If you don’t have one, you are missing a key supply chain expense reduction ingredient
By Robert T. Yokl
You might not be aware of it, but in the new healthcare economy we live and work in there will be a new emphasis on Total Lifecycle Management of the products, services and technologies you are buying. Why? Because every penny saved and every process improved will contribute to enhancing your healthcare organization’s cost and quality which are two of the hallmarks of the Affordable Care Act.
Total Lifecycle management has a beginning, middle and end. At the beginning of the lifecycle is your value analysis process (i.e. deciding on best value), the middle is your utilization management system (i.e. controlling your in-use cost) and at the end of the lifecycle you need to economically and ecologically dispose of the commodity to complete its lifespan.
While most hospitals, systems and IDNs have greatly improved the beginning and end of their products, services and technologies Total Lifecycle Management process, only a few healthcare organizations have a system in place to rein in the middle or utilization, where most of their lifecycle costs are incurred. This fact could be costing your healthcare organization millions each year!
Let’s say, for example, that your I.V. pump set cost is $4.65 each and you use 100,000 sets per year. Then this $465,000 represents your annual utilization cost for this I.V. set. If your clinical staff is misusing, misapplying or the I.V. set is a value mismatch (i.e. lower cost alternative available, but not being employed or purchased) of 10% you are losing $46,500 annually in what we call a utilization misalignment.
Now, multiply this factor by the 7,000 to 15,000 products, services and technologies that you buy annually to help you to understand the impact of how not having a system in place to effectively, efficiently and easily manage and control your supply utilization is compromising your overall cost efficacy.
That’s why we preach that price is the smallest factor to be considered in your hospital, system or IDNs spend. This is because you could actually pay more for a product but have a lower utilization cost (e.g. electrode, bath system or lab test, etc.) and still be way ahead of the game. This fact is important to remember as we, as an industry, move closer to value-based purchasing, where the cost of a patient’s entire episode of care will be measured in Toto, not the sum total of the price of the products, services or technologies employed to get the patient well again.
Hopefully, these examples will demonstrate conclusively to you the significance of having a system in place to automatically manage and control all of your products, services and technologies’ in-use costs that your hospital, system or IDN incur each year. To ignore the importance of this revelation is to risk having a higher cost per patient day, per discharge or per procedure than your peers who are vying to win the same commercial contracts as your healthcare organizations and/or to maintain a profitable expense to reimbursement ratio.
Robert T. Yokl
Chief Value Strategist
Strategic Value Analysis in Healthcare
www.strategicva.com