What Are We Missing if We Are to Secure All Loose Ends in Our Supply Chain Costs?

By Robert W. Yokl, Sr. VP, Operations — SVAH Solutions


I am very happy to see all sorts of focused value analysis teams in our healthcare supply chain world. Most organizations have the traditional Surgical and Clinical Value Analysis Teams in place today, but we are now seeing teams such as Cardiology, Orthopedics, Lab, Radiology and many more across major categories in hospital and health system’s major operating costs. Even better, there is a rise of Purchased Service Value Analysis Teams at many healthcare organizations that cover the areas that were once left untouched. All of this is great, but what are we missing if we are to secure all loose ends in our supply chain costs? 

What are we missing to lock down any and all savings once and for all?

The answer is simple: We are missing a Supply Utilization Value Analysis Team where the focus would not be on converting contracts, evaluating new product requests, fixing problems, or dealing with recalls. This team would focus on utilization and consumption, or the increases in costs not related to price. They need to focus on the world after price, because what happens after we have the right product at the right price in the right department at the right time? It goes into the hands of our customers!  

Once a product is in the hands of our customers, anything can happen, and it does. Why is this? Because any analysis is a retrospective analysis based on previous purchase history spend only in 99.7% of the cases. To implement any change be it contractual or other, we look at the previous 12 months and then project our savings moving forward. Unfortunately, the moving forward part is a whole new ball game and just because you secured a better price does not guarantee that your changes are not going to affect other things. 

When are we going to stop filling a leaky bucket?

In any product category, whether it be newly implemented or an existing category, there can be over-use, under-use, waste, inefficiencies, policies and procedures, value mismatches or anything else that can and does affect your supply utilization costs. But no one is doing anything about this at most organizations – they just keep filling the leaky bucket with more and more price savings with the hopes that it stays fuller than what is leaking out in a year. 

Has the time come for Supply Utilization Management Value Analysis Teams?

The time has come for healthcare organizations to formally acknowledge and attack supply utilization cost savings on an ongoing basis. We all have been part of value analysis teams where we have started looking into a contract conversion or value analysis study where we found a huge unexpected savings due to utilization/consumption. What would happen if you had a team with established volume-based reporting to attack all supply utilization overruns on an ongoing basis? Your costs savings program will finally lock down all costs once and for all!