“Ongoing visibility is what allows Clinical Supply Utilization Management to continue producing savings opportunities year after year.”
For years, healthcare organizations have relied on the two most familiar strategies to reduce supply costs: price and standardization. Negotiate a better contract, standardize products where it makes sense, consolidate vendors, and then do it all over again. Those strategies still matter, but eventually the savings become harder to find while the expectation to continue producing significant savings remains.
So, what happens when you have negotiated the best price you can, standardized products where appropriate, and your organization is still expected to find millions of dollars in savings? It may be time to take a closer look at how much you are actually using. That is where Clinical Supply Utilization Management (CSUM) comes into play.
What Exactly Is Clinical Supply Utilization Management?
At its simplest, CSUM is about understanding how your organization consumes clinical supplies and determining whether that utilization is appropriate, efficient, and consistent with best practices. It is much more than simply looking at supply spend.
Two hospitals can pay exactly the same price for the same product and still have dramatically different supply costs because they use that product differently. One organization may be using the appropriate amount, while another may be using 20%, 30%, or even 50% more. That difference is utilization.
CSUM looks beyond just price and asks a much more important question: How much are we using and is that amount appropriate for the care we are providing?
A well-designed CSUM program can uncover overuse, waste, inefficient utilization, unnecessary product features, changes in clinical practice, and other variations that can increase costs over time without being noticed.
Perhaps most importantly, CSUM is not a one-time project. Healthcare is constantly changing. Patient volumes fluctuate, clinicians and practice patterns change, products evolve, contracts expire, and organizational priorities shift. Even when an improvement has been successfully implemented, people can gradually return to familiar habits. As a result, utilization can change as well.
A category that looked perfectly healthy six months ago may suddenly become a savings opportunity today. That is why CSUM is best viewed as an ongoing management system rather than a one-time savings initiative.
Why Start a CSUM Program?
Healthcare supply chain leaders already have enough competing priorities. Between contracts, shortages, recalls, new product requests, physician preferences, standardization initiatives, and daily challenges, finding the time to guess where the next significant savings opportunity may be hiding is nearly impossible.
Fortunately, you shouldn’t have to guess. The first step in CSUM is simply knowing where you stand. Rather than selecting a handful of categories and assuming they represent your greatest opportunities, the right analytics can provide a comprehensive view of clinical supply utilization across the organization.
That matters because every hospital and health system has a unique utilization profile. You might assume that your top 10 or 20 supply categories represent your greatest opportunities, only to discover that your organization is already performing extremely well in most of them. Meanwhile, a category that was never on your radar may be running well above appropriate benchmarks.
Without the data, you don’t know. With the data, you do, and that knowledge is very powerful.
You Can Have Great Pricing and Still Have a Supply Cost Problem
One of the most common misconceptions in supply chain management is that if you have the best price, you must have the best overall cost, but that is not necessarily true. Think about buying a car. If you need a reliable vehicle to get you where you’re going, you don’t necessarily need the most expensive model with every available feature. You may be paying for capabilities that you rarely, if ever, use. Healthcare supplies can work the same way.
If your clinicians need a product with five essential features, but your organization consistently uses a product with fifteen features, you may be paying for capabilities that aren’t necessary for the clinical application.
That is one side of utilization. The other is quantity. Suppose your organization negotiated an excellent price on a particular product, but you are using significantly more of that product per patient, case, procedure, or adjusted patient day than comparable organizations. You may have won the contract battle while still losing the utilization battle.
That is why CSUM looks at cost in relation to clinical activity, rather than simply looking at total spend. A product’s total cost becomes much more meaningful when you understand how much of it you are using relative to the patient care activity driving that use.
Don’t Just Find Problems but Also Know Where You’re Doing Well
One of the greatest advantages of a comprehensive CSUM system is that it doesn’t just identify what is wrong, but also shows you where you are already performing well. When you benchmark utilization across your major supply categories, you may discover that your organization is already performing at or near best-practice levels in many areas. That is valuable information!
You don’t need to spend limited Value Analysis resources trying to fix something that isn’t broken. Instead, your team can focus its time and attention on the categories where the data demonstrates a substantial savings opportunity.
That opportunity could be an obvious low-hanging-fruit savings opportunity. It could be a category that simply needs closer monitoring. Or it could be a more complicated physician-preference issue requiring a deeper clinical conversation. The important thing is that you now have a roadmap and your Value Analysis team can spend its time working on real opportunities instead of chasing dry holes.
The Benefits Go Beyond Cost Savings
While savings are certainly a major reason to implement CSUM, they are far from the only benefit.
You Gain Peace of Mind
Having a CSUM system in place means you don’t have to wait for someone else to tell you that your utilization is running high. You already have the information needed to identify potential issues within your own organization.
Even if you aren’t ready to act on every opportunity today, having the information available allows you to revisit it when the timing is right, perhaps when a contract is coming up for renewal, patient volumes change, or a clinical initiative makes a particular category more relevant. The data is there when you need it, rather than requiring you to start from scratch when an issue suddenly becomes a priority.
You Can Identify Potential Quality Issues
Utilization isn’t always about dollars. If a department is using significantly more of a particular clinical supply than comparable organizations, that difference requires a closer look. The utilization may be completely appropriate, or it may uncover an opportunity to improve a process, reduce unnecessary use, or reinforce a best practice.
Sometimes the most important question isn’t, “How much money can we save?” It’s, “Why are we using this much?” That question can lead to both financial and clinical improvements.
Clinicians Get Evidence Instead of Opinions
Data can change the conversation. Instead of telling a clinician, “I think we’re using too many of these,” you can show them where your organization stands compared with appropriate peer organizations. That changes the discussion from opinion to evidence, and it doesn’t necessarily make the conversation adversarial. In fact, just the opposite can happen. Clinicians often want to understand their own utilization patterns and, when presented with meaningful data, may have questions, ideas, and even suggestions for improving the measurements themselves.
The goal isn’t to catch anyone doing something wrong. It is to give everyone a clearer and more objective understanding of what is actually happening.
You Can Recognize Best Practices
A good CSUM system should also identify your successes. Perhaps one department is achieving exceptional utilization performance, or one facility within a health system has developed a process that is producing particularly strong results. Those outcomes are worth recognizing and, where appropriate, sharing with other departments or facilities.
Benchmarking shouldn’t only tell you where you need to improve. It should also show you where you already have something worth celebrating and potentially replicating.
Here’s Where the Analytics Make It Easier
This may be the part that surprises people most. Starting a CSUM program doesn’t mean manually analyzing hundreds of categories or creating an army of spreadsheets. With the right analytics, much of the heavy lifting can be automated, allowing your team to spend more time evaluating opportunities and less time trying to find them.
The process begins with establishing a baseline. Your supply data is organized into meaningful categories and connected to appropriate activity-based metrics, such as cost per surgical case, cost per Cath Lab case, cost per adjusted patient day, cost per implant, or another measure that makes sense for the category. From there, your performance can be compared against appropriate benchmarks, historical performance, and other relevant measures.
This is where the picture begins to come into focus. A category performing significantly above its peers can be flagged for further investigation. A category that has steadily improved can be recognized as a success. A category that was performing well but suddenly begins trending upward can be identified before the problem becomes significantly larger. And a category already performing at best-practice levels can move down the priority list.
The analytics tell you where to look, and then your team gets to decide what to do about it. That is a much more effective way to manage utilization than throwing darts at a moving target.
And the Data Keeps Getting Better
One of the most valuable aspects of CSUM is what happens after you get started. You continue to update the data on a regular basis (monthly, quarterly, or annually). Over time, you begin to see trends and patterns that aren’t visible in a single snapshot.
Perhaps utilization improved following a Value Analysis intervention, but six months later it starts creeping upward again. Maybe a new clinical practice changed the amount of a particular supply being used. Perhaps patient volumes shifted significantly and changed what previously appeared to be normal utilization. Or maybe a category that was never an issue suddenly becomes one.
This is why CSUM isn’t a report that you run once, put in a folder, and forget about. It is a living system that evolves with your organization. That ongoing visibility is also what allows CSUM to continue producing savings opportunities year after year. As circumstances change, the data can identify those changes and help your team determine where attention is needed.
CSUM Doesn’t Mean You Have to Fix Everything at Once
When you first see your organization’s utilization across hundreds of categories, it can be tempting to think, “We have to work on all of this?!” You don’t. The purpose of CSUM isn’t to create hundreds of new projects for your Value Analysis team. It is to help you prioritize intelligently.
Perhaps ten categories represent significant savings opportunities. Maybe five require immediate attention, while another twenty simply need to be monitored. Now you have choices! You can focus on the opportunities with the greatest financial impact, coordinate initiatives with upcoming contracts, address clinical concerns first, or send certain findings back to departments for self-correction.
Most importantly, you’re making those decisions based on evidence rather than instinct.
The Next Level of Supply Chain Performance
Healthcare organizations have become very good at negotiating price and standardizing products, and those strategies will always have an important place in supply chain management, but they can’t be the entire strategy.
Eventually, the question becomes: What happens after you’ve gotten the best price you can get? That is where Clinical Supply Utilization Management can take your organization to the next level. CSUM gives you visibility into the part of the supply equation that is often overlooked: Consumption. It helps you understand not only what you’re paying, but how much you’re using, whether that utilization is appropriate, where you’re performing well, where you may be out of alignment, and where your next opportunity may be hiding.
And perhaps best of all, you don’t have to know all the answers before you begin. You need the right data, the right analytics, and a willingness to look honestly at what the data is telling you, because the goal isn’t to guess where your next savings opportunity will come from. It’s to know!
Once you know where you stand, you can make better decisions about where to focus, where to improve, and where to go next.
Article by:
Danielle Miller, Healthcare Supply Chain Analyst, SVAH Solutions
Danielle is a healthcare supply chain analyst at SVAH Solutions with more than 14 years of experience in healthcare supply chain management and value analysis. She supports cost optimization, savings validation, benchmarking, and category management initiatives and serves as Managing Editor of Healthcare Value Analysis and Utilization Management Magazine.
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