Supply Chain Expense Management: It’s Not About Price Any Longer

More and more supply chain and value analysis professionals are getting it: It’s not about price any longer. After more than 50 years of GPOs, systems, and IDNs squeezing prices until they squeak, there is very little left in price related savings to be obtaining today, tomorrow, or even in the near future. We are now in a maintenance (i.e., monitoring, compliance, and vigilance) mode when it comes to prices. It should be our goal to try to keep our new pricing below the rate of inflation for any given year. That’s all we can hope for into the next decade to contain our prices.

On the other hand, there is a whole new world of savings in supply utilization management that most healthcare organizations aren’t attacking. Yes, some hospitals, systems, and IDNs stumble over some utilization savings from time to time. However, very few are actually scientifically targeting their utilization misalignments as they have been doing for years with their price savings opportunities. It’s now time for supply chain and value analysis professionals to change their cost management direction, by as much as 360 degrees, before your price savings dries up completely!

Most healthcare organizations shy away from utilization management because they believe it requires more work than their price related projects, when it fact, most utilization misalignments can be identified and fixed without much effort. For instance, we recently pointed out to one of our clients, with data from our utilization dashboard, that their disposable neonatal Oxisensors’ utilization was three per neonatal patient day. It was quickly identified that the disposable neonatal Oxisensors their OB department was buying had adhesive strips that weren’t holding up during their patients’ bathing or treatments, thereby needing frequent replacement. The solution: Reusable Oxisensors that would hold up much better adhesion for many days at half the cost. As you can see, you don’t need to spend hundreds of hours tracking down and eliminating your utilization misalignments if you have the right data and some commonsense to come up with a lower cost alternative.

By the way, if this client hadn’t fixed this neonatal Oxisensor value mismatch it would have cost them tens-of-thousands of dollars on just one product annually.