3 Steps to Planning For Cost Savings Analysis

This article was written by Pandush Mitre.

In order to maximize margin improvement for your hospital, planning ahead for cost savings analysis is invaluable.

In over two years working with hospitals and healthcare organizations for VIE Healthcare®, I have developed a simple three-step process that enables me to take a deep dive into cost analysis and into achieving cost savings for our clients. Each individual contract, whether for blood services or software and maintenance, requires a comprehensive review to realize the highest level of cost savings.

My three step process, outlined below, enables healthcare leaders to transfer their attention from the nitty gritty contract and invoice details to focus on the essentials of patient care.

Step 1: Identify The Service For Analysis

This is achieved by reviewing an accounts payable (AP) spend report.

The AP report helps me to identify the vendors I am familiar with, and those I have not previously worked with but who may be worth investigating.

This process is made much easier with my access to the extensive insights into agreements and pricing structures that VIE Healthcare® continuously compiles.

That information also allows me to understand how vendors operate across health systems in the industry and narrows my focus when searching for a cost savings initiative.

For instance, one of my priorities is to identify vendor agreements that are coming up for renewal as these are details which are often overlooked in a pressured hospital environment.

In this way, I ensure that healthcare organizations are not locked into a new 3 or 5-year agreement contract with a vendor that has auto-renewed. This vital step guarantees that healthcare leaders are given the opportunity to negotiate a more cost effective agreement.

After vetting the most important aspects of purchased services agreements, I am able to identify which ones are worth analyzing. My focus is further narrowed by internal stakeholders highlighting the services they wish to be reviewed.

Step 2: Presentation of Data

Following the approval from internal stakeholders to move forward with the analysis, I organize and collate all available data into a clear and concise plan. In my experience, this certifies that the entire process flows more smoothly.

For example, my goal when analyzing a blood services agreement is to identify hidden cost savings. My approach to this covers the following points:

  • How have I achieved cost savings on similar agreements in the past?
  • What information do I currently need to gather in order to reduce costs?
  • What are my targets and what information or steps in the process am I missing?

To assist my review, it is helpful to have copies of all current agreements, amendments and addendums in place, together with invoice samples covering a 12-month period.

It is this attention to detail which separates VIE Healthcare® from other consulting organizations and enables us to maximize potential cost savings for our clients.

Our Invoice ROI™ technology identifies the line-item details of your hospital’s purchased services invoices in real-time. Click To Tweet

Once obtained, the invoices are extracted through our exclusive Invoice ROI™ process. This patent pending technology provides the invaluable insights the line item invoice details have to offer. Crucially, the data in the analysis is not based on estimates, nor is the spend based on categories but on the actual services that the hospital pays for directly, provided by line item detail.

In addition to invoices, I typically have a utilization report to enable me to validate the hospital paying for what it has actually used, rather than what is being invoiced.

After completing my evaluation, I am in possession of the information I need to present my analysis to the internal stakeholders.

Step 3: Identify A High-Level Cost Savings Strategy

My third and final step in planning a cost analysis is to identify a high-level cost savings strategy based on my investigations. This allows me to provide a cost savings plan, complete with actionable insights, a detailed analysis and supporting information to the hospital or healthcare organization I am working with.

This strategy is outlined in a SOAR report (Savings in Operations Achieved Rapidly).

Following the submission of this report, VIE Healthcare® makes recommendations to our clients and outlines the next steps to implement their strategy and achieve their goal of margin improvement through cost savings.

The Value of GPOs: Truth Or Myth?

This article was written by Lisa Miller.

The value of GPOs – is it a truth or a myth?

After labor expenses, supply costs are the second highest level of expenditure facing hospitals – and they have been rising relentlessly over the last decade. On average, they comprise 15% of a hospital’s total overall costs but that figure can reach 30-40% in surgery intensive hospitals. By 2020, it is now predicted that supply chain costs will overtake labor expenses as the number one cost in healthcare. Hospital survival will increasingly depend on effective supply chain management.

Negotiating cost-effective supply agreements has historically been a challenge for many healthcare organizations. Most are not robust enough to purchase sufficient volume to secure discounts from vendors and manufacturers in isolation. Ultimately, they pay excessive prices for supplies that are essential to their very existence.

Enter the GPOs.

GPOs (Group Purchasing Organizations) play a major role in the supply chain of the US healthcare industry – and the level of their non-labor costs. Click To Tweet

According to the Healthcare Supply Chain Association (HSCA), GPOs exist to help ‘… healthcare providers….to realize savings and efficiencies.’ This is achieved by using their leverage to negotiate discounts with manufacturers and other vendors. Today, there are 633 GPOs in the US and Canada and over 12,000 members within those GPOs.

Dissenting voices, my own among them, have contributed to the debate over whether this system of purchasing does in fact save hospitals money or is ultimately contributing to rising healthcare costs. Three key arguments in favor of GPOs are that they reduce costs, increase competition and drive transparency. But in almost two decades as the founder of VIE Healthcare®, I see growing evidence to challenge those claims.

Here’s why.

GPOs: A Cause For Concern?

In October 2014 the GAO delivered a report to Congress on GPOs, entitled The Funding Structure Has Potential Implications for Medicare Costs. This report provided a starting point for the US government to examine GPOs more closely and evaluate the potentially negative impact they have on healthcare costs. But in the last four years, the situation doesn’t appear to have changed.

From my observations, GPOs are often shrouded in secrecy, yet a glimpse into their world reveals major hidden issues. I’ve explored some of my concerns – and those of others – below:

Monopolization by GPOs Prevents Competition

An article in the Wall Street Journal in May 2018 Where Does the Law Against Kickbacks Not Apply? Your Hospital highlighted the conflict of interest and secrecy surrounding GPOs. In a market dominated by four giant GPOs, it emphasizes just how difficult it is for other new and often more innovative companies to break through.

Notably, Amazon Business, which originally intended to expand its client base to include larger hospitals and health systems, withdrew from the healthcare supply market in April, in part due to the barriers imposed by the relationships between hospitals and GPOs.

Furthermore, GPOs use just three major distributors which in turn pay fees to GPOs and are entitled to manufacturers’ rebates on contract products. As smaller suppliers cannot access these rebates they are effectively excluded from the entire market. The article suggests that higher costs and supply breakdowns are the ‘inevitable’ consequences of these arrangements, an argument which I agree with.

GPOs: The Cause of Drug Shortages?

Back in 2015, GPO kickbacks and anti-competitive practices were identified as the cause behind generic drug shortages, as it was noted they were in control of over $300 billion in drugs and supplies for around 5,000 hospitals. That situation has not improved. In many cases, hospitals continue to experience a shortage of saline. Other drug supplies affected by the purchasing power of GPOs include anesthetics, painkillers and IV fluids for oral rehydration.

The Power and Influence of GPOs

GPOs weren’t originally intended to operate in this way. The first healthcare GPO was established in New York in 1910 when hospitals collaborated in an attempt to reduce the cost of laundry services. Many decades later, in the 1980s, GPOs were given a ‘safe harbor’ by Congress, which allowed them to take kickbacks from suppliers.

Today, GPOs wield what appears to be immense financial and political power. Writing in the Summer 2018 edition of the Journal of the Association of American Physicians and Surgeons, Marilyn M. Singleton, MD, JD observes that GPOs don’t always choose the products that are best for their customers or patients and calls for their ‘safe harbor’ status to be reconsidered. This is unlikely to be achieved due to the extent of lobbying in Congress. Premier Inc alone spent a total of $1.79m on lobbying in 2017. This lack of transparency and federal oversight allows the practice of kickbacks to continue unmonitored, leading to higher spending for Medicare and fueling the spiraling cost of healthcare.

A further concern arises from the fact that Medicare may be paying rates based on inaccurate data. The annual update of Medicare payment rates to hospitals relies, in part, on information that hospitals report to the Centers for Medicare and Medicaid Services (CMS), an agency in the Department of Health and Human Services (HHS). According to the most recent records, the last review of this report was carried out in 2005.

Although all hospitals are required to report GPO kickbacks to the CMS, there is no data verifying that this information was, in fact, provided to the department on a regular basis since 2005. The most current report may therefore be inaccurate.

Medicare payment rates may be affected over time based on inaccurate data in the annual update to hospital payment rates, which relies, in part, on information that hospitals report to the Centers for Medicare & Medicaid Services (CMS)—an agency in the Department of Health and Human Services (HHS). Hospitals are required to report all GPO kickbacks to the CMS as reduction activity, but an accurate report of GPO kickbacks is difficult to determine if the last review of this report was done in 2005. Medicare might be paying rates based on inaccurate data.

Is There An Alternative to GPOs?

Ideally, a healthcare system should focus on the needs of the patient and broader society over corporate gain. The current system appears to be failing to achieve that aim. Click To Tweet

While GPOs negotiate contracts with manufacturers, vendors, and distributors, hospitals typically maintain the ability to make purchases outside of the GPO contracts but negotiating in isolation is difficult, as prices are likely to rise. For hospitals considering working with GPOs, resources and guidance on negotiating concessions before entering into an agreement are also available.

Singleton also suggests that the mood is changing and offers evidence of a shift in the market:

  • Healthcare organizations are moving towards bypassing GPOs to gain the best value medical technology contracts.
  • A growing number of systems are ‘owning and controlling their own supply chain destinies.’

Amazon also remains serious about disrupting healthcare supply chains. In July 2018, its acquisition of pharma startup PillPack was announced, sending shockwaves through the market – but it is in its very early days.

At VIE Healthcare® we work with healthcare organizations to identify areas for cost savings in non-labor spend with our unique Invoice ROI™ Purchased Services Technology. Since 1999, we have saved hospitals millions of dollars by utilizing data analytics to find cost-saving opportunities in every invoice line item. Our team of experts dig deeper than the average AP spend and compare market pricing and market trends to identify where the opportunities lie for our clients.

Take our hospital cost assessment to better manage your hospital’s purchased services spend.

For a complimentary consultation, call our office today at 1-888-484-3332, Ext 500 or email us at info@viehealthcare.com.

Healthcare Decision Analytics

This article was written by Rich Dormer.

For more than a decade, I have been working successfully with senior executives and key stakeholders at hospitals and healthcare systems within the United States in identifying areas to extract unnecessary costs within their organizations and then delivering upon these opportunities. During this period, the team and I at VIE Healthcare have delivered more than $600 million in realized savings and margin enhancements.

While working with a diverse group of clients with different objectives, personalities, and cultures, I have uncovered the universal process that is common to all of those who achieve superior results. I have named that process “Healthcare Decision Analytics,” or HDA. HDA is comprised of three equally important parts: The Data Design, The Stakeholder Alliance, and The Strategic Blueprint. The goal of this article is to put clarity around this very important, and common, universal decision-making process.

Getting to, and making the optimal decision, for a healthcare organization present unique challenges, including competing stakeholder priorities, time and resource management, capital cost barriers of new technologies, local and regional community influence, and incomplete or overwhelming amounts of data to digest and make sense of. And these are just a few of the obstacles that successful decision-makers must overcome. Making the wrong decision, not making a decision, or even delaying a decision can have a lasting negative effect on an organization.

Healthcare Decision Analytics (HDA) requires accurate, intelligent and presentable data. As referenced above, this is HDA’s first critical component, which I have named The Data Design. Carly Fiorina, the former Republican Presidential Candidate and former Chief Operating Officer at Hewlett-Packard once said, “The goal is to turn data into information, and information into insights.” This quote concisely expresses the overarching goal of The Data Design process which not only turns data into insights, but is built on the collection of the “right” data.

Identifying and obtaining the “right” data can be quite the challenge, but equally daunting is how one analyzes the data and turns it into useful, actionable information. The more complex a set of data, the more complex and variant the analysis, and by extension, the more likely to lead one down dead-end analysis paths before finding the right path, if it is found at all.

Once the data has been collected and analyzed, the final and equally important step in The Data Design is how that information is presented to demonstrate the derived benefits in a clear and concise way. And though the derived conclusions and core recommendations will be the same, the presentation must be developed and geared to the target audience within the organization.

For example, one would need to develop and present the information differently to a CFO versus a spine physician versus a nurse manager versus a vendor representative. A flawed or misdirected presentation, which does recognize and respect the nature and culture of the specific target audience, could convert an otherwise solid set of recommendations into failure.

The second of three key components of HDA is The Stakeholder Alliance. Basically, The Stakeholder Alliance creates a shared vision of success through collaboration of the key team members. Typically the key team members will include stakeholders from the executive staff, involved department, and clinical or medical staffs as the case may be. Sometimes there may be a key influencer that is not an actual team member, but who has to be brought into the process in order to achieve success. The Stakeholder Alliance is a critical process of collaboration that has to be thoughtfully approached and navigated if one is to achieve success.

A Crew Team metaphor is perhaps the most effective way to explain the Stakeholder Alliance section of Healthcare Decision Analytics. If all of the crew members are rowing in unison, the vessel will move optimally. The importance of the team rowing in the same direction to make the right decision cannot be stressed enough. Good luck in getting the best in class orthopedic pricing if you don’t have the involvement and buy-in of the surgeons performing the orthopedic cases. Equally important is executive leadership support. Just like the Coxswain who guides the rowers to unified action and optimal results, the executive leader provides guidance and the authority to keep the initiative on course. Finally, just as the “shared vision” of the crew team is critical to their success, so too is shared vision a critical success factor for The Stakeholder Alliance. The spirit of a successful crew team and Stakeholder Alliance are the same; where do we want to go, how quickly do need to move, and what is the defined goal that will make this initiative a success?  If any of these pieces are missing or flawed, then the chance for success is compromised, if not lost completely.

The last section of Healthcare Decision Analytics is the Strategic Blueprint, which is the engine that drives the decision-making process to superior results. Creating a clear decision process, understanding and balancing time with the availability of resources, and following fundamental negotiating principles will help leaders avoid making a poor, non-tactical decision. Gaining clarity of the decision process and urgency amongst all parties involved is critical to accomplishing and maximizing and realizing the opportunities. One client recently had a contract addendum held up for two months in legal review. This delay cost their organization over $200,000 which could have been avoided if their senior leadership had been notified earlier of the time sensitivity and the need for an expeditious legal review.  The amount of time to accomplish a goal and the availability of resources (data, people, and experience) are directly proportional to the amount of expertise and outside thinking and help that is needed. If an organization has limited time and/or people to work on a project and/or core competency in the specific type of initiative, then one needs to seriously consider outside, third-party expertise to accomplish their goals.

The appropriate application of outside, third-party resources and expertise will always, when properly applied, increase both the bandwidth of in-house resources and the speed to goal realization. Click To Tweet

Negotiating correctly and without emotion is the final step in the Strategic Blueprint; try to avoid the using the “sharpen your pencil” strategy.

So, in conclusion, I hope I have conveyed the very important concept of Healthcare Decision Analytics (HDA) and its three essential building blocks, namely The Data Design, The Stakeholder Alliance, and The Strategic Blueprint. Furthermore, I hope that I was able to provide some insights into the successful decision-making process that I have witnessed and used while working with healthcare senior executives and their organizations. While some decisions may not directly affect an organization’s bottom line, most do have a long-lasting positive or negative effect.

The goal of Healthcare Decision Analytics is for leaders to gain the clarity and process they need to consistently make superior decisions which will then provide margin enhancement, stability and sustainability for their organizations.

How to Achieve Quick Wins in Your Hospital 2018/2019 Annual Budget

This article was written by Lisa Miller.

There are only a handful of weeks left in 2018 and many hospitals have asked us for advice on how they can find cost reduction opportunities from now until the end of the year.

You’ll want to follow our Annual Budget Preparation Guide in our latest report titled, “Hospital Cost Improvement Strategy” to improve your hospital operating margins in 2019, but if you’re looking for easy ways to achieve quick wins this year, try these four tips.

Review Merchant Card and Credit Card Procedure Rates

Review your merchant card agreements periodically to see if there is a chance of reducing fees. Since your hospital and affiliates accept credit cards, there might be a promotional discount or other factors that would warrant a reduction in charges. You will also want to look at your bank fees. There could be several opportunities to renegotiate those costs. Do this periodically for both credit card and bank fees to achieve more savings every month.

Find Opportunities in Your Accounts Payable Audit

Run a 12-month accounts payable (AP) report by vendor and by total spend to review your non-clinical and non-labor costs. We categorize these areas as: support services, facilities, finance, HIM, HR, IT, telehealth, telecommunications and administrative. Identify which ones you are overpaying and strategically renegotiate pricing and terms with those vendors.

Do not overlook charges that roll over month after month with no questions asked.

These sacred cows often represent the largest cost savings. Click To Tweet

Review Inventory in the Operating Room

Receive credits for excessive inventory in the operating room (OR) by conducting an inventory assessment to find which supplies can be returned for credit. When applicable, reuse, recycle or repurpose. There’s a myth in healthcare that suggests supplies in the OR must always be disposed of, but with today’s sterilization practices this is no longer an issue. Also, keep a pulse on the things that are owned versus consigned. ORs usually have a tremendous amount of inventory and these two categories are often mixed. Don’t lose track or it will lead to discrepancies in costs.

Evaluate Agreements to Expire in 4 to 6 Months

Evaluate agreements that are due to expire in 4 to 6 months to identify the quickest cost savings opportunities. Your current contracts might uncover pricing or contract terms that can be renegotiated within the next few months, offering cost reduction scenarios that would affect your budget this year and next year. Strategically, this will put your hospital in a more profitable position for 2019. Execute this strategy every 4 to 6 months going forward, and your organization could stand to see more savings in 2019 than it did in previous years.

Looking for more cost improvement tips? Ask for a free copy of our “Hospital Cost Improvement Strategy” report by calling our office at 1-888-484-3332 Ext 500 or email VIE Healthcare CEO and Founder Lisa T. Miller at lmiller@viehealthcare.com, a Healthcare Margin Improvement Expert, to discuss your cost reduction goals.

6 Steps to Optimize the Value of Your Outsourced Agreements

We’re concluding our series on ensuring quality and financial high performance from outsourced providers. In case you haven’t read them, here are parts one and two.

1. Have clear visibility to data, usage and the ability to understand costs easily. Research indicates that between 40% and 70% of outsourcing value may be lost due to unsustainable contract terms, incorrect pricing and poor relationship management. Understanding these factors, and their impact on revenue and value leakage over time, is absolutely essential to maximizing the value of an outsourcing partnership. Ensure your invoice is accurate, easily understandable and that there aren’t any issues with non-standard and convoluted pricing schemes that make your invoice difficult to validate.

2. Get feedback from the end-users. It’s important to have the insights from those who are working with your outsourced provider. Conduct quarterly performance reviews, quality surveys and an annual meeting with key end-users to understand how the outsourced provider is performing. Are there gaps? Are there issues that are not getting resolved? Are there opportunities for improvement? A well-designed feedback system will ensure a mutually successful outsourced partnership.

3. Expect that the outsourced provider is an extension of your organization and will be committed to cost improvement, process improvement, and revenue improvement. So many times when we review the services being provided to our clients and find out that there are “utilization” issues and we bring it to the attention of the outsourced provider—the provider says they are doing their job according to the agreement. We say, it’s your “job” to ensure utilization is optimized and costs are minimized. If you oversee laundry services, then you are responsible to deliver best in class services and standards in the industry per pound/patient day. If this exceeds the “norm” then it is the outsourced provider that must lead the charge to fix it.

4. Consider performance-based contracting arrangements. In a performance-based contract, the outsourced provider provides your hospital with specific benefits, such as cost reductions or revenue generation, and in return, the provider shares in the value created. A portion of the price of the contract is linked to a series of key performance indicators that the supplier is responsible for meeting and to business benefits achieved by your hospital through the fulfillment of the contract. Performance-based contracting agreements create an incentive for the provider to control its costs as these contracts align the interests of both parties. Performance-based contracts tend to encourage closer relationships with providers. Performance-based contracts should be implemented for projects with outcomes that can be measured objectively. Performance-based contracts can be used for any contract, including small-dollar-value contracts, but are generally most appropriate when:

• Projects are large, have new technology, or have high risks.

• Existing contracts can be converted to define as much of the requirements in performance-based terms as possible.

• Large umbrella contracts are experiencing cost overruns or performance problems.

• Benefits contributed by providers can be quantified.

• Project implementation and production time need to be reduced.

5. Never be afraid to benchmark. Either informally or formally; and during any time of your agreement. You have a right to know what the competitive marketplace is offering for services, prices, incentives and most importantly new ways of thinking – 16% to 30% can be financially gained when outsourced initiatives are benchmarked by VIE Healthcare.

6. Test-market the relationship — observe behaviors during a well-defined test phase, assuming that realistic tests can be devised and that necessary observations can be obtained, even if pre-contractual monitoring can only be done at a cost that could not be sustained during the contract. For the test to be meaningful, a certain level of environmental stability relative to the contract duration is required. Additionally, it must be possible to perform the test phase without massive irrecoverable investment from either party. Finally, the test must be reliable: it must be too expensive for either party to manipulate the test phase to influence the results, or there must be re-contracting intervals if the initial tests do not turn out to have been reliable.

Outsourced agreements are complex and have many moving parts in the agreement. Click To Tweet

It is difficult for departments to easily validate contract pricing to invoice pricing and the “promises” that were made initially when the agreement was signed. There is a lot of work on the front of putting together a high-performance outsourced agreement.

However, once that work is done, you have a system in place to ensure you are receiving the value for your investment into an outsourced provider. And remember, you don’t have to outsource an entire department or service line—“selective outsourcing” offers a way for your organization to outsource one aspect of a larger service.

However you choose to structure your outsourcing agreements, ensure you’re doing your due diligence in creating an arrangement that leads to success.

Hospital Value-Based Purchasing Program: How YOUR Hospital’s Quality is Being Graded

Quality can be difficult to judge and determine.

To use an example outside of healthcare, a gymnast or figure skater needs to know how the judges score and what they’re looking for in order to perform well.

In a similar way, hospitals need to know what Medicare is looking for in order to maximize reimbursement while maintaining and improving high-quality patient care.

The vision of the Centers for Medicare and Medicaid Services is that “all CMS beneficiaries [achieve] their highest level of health, and disparities in healthcare quality and access [are] eliminated.”1 In accordance with this vision, a shift is taking place. Historically, hospitals were paid based on the quantity of services they provided. Recent changes reinforce the need to reward hospitals based on the quality of care they provide. This includes a renewed focus on following best clinical practices and enhancing patients’ experience in the hospital.

Under the Hospital Value-Based Purchasing (VBP) Program, Medicare makes incentive payments to hospitals based on either: 2

  • How well they perform on each measure compared to other hospitals’ performance during a baseline period.
  • How much they improve their performance on each measure compared to their performance during a baseline period.

Every hospital in the Inpatient Prospective Payment System (IPPS) is given a Total Performance Score (TPS) to determine the amount of funding it receives. Specific measures are used to determine each hospital’s TPS. This is Medicare’s “scorer’s card” or blueprint for evaluating the VALUE that each hospital provides.

For the Fiscal Year 2018, the TPS is derived from four domains (25% weight for each):

  1. Clinical Care Domain.
  2. Patient and Caregiver-Centered Experience of Care/Care Coordination Domain.
  3. Safety Domain.
  4. Efficiency and Cost Reduction Domain.

HCAHPS Survey results form the basis for the Patient Experience of Care domain in the Hospital Value-Based Purchasing program.3

The world of healthcare is an ever-changing one. If an organization hopes to continue to thrive, those who lead it cannot be spectators. Click To Tweet

They must recognize the changes that are taking place – the standard by which they are being judged – and adjust accordingly.

How will your organization respond?

1. https://www.cms.gov/About-CMS/Agency-Information/OMH/about-cms-omh/mission-vision-our-work.html

2. https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/downloads/Hospital_VBPurchasing_Fact_Sheet_ICN907664.pdf

3. https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Downloads/HospitalHCAHPSFactSheet201007.pdf

Physician Preference Items (Part 2)

In the first article in this series, we highlighted several important points about physician preference items, including issues, inefficiencies and discrepancies. Here, in part two, we’ll discuss potential solutions.

One study published by The Milbank Quarterly: A Multidisciplinary Journal of Population Health and Health Policy discussed the value of “standardization strategies.” These strategies are designed to restrict physician choice in one way or another.

“The formulary model restricts the number of choices of manufacturers from which physician preference items are purchased or of the range of products that are bought for a given procedure,” while “the ‘payment-cap model’ does not explicitly restrict particular products or manufacturers but instead standardizes costs by restricting the price paid for products in a particular category.”

Restricting surgeon choice is not a popular approach, but change is never popular. However, change is necessary in a healthcare system that seems to always have rising costs and falling reimbursement rates (https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2690325/).

Education is another way to address the issue of supply chain inefficiencies. Surgeons need to be made aware of similar and even superior products that can be purchased at better prices. Other programs have provided surgeons with the breakdown of costs for a particular surgery they perform and how it compares with the costs for other surgeons to perform the same surgery. This model informs surgeons and creates a safe form of competition which could help reduce a hospital’s spending.

No matter what approach is taken, the relationships affected by any changes implemented must be considered. Click To Tweet

Physicians often have strong ties to sales reps. Perioperative administrators must maintain healthy relationships with surgeons. Hospitals must remain in good standing with the communities they serve. Many hospitals, in an effort to focus their efforts on providing excellent patient care, have partnered with third-party organizations who excel in negotiations and have experience in finding cost savings for hospitals, particularly in the area of supply chain. Whatever steps a hospital takes to contain spending in the supply chain and minimize waste on overpriced PPIs, administrators must understand that doing nothing is no longer an option.

The stakes are too high and the potential savings too great to ignore the impact PPIs have on supply chain inefficiencies.

What has your organization done to minimize supply chain inefficiencies?

Is Your GPO Partner Saving You Money or Just Replacing Your Staff?

This article was written by Lisa Miller.

Your group purchasing organization (GPO) service is expected to find you cost-savings, but its bundled services and products could cost more than if you simply hired a full-time hospital staff. However, would an in-house staff bring enough cost-savings to offset employee salaries?

Understandably, a full-time staff tasked with reviewing and negotiating on your behalf would be a costly venture, but the return on investment might be worth the effort. Considering how much hospitals spend daily on non-labor services, an experienced staff of professionals negotiating prices, analyzing data and reviewing your contracts is a tempting alternative, but what if you could have both?

By both we mean a full-time staff working to save you money without the cost of hiring an in-house staff, which defeats the purpose of saving you money. For this setup, you might consider an independent consulting service that works endlessly to find you cost-savings without the added salaries of an in-house staff or the added fees of a GPO.

GPOs – Cost-Saving or Cost-Replacing?

Many hospitals work with GPOs to find cost-savings, but GPOs have started to bundle their own products and services, replacing the cost-savings they find with their own fees. Additionally, what exactly are the bundled services doing for your organization? Are they necessary for your needs and are all services being utilized? Finally, can you find the same services in the marketplace or is it something exclusive and innovative?

Perhaps you could find innovation with your full-time staff because employee ideas are one of your best assets. Or, you could save yourself the added cost of employee salaries and hire an independent consulting service to develop an exclusive spend strategy for your organization.

An independent service would leverage strategies used in other hospitals and consist of professionals who are experienced in purchase spend savings. Click To Tweet

VIE Healthcare has helped many hospitals reduce the cost of running a hospital through innovation and diligence. We also help hospitals revamp their work culture, improve employee performance and streamline their operations for improved mapping of the patient journey. To learn more about VIE and our unique concepts, leave a comment below or call our office today for a free consultation.

Achieving World-Class Hospital Supply Chain Superiority

What are the key elements of achieving a world-class hospital supply chain superiority?

This is important, because only a 5%-15% savings in supply costs can equal a 1%-3% improvement in a hospital’s total operating margin. It goes without saying that a keen focus on your supply chain can make a big improvement in your hospital’s finances!

This will be the first of a three-part series dedicated to achieving a world-class hospital supply chain superiority as well as what works against you in achieving it.

Let’s begin with what should be the obvious – your people. Having a great staff and great leadership is fundamental to achieving results. They’re the backbone of your operation, they’re the ones engaging with patients, and they’re the ones making the decisions that impact every area of your hospital. You have to ensure you have the right people in the right roles.

You also want to look at technology. Specifically, investing in it, and then actually using it!

Historically, healthcare providers have invested less in IT to support supply chain than other industries. Click To Tweet

If you walk into any other manufacturing environment anywhere in the world, you will see about 60% of the IT budget devoted specifically to operations and supply chain.

A recent study also showed that healthcare providers that make greater investments in back-office automation and process improvement enjoy operating cost ratios that are 2%-4% better than those of their peers. These percentages support the investment and utilization in technology, specifically in the supply chain.

To round off the first part of this series, you also need to create an environment of innovation. A hospital that doesn’t take the input of their staff and employees seriously is a hospital that isn’t operating to its potential. Their feedback is critical to your success, so promote innovation across your entire workforce.

Our next entry will share further key elements to achieving a world-class hospital supply chain superiority.

In the meantime, what would you say is another important factor to consider here? Share your thoughts in the comments.

The audio version of this entry is available at the bottom of this post.