invest In Comparative/Data-Driven Analytics To Surface Performance "Gaps"
Most healthcare organizations, in some shape or form, are employing analytics to uncover their hidden supply chain expense savings. Yet we have found only a few who are using comparative/data driven analytics benchmarks to identify their supply chain performance "gaps" in real-time against their peers.
Why is this important? Trending, tracking and observing changes in your supply spend is essential, but it doesn't provide you with enough ammunition to change the behavior of your clinicians. That should be the goal of every supply chain professional - changing behavior.
Only by sharing comparative/data driven analytics benchmarks with your customers can you be assured that you will get their attention, find them receptive to your recommendations, and open them up to modifying their practices to maximize your supply chain expense management performance.
As I see it, these four guideposts are new leverage points that you can employ to create a great leap forward in your supply chain expense reduction program. These tactics will enable you, your staff and your value analysis teams to deep dive into your supply chain expenses to produce breakthrough savings that are sorely needed for your healthcare organization to survive and thrive in this era of healthcare reform. Taking the path less traveled is the secret to success in the ever-changing landscape of healthcare supply chain management. Remember, if you don't have a roadmap, you could easily get lost in the details. Make sure you have directions to guide your way.
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