You Will Only Reap What You Sow with Clinical Supply Utilization Management

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

“Future consequences are inevitably shaped by present actions.”

This old proverb becomes a reality for healthcare supply chain organizations in that you must first plan, build, implement, and sustain a clinical supply utilization program before you can reap the major benefits of it. What exactly are the major benefits of clinical supply utilization management? They are an opportunity to attack your savings, beyond price and standardization (waste, inefficient use, value mismatches, over-standardization, and lifecycle shortfalls). Our studies over the past ten years have shown that could be an additional 7% to 15% of total supply chain budget; a new robust savings opportunity that is worth the effort to obtain in these challenging times for healthcare organizations.

How Can There Still Be 7% to 15% in Total Supply Budget Savings?

Let’s face it, 94% of all healthcare organizations do not have any type of supply utilization program in place in today’s hyper-competitive supply chain world. Have they implemented and sustained dramatic savings in their price and standardization programs? Yes! Have they implemented robust value analysis programs to find the right products and vet new product requests? Yes! But neither of these addresses the in-use costs of products, services, and technologies once they are in the hands of their customers and how they consume/utilize these products. For example, you have the best price on an IV catheter or an endomechanical stapler, but you are using three catheters when you should be using one, or two staplers per case but your surgeons are using three or four. These are just simple examples of clinical supply utilization that occur, and you don’t even know this is happening.

Is Clinical Supply Utilization Management the Next Purchased Services Savings?

Remember a few years back when purchased services started to become a major savings opportunity? These opportunities are in excess of 8% to 13% overall. You could ask the same exact question then as you can now for supply utilization: How could we have missed 8% to 13% in overall budget savings? Now, most hospitals and health systems throughout the country have purchased services savings programs in place, and GPOs all have major purchased services contract offerings as well. Clinical Supply Utilization is the true last bastion of major supply chain savings because it is not about price – it is about optimizing the total in-use cost to the organization of each product, service, or technology.

You Can Continue to Ignore Clinical Supply Utilization at Your Bottom Line’s Peril

The best way to start down the road to Clinical Supply Utilization Management (CSUM) is to first educate your supply chain team that there are more savings than just the almighty price. Price savings, due to the maturity of hospital contracting, is not growing in new opportunities but shrinking in most cases because you have become much better. The law of diminishing returns comes into play there. Thus, we must move to the next big savings opportunity in supply chain which is clinical supply utilization – savings beyond price!

Next Steps Towards 7% to 15% Savings Beyond Price

Next, you need to start to establish a baseline of reporting that will not only track spend but also track spend to operating metrics for all of your supply chain purchases. You can then use this information to compare to system level, fiscal year, quarterly, monthly, and cohort benchmarks. The reality is that you cannot compare to anything or anyone without first establishing your baseline of data/reporting. This will immediately start to pay dividends as you can now see the ebb and flow of your clinical supply chain major/minor product categories which will result in robust savings opportunities.

How Do You Achieve Clinical Supply Utilization Major Savings?

As I mentioned above, CSUM is about total in-use costs, so you are looking for the waste, inefficient use, value mismatches, and lifecycle shortfalls that occur with your products, which your new reporting will spell out for you. When you have your cost per adjusted patient day for Troponin Lab Test Kits increase by 67% ($233K annualized increase) from FY20 to FY21 to date, then you know that there is something wrong that needs to be addressed. There is no way you have patient indications in Covid times that would cause that big of an increase on a product that is primarily used in the Emergency Department. This then gives you fuel for your value analysis team to address this issue as a regular savings project using your own internal processes. Value analysis will be confident in getting results because they have good data to work from, but without the good data, you and your VA team will more than likely not even be looking at this out-of-control cost.

No Guessing with Clinical Supply Utilization Management

The good news is that once you get CSUM up and running, it will be a continual flow of savings opportunities in all of your major supply chain categories. There are 500-700 major categories of spend and another 700-800 in minor categories of spend, depending on your size. If you are an individual hospital you will reap major savings. It will be even bigger savings if you are a health system, as you will have even more comparable benchmarks to work from. Either way, there are huge savings just ripe to be picked, but you must first plan, build, and implement a clinical supply utilization management program. Go get your 7% to 15% savings beyond price now!

About Robert W. Yokl, Sr. VP of Value Analysis & Supply Chain Solutions
Robert is the Program Leader for SVAH Solutions that provides value analysis, clinical supply utilization, and savings validation tools to help organizations to gain the next level of savings beyond price and standardization.