The healthcare ecosystem is one that’s full of complexities, and C-suite staff at hospitals and hospital systems know this well. Any opportunities for cost-cutting without sacrificing the quality of patient care are worth considering.
The supply chain team is frequently tasked with identifying and executing cost-savings measures. Yet often there’s a disconnect between the goals of the C-suite and the realities that the supply chain team has to navigate. Here are three strategies C-level executives can implement to better equip their healthcare supply chain teams to harness purchasing power.
Why Increased Purchasing Power is the Ultimate Goal
The ultimate goal – one that every C-level leader must always keep in mind – is increased hospital purchasing power. By cutting costs in one area, a hospital frees up funds to invest elsewhere. This is simple math, but it’s all too often overlooked.
One recent study from Navigant shows that the average hospital could free up funds equivalent to 2,680 hip implants or 165 additional RN salaries by tightening their supply chains.
Numbers like those equate to real improvement opportunities. The supply chain holds the key to gaining ground on purchasing power inside the same fiscal budget period. In any cost savings initiative, C-level executives must keep real, tangible results like these in mind.
Reason #1: Unbiased View of Market Benchmarks
Hospitals already have the data they need to harness purchasing power. The power of greater good for patients starts with leveraging that data to its fullest potential. Many hospital systems rely solely on their group purchasing organization (GPO) metrics, but these numbers don’t tell the full story. If all you’re looking at is GPO benchmarks, you’re likely only seeing the top-line discount that your particular GPO receives, and benchmarks are limited to the GPO contracts. You’re not getting insight into what another similar hospital is paying in the same region. And more importantly, it’s not unbiased.
It’s also important to understand that data specialization is critical. No company is doing it all in each share of wallet (Purchased Services, Capital Equipment, and Clinical Products). And for that reason, it’s tempting to ignore or sidestep the effort. Curvo focuses on the clinical supplies and products categories, which are two of the biggest areas where the supply chain can realize cost savings. Each of these categories are incredibly complex and require specialization for benchmark data to be productive for driving savings.
C-Suite leaders understand that an unbiased view of market benchmarks is the first step towards harnessing more purchasing power. They cannot harness the full purchasing power without investing in benchmarks that have specialization in clinical products. And, clinical products (PPI) offer more opportunity for local level contracts versus pricing through the GPO, resulting in huge savings impact. This is an important complement to their GPO relationships and a key focus in their strategy.
Reason #2: Data and Automation in Supply Chain
C-Suite leaders understand that a limiting factor in scale, efficiency, and profitability is acceleration and automation in the supply chain. They understand that these teams are working hard. They also see the dynamic of these teams battling against talent gaps and shortages. The development of talent in supply chain isn’t fast enough to keep up with the demands of the department. That means they need to equip these teams with time-saving investments in order to harness the full potential of purchasing power.
Without automation, a hospital will face these challenges:
- Supply chain is always understaffed
- Manual data preparation for a single PPI category can take weeks – even months
- Team is limited on how many saving projects they can run
- Not able to stay on top of price and utilization creep
- Constantly reacting to the market rather than making proactive moves
Do these pain points sound familiar to you? If so, better data gathering and automation can help alleviate these pressures.
It’s important to understand that when we talk about automation in supply chain, we generally aren’t talking about reducing headcount. Rather, it’s about increasing capacity.
There’s more work to do than there are people to do it. Hospital supply chain is a difficult niche to fill, and every system we talk with is constrained both by headcount and ability to fill that headcount.
When hospitals do have an available headcount, they’re searching within a very small pool of candidates who understand both supply chain in general and clinical products in particular. While the industry needs to focus on talent development in this area, that is a long-term solution. Providers simply can’t afford to wait that long to tip the scales on purchasing power. Adding automation to the humans that already have domain expertise in their system can provide a short-term path towards purchasing power.
In addition to all this, manually working with data to analyze spend is incredibly burdensome and time-consuming. And, it’s an entirely additional skill set being demanded from your supply chain staff.
Hiring more people or outsourcing this function is never going to be a complete solution. The more we can automate, the more your in-house team can accomplish.
Reason #3: Better Dialogue Between Clinicians and Supply Chain
Better and more frequent dialogue between clinicians and supply chain is another executive desire, and here the C-suite can have more direct influence, by encouraging or even mandating this communication. Historically, this communication has been driven around a savings event run every 12-18 months.
Why is this important? Because savings isn’t possible in PPI without this collaboration. Collaboration isn’t possible without trustworthy and defensible data around clinician utilization.
More and more we see C-suite decision-makers using cost-accounting tools to identify high-level case-cost variance between physicians. But then supply chain is tasked with rebuilding procedural constructs from scratch. They then have to compare those constructs to market benchmarks in order to have defensible data to present to clinicians. This is a time-consuming and manual process.
Collaboration must shift to monthly or quarterly reviews in a category to keep up with practice pattern and utilization changes. C-suite reinforcement ensures that supply chain is equipped with usable and defensible data to drive these conversations on a more frequent basis and that in turn, drive purchasing power.
The Fastest Path To Net Positive Impact This Fiscal Year
C-suite executives are looking to supply chain for answers and improvements. These teams hold the key to purchasing power. Investing in the supply chain offers one of the fastest paths towards a net positive impact in the same fiscal year. In all of these, Curvo is here to help with our clinical spend management software. Interested in learning more? Contact us to schedule a demo today.