Healthcare Supply Chain: What Happens If You Run Out Of Price Savings?

What Happens If You Run Out Of Price Savings?

When I’m giving a seminar, workshop, or masterclass, I am often asked, “What happens if you run out of price savings?”. Some of the typical answers that I hear from healthcare supply chain professionals in attendance is that they would squeeze their vendors even harder, change their group purchasing organization, or take early retirement. Well friends, this question isn’t a hypothetical one any longer. We are now hearing from our healthcare supply chain and value analysis community that they are running out of price savings. In fact, their vendors (even if under a GPO contract) are stating that they are going to raise their prices immediately to cover their shortfalls brought about by the pandemic. However, this doesn’t mean the savings game is over.

Your healthcare organization still needs supply chain expense savings each year just to keep pace with inflation which is running 8.5% as I write this article. So where are these new savings going to come from? The answer to this dilemma is savings beyond price, specifically, value analysis and supply utilization savings!

A little-known secret is that value analysis practitioners have only achieved savings at the tip of the iceberg. There are hundreds of thousands of dollars in achievable savings below the water line with a VA technique known as functional analysis (or analyzing what a product, service, or technology does). This is accomplished by value justifying the functions (primary, secondary, and aesthetic) of the products, services, and technologies you are buying. You will be amazed at what is absolutely, positively required vs. what has actually been specified over the years. When you get inside your contracts, you will find that there are lower cost alternatives all over the place that will dramatically reduce your costs and be GPO friendly.

In addition to value analysis savings, supply utilization management is the strategy to opening up a whole new area of huge supply expense savings for your healthcare organization in the range of 7% to 15% of your supply budget. Your utilization misalignments (or wasteful and inefficient consumption, misuse, misapplication, and value mismatches) are also eating into all of the price savings you have achieved over the years. So, when you think you are running out of price and standardization savings, don’t forget that savings beyond price savings are there for the taking.

About Robert T. Yokl, Founder & Chief Value Strategist for SVAH Solutions
Robert T. Yokl is President and Chief Value Strategist at SVAH Solutions. He has four decades of experience as a healthcare supply chain manager and consultant, and also is the co-creator of the Clinitrack Value Analysis Software and Utilizer Clinical Utilization Management Dashboard that moves beyond price for even deeper and broader clinical supply utilization savings. Yokl is a member of Bellwether League’s Bellwether Class of 2018.

Articles you may like:

Why KPIs Can Help You Optimize Your Value Analysis Team’s Performance Almost Overnight

The Next Big Wave to Major Healthcare Supply Chain Savings Success