Supply chain expenses: A never-ending diet
Tuesday April 29, 2014
It seems like everyone I know is on a diet nowadays. All my friends have crawled their way out from under winter got on their soap box and decided to get back in shape by embarking on some new, ridiculous way to lose the extra pounds. I’ve heard how the Atkins diet shrinks fat cells, how the South Beach Diet increases energy, and how the grapefruit diet not only helps lose weight, but also improves skin tone. I’m just waiting for the day that the tapeworm diet makes it to the soap box, wouldn’t that just take the cake (no pun intended).
Twenty-eight ridiculous diets later and the soap box is still waiting for its well-earned retirement.
When it comes to cutting supply chain expenses, we are constantly looking for the next diet. We find quick ways to trim down the price of materials, convert commodities to lower-cost manufacturers, and laboriously standardize physician preference items to obtain better pricing. Just like that, our costs instantly appear slimmer! Yet, four weeks later, despite changing ordering practices and physically reducing the cost of goods, expenses increase and the belt starts to tighten again.
So, here lies the point: No matter how many diets we embark on, nothing will be as effective as embedding healthy habits into all aspects of our life.
Short term chaos does not equal long term sustainability. Not many people can live their whole lives carbohydrate-free or eating large amounts of grapefruit for every meal. These expectations are unrealistic. Diets are meant for short-term resolutions; not long-term solutions. We need to look at supply chain expense in the same way. We can’t keep relying on the lowest price product to trim the fat from supply chain expenses and we can’t expect clinicians to do their jobs when we remove necessities from the formulary.
There needs to be a better way to save money – and there is.
Success comes when you peer past the diets and take a good hard look at your lifestyle, or in the healthcare world, the way we deploy commodities. It doesn’t matter how many calories you remove from that brownie if you eat five of them. The same applies to commodities; it doesn’t matter how many cents you trim off that exam glove if you drop three on the floor every time you pull one out of the box.
There are thousands of applications of this principle every day on hospitals’ value analysis teams. Value analysis can play a huge role in correcting this paradigm by prioritizing clinical commodity cost reduction initiatives and involving all stakeholders from procurement to practice. Most hospitals turn to data, but data is not the answer, it’s just the start.
Here’s a list of things every value analysis team needs:
1. Data. One hospital’s data isn’t going to reveal anything – you need at least 30 hospitals to establish a viable benchmark. The more, the better.
2. Granularity. Category benchmarking is fine, but granularity is gold. If you lost your wedding ring at the beach, would you stand at the snack bar and scan the sand? I didn’t think so.
3. Clarity. Your clinicians aren’t statisticians, so stop expecting them to be! Use their time wisely and provide clear, succinct interpretations that they can act on.
4. Action. You don’t need a 36 page report to tell you that you use more catheters than the hospital next door, especially if you’re only reading the last page. Remember that more isn’t always better.
5. Execution. Use your own staff to implement projects – no one knows your process and products better than your own employees. Find a tool to do the background work so you can have “all hands on deck” to implement.
Initiatives that focus on the clinical side of commodity items find target savings of $6,000/bed. This type of cost reduction requires lifestyle changes, so instead of gaining back the weight in three years, we can ensure that the lighter expenses are here to stay. So, go ahead and structure your value analysis team for success, change your hospital’s lifestyle into one of sustainable savings, and splurge on a brownie every now and then.
Lindsey is the Director of Utilization for Blue.Point Supply Chain Solutions, an avid angler, hydrangea fanatic, and self-confessed chocolate nut. Above all, she is obsessed with the objective of clinical product utilization.