Cost Management Within Hospital Supply Chain

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How To Make Your Hospital Supply Chain Lean And Mean Hospital supply chains can account for up to 50 percent of expenditure, which is why it is absolu...


How To Make Your Hospital Supply Chain Lean And Mean

Hospital supply chains can account for up to 50 percent of expenditure, which is why it is absolutely essential for executives in the c-suite to sit up and take notice. In order to run a successful operation, administrators need to ensure the supply chain is totally efficient.

Healthcare Global Gives Five Top Tips To Optimize Hospital Supply Chains >>>


#1. Involve physicians in supply chain discussions, especially related to physician preference items (PPIs) >>>

According to Healthcare Finance News, PPIs account for an estimated 40 percent of a typical supply budget, however they can also cause tension between administration and physician. Every year, medical device companies introduce new models of high-end, implantable devices such as pacemakers, artificial knees and spinal discs. But while the new model nearly always arrives with a higher price tag, there is often little data to suggest it is a clinical improvement over the incumbent.

One way to address this is through value analysis committees comprised of physicians, materials representatives and administration that evaluate PPI selection. If clinicians want to acquire a new PPI, they have to present evidence-based, clinically sound information suggesting the new device would provide a safer or more effective result to a committee of key decision makers.

By aligning physicians with administrators, supply chain managers and other leaders, and by taking a data-driven approach, health systems can limit the acquisition of new, costlier products to just those where data clearly shows increased value.

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#2. Make sure the entire operation is efficient, including the seemingly ‘insignificant’ costs >>>

For many providers, there are multiple opportunities to reduce costs by addressing so-called 'low-hanging fruit'. This could be as simple as replacing branded items with non-branded ones for example. Other options include ensuring that all care sites within a health system are buying identical products using the same contract. This concept of product standardization can be extended to a regional or national level via participation in a group purchasing organization. While these opportunities may not result in huge savings individually, they do in aggregate, and uncovering them isn’t resource-intensive.

#3. Optimize product utilization for cost effectiveness >>>

Optimizing product utilization can be a complicated process however it can produce big savings. Hospitals use comparative data that allows them to make decisions based on quality and cost, they can also gain an understanding of which products are top performers nationwide.

#4. Don’t underestimate energy efficiency opportunities when it comes to saving money >>>

Energy costs consume up to three percent of a hospital's total operating budget and at least 15 percent of their annual profits, reports suggest. Efficient energy use is an often-overlooked opportunity to reduce cost, increase net profits and contribute to the bottom line and is often as simple as replacing energy inefficient light bulbs.

#5. Remember to address ‘deadstock’

Second to labour costs, supplies are the largest expense for most health systems. Reducing on-hand inventory value and increasing inventory efficiency can present significant savings opportunities.



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