Close the door tight on these multi-million dollar purchases
Every supply chain manager contracts for purchase services during any given year, but how many are taking their purchase services seriously enough to make an impact on their healthcare organization’s bottom line? The answer to this question, if you are honest with yourself, is very few!
This seems to be the pattern in most supply chain organizations and has left a big vacuum (e.g. cost, quality and utilization) in this supply chain category of purchase. These multi-million dollar contracts are either considered the exclusive domain of your department heads and managers, or your supply chain supply chain department is mindlessly processing some or all of these contracts without giving them a second thought.
That’s why progressive supply chain organizations recognized that it is mission critical for them to manage their hospital’s contingent labor, legal services, facility management, real estate, benefits, reference lab, telecommunications, transcription services, travel, advertising, etc., where strategic savings opportunities are endless and limitless.
It is now time for all purchase services to be professionally managed by supply chain managers employing the same successful methods, processes and analytical skills that you have used to save millions for your hospital, system or IDN with supplies.
For instance, did you know that there is about a 10 percent error rate on telecommunications invoices that your hospital is paying without questioning them now? Or, that your blood product’s cost can most likely be reduced by 13, 15 or 19 percent by establishing a comprehensive blood management program?
These are just some of the savings areas that your department heads and managers haven’t explored because they have been happy with the status quo for many, many years. It’s time to put fresh eyes on these purchasing categories to wring out the last dollar in price, standardization and utilization in the range of 11 to 18 percent on tens of millions of dollars of your hospital’s spend annually.
These aren’t back of the envelope savings estimates, they are the actual savings our clients are experiencing today on their purchase services. That’s why we know that you, too, can obtain these same savings yields if, and when, you decide to close the door tight on these purchases by taking control of your purchase services. Take advantage of these new strategic savings opportunities that are under-managed, untouched and underutilized today.
Robert T. Yokl is president and chief value strategist of Strategic Value Analysis® In Healthcare, which is the acknowledged healthcare authority in value analysis and utilization management. Yokl has nearly 38 years of experience as a healthcare materials manager and supply chain consultant, and also is the co-creator of the new Utilizer® Dashboard that moves beyond price for even deeper and broader utilization savings. For more information, visit www.strategicva.com. For questions or comments, e-mail Yokl at bobpres@strategicva.com.
I couldn’t agree with you more Mr. Yoki! I will add courier service, service contracts and leases to your listing and there are others.
It is amazing to me when you ask materials managers if they have a centralized purchasing/materials management system most without hesitation will say yes. When you peel back the onion, and probe further departments like Pharmacy and Food Service are decentralized. If Housekeeping, Laundry and Engineering are being run by third party vendors those purchases are decentralized. While we are on this subject it always amazed me that in spite of the knowledge and respect that a materials manager had built up over a career, when it comes to negotiating third party outsourced agreements with vendors to run departments, administration leaves the materials manager out of these meetings!
Also, let’s not forget IT who spends millions of dollars in both hardware and software purchases. They are usually considered a sacred cow and have enough political leverage to become decentralized.
In a number of areas that you list like telecom, travel, real estate, benefits there are some excellent consultants who base their fees on what they can recover going back in time and what they can save a facility going forward in time which can be totally documented and verified. However, the materials manager and of course the department who has taken over the responsibility, would consider this to be a “slap in the face” that someone in their field actually knows more than they do. In addition, these consultants have databases in so many significant categories to negotiate with on behalf of their clients, versus the hospital who has only their own data to work with and no one else’s. I think the old line mentality that if someone outside the hospital finds “money” then I am not doing my job and the I will be fired mentality takes over.
If i was working in a hospital today and through whatever efforts I was able to bring back 1-2 million dollars in savings and/or recoveries, I would think my boss would applaud my efforts regardless of how I got there and for thinking outside the box and looking at options and partners to save me money.
One last thing. As a former materials manager, I am all for including the departments in negotiating sessions with vendors specifically in these areas. I don’t have all the answers and I don’t necessarily know if the vendor is blowing smoke or makes valid points on all topics. A well put together internal team can really shine in these sessions and have much more favorable outcomes than doing it alone.
As I look back when I sat in the materials management seat how many times did I meet with vendors who numbered 3 or 4 versus me (the old 4 on 1 basketball fast break). Guess who got the better outcomes!
I would be glad to speak with any of my colleaguesa about a subject and further review your situation.