As healthcare providers face the challenge of “doing more with less,” many leaders are beginning to look outside the healthcare industry for solutions. As non-labor costs rise at unprecedented rates, c-suite executives are looking for assistance with supply chain, in particular. While supply chain leaders should be involved in this process, that isn’t always the case. Back in the 80s and 90s, the concept of tanking best practices from outside the industry and applying them to the healthcare industry was pretty novel. But now those same questions are being asked again and executives are reaching out for guidance from outside firms such as McKenzie, Navigant, and Deloitte, to name a few.
John Pritchard, publisher of The Journal of Healthcare Contracting, recently sat down with Tim Chapman of Vantage Point Logistics, to discuss why it is so vital that supply chain executives are included and how they make sure they have a “seat at the table” in these discussions.
Why are c-suite executives looking for outside help?
Margins are being squeezed. In fact, a Moody’s study found that, for the first time in a long time, hospital and health system’s total operating expenses outpaced revenue growth. Non-labor costs are growing rapidly in part because health systems are increasingly complex. Additionally, hospitals and health systems are substituting non-labor costs for labor costs. Historically, providers have frequently outsourced services like housekeeping, laundry and food services. But now health systems are opening up to the idea of outsourcing in other areas, like energy management or total facilities management. In some cases, providers and suppliers are creating shared service areas – with suppliers co-running a hospital’s cath. Labs, the sterile processing department, or other areas.
Many of the areas of increasing spend are not within the traditional purview of supply chain, which has previously overseen med/surg procurement and occasionally, some purchased services. This can mean that a very large portion, of a provider’s non-labor costs are not getting the benefit of a really rigorous, professional sourcing value analysis approach that supply chain executives can offer, Chapman says.
What can supply chain executives do to get a “seat at the table?”
“Outsourcing is a skill that can be honed and used as a vehicle for continuous improvements,” says Chapman. He says he recommends his clients use outsourcing as a skill to evaluate and improve internal operations and (in a way) steal shamelessly from what suppliers say they can do for you. Because the vast majority of what a supplier can do for a health system, the system can actually do for itself.
In the webinar, Chapman goes into detail about the best way for supply chain leaders to respond to their leadership when an outside consultant is brought in. Here are some of the takeaways:
– Thank your leadership for investing the capital and time and energy in your supply chain team. – Be mindful of helping to shape the objective of the efforts and the scope of the effort.
– Make sure the effort will deliver on the cost objectives (It is a cost reduction exercise, after all)
– Work to “muscle build” the capabilities of the health system’s supply chain overall – not just the department that calls itself supply chain, but the capability of the entire enterprise – really focusing on a comprehensive, all-in approach to non-labor cost management.
And that’s not all! Be sure to check out the insightful webinar at [location].