Why You Need to Focus on Supply Utilization Management

Robert T. Yokl, President/CEO, Strategic Value Analysis in Healthcare

We know that value analysis practitioners are hungry for big savings to justify their existence in their healthcare organization. Since new GPO contracts and departmental requests usually cost a hospital, system or IDN money, how do value analysis practitioners make this goal happen?

Well, the best way that we know of to ensure your annual savings goal is met each year is to focus on supply utilization management. That’s why we recognized this third savings source (price and standardization being #1 and #2) as being an integral part of any and all value analysis programs.

For you see, we realized 15 years ago that the savings we were identifying and implementing for our clients weren’t price or standardization opportunities, but were something else that we labeled “utilization misalignments (UM).” We defined UM as wasteful and inefficient consumption, misuse, misapplication or value mismatches in a healthcare organization’s supply streams. We found that this is where 97% of all new supply chain expense savings are hiding.

To get at these new UM savings opportunities you will need to look beyond price and standardization and then investigate why your consumption on given products or services is higher than your own historical standards and/or your peers’ benchmarks. You can try to do this with the naked eye, but the chances are very poor that you will uncover substantial utilization savings for your healthcare organization.

Instead, you will need to invest in a utilization analytical tool to identify the savings for you. It will act just like supply chain radar! Nothing passes through this UM filter unless it conforms to your healthcare organization’s requirements. Conversely, if you think you can perform this task with a Spend Manager – think again. Spend Managers may find you a better price, whereas a utilization analytical tool searches for waste and inefficiencies in your supply streams.

Lastly, it is also important for you to follow the 40/20/40 value analysis rule: 40% of your team’s time should be spent on new product reviews, 20% on GPO contract conversions, and 40% on investigating utilization misalignments. This is the ideal time management template to help you focus on the right things, in the right timeframe, yet all at one time.