A recent client I was working with on a Supply Chain
Scorecard Program and then subsequently a Strategic Value
Analysis® Program vehemently disagreed with many of the
metrics and benchmarks that SVAH utilized to identify
savings opportunities for their organization in all of their
products and commodity areas. Now keep in mind, I was
dealing with the VP of Operating Room Services who up to
this point had run their product standardization and
evaluation committee (for 7-years prior) before we were
engaged by their system to perform our supply chain savings
services. No matter what product and/or commodity group I
showed on their savings opportunity scorecard he would
disagree that I did not have my facts correct or that the
benchmark metrics were outright wrong.
For example, we were being challenged on their IV Set usage
per case mix adjusted patient day, whereby the metrics
showed a savings opportunity of $155,000 on an
$850,000 annual spend, an 18% savings opportunity!
Interestingly enough, this hospital just completed their own
analysis by their product evaluation committee on their IV
Sets and concluded that everything was in-line and that they
were optimized on their costs and quality (I did not see
any supporting data other than discussions from committee
meeting minutes that could support their findings). I
held firm, I knew my numbers were good and I had over 301
hospitals in my database to back me up that I was in the
“Savings Zone,” whether my client wanted to believe me or
not.
As it occurred we continued to work together and set up
their supply value analysis program which of course IV sets
was at the top of the list. Now the unique thing about our
company is that we have seen IV Set studies at 50 different
hospitals and health systems, so we get to bring all the
best practices, questions and strategies to the table for
our clients. Here is what we found out with this particular
IV Set Study/Analysis.
-
The Good News! They had the
best price –
they were part of a large IDN and had a direct
manufacturer agreement, no price savings could be
achieved. We compared them to our best price
database and they ranked in the top 95th
percentile.
-
Not labeling was costing them
thousands
- All the departments were not date/time labeling their
IV Sets correctly or at all to let other nurses know
when an IV Set was set up on the patient, therefore they
would automatically change the set (often too soon) on
the patient to insure quality. The best practice is to
change the set between 72-hours and 96-hours. Because
they were not labeling correctly a good Nurse would
change the set so not to endanger the patient by leaving
the IV Set on too long. $25,000 to $35,000 in
utilization savings!
-
They had been sold a wrong
bill of goods
– 11-months prior to SVAH’s engagement, the hospital’s
product evaluation committee had approved the
implementation of an IV Set locking device that cost
$5.00 (in addition to the IV Set cost) to be utilized
solely on central intravenous lines for an annual added
expenditure of $5,000. This made sense to all and would
add to the quality of care for patients with the central
lines. What happened was, the product was then misused
on every IV Set throughout the entire hospital which
added $120,000 in added cost as opposed to $5,000.
$115,000 overrun! (They did not know
this overrun situation was happening because they had no
system to monitor their commodity costs) The
hospital then re-evaluated and found that the product
was not required at all, they returned to using sterile
tape! $120,000 in savings.
-
There is more! -
the client opted not
to pursue this product category until a later date
because of the major changes that the two opportunities
above would make to their nursing staff, but they will
then revisit this product line to look at the
value/function of the products being utilized. There
could be thousands more here!
Up to this point, my client did not have the tools or
knowledge base that SVAH brought to the table that would
uncover these hidden/invisible savings opportunities in
their hospital’s supply chain. My client did not believe
that there was that much savings on this particular
commodity grouping but was only working with what they knew
from their product evaluation committee and existing supply
intelligence told them. It was not on his radar screen!
Could This Scenario Be Happening Anywhere In Your Hospital?
If so, You Need a Scorecard Monitoring System that Will
Catch These Anomaly’s Before they Damage Your Bottom
Line!
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MAILBOX
I’m thinking about having my purchasing data cleansed, but I
need to justify this cost to my CFO. What benefits could I
tell him our hospital would derive from such a project to
sell him on this idea? R.T.
Supply cost management begins and ends with
business intelligence about your hospital, system or
IDNs buying behaviors. Data mining would be the source of
your intelligence. Some questions you need to find answers
to with your data mining are: (i) is your hospital
standardized on all of your pricing for the same products,
(ii) does your hospital qualify for higher tier level
discounts, (iii) are your departments buying similar
products when lower cost alternatives are available, (iv)
are you obtaining the best pricing for the products that you
are purchasing, and (v) can you pull out data spends/costs
and detail on any major commodity/product line in your
hospital?. If you can’t answer these basic questions
because your purchase data is antiquated, flawed,
defective, inconsistent, uncategorized, out of order or
substandard your hospital is losing the opportunity to
save 1% to 2% on your purchasing costs
annually. This is because your ability to data mine is
non-existent. This in my opinion would justify why you need
to cleans your purchasing data.
While you are at it, please let us
quote on your data cleansing project, since we have a
four year history of providing hospitals with cleansing
services at very reasonable fees. We make sure your data is
supply savings friendly!
Good
luck,
Bob
Yokl, Sr.
Chief Value Strategist
Strategic Value Analysis In
Healthcare
800-220-4274
bobpres@strategicvalueanalysis.com
P.S. If anyone
else has a burning question that you would like me to answer, please
call or e-mail me and I would be delighted to answer.
There Is Still “Gold In them Thar Hills”
Searching For Lower Cost Alternative Products, Services And
Technologies Can Generate 4X The Savings You Are Now
Producing
Hospitals, Systems, IDNs And Networks Historically Keep
Buying The Same Things, Thereby, Keep Getting The Same
Meager Savings Results!
Recently I spoke with a director of a
regional healthcare group who told me that she just received
bids from GPOs to capture their member’s supply business
that ranged in savings from $1 million dollars to $4 million
dollars. When I asked her why there was such a disparity
in the bids, she told me that the $4 million dollar quote
represented using lower cost alternative products
than her network’s members were purchasing now.
This discussion reminded me of a story!
When I was in the material management
business for about 8 years (and GPOs only carried just a few
product lines), I would bid out my entire warehouse products
(stationary supplies to medical supplies) once a year. Here
is the twist. I asked my bidders to also submit to
me lower alternative products, than what I was now
purchasing. To my surprise, I found that I could save an
extra 12%, 26% or 38% on equal or better alternative
products than my hospital was buying for years, because I
was willing to make the extra effort to introduce
these new products to my value analysis committee for review
and approval.
What do these two stories mean to you?
Well, if you historically keep buying the same things,
thereby, keep getting the same meager savings
results, then you too need to proactively ask your
GPOs and your other vendors to provide you with lower cost
alternative products in order to achieve much greater
savings on the products, services and technologies you are
buying today!
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