Embracing Innovation

Are you embracing innovation?

Let’s face it, each hospital has key differences which either make them successful or make them lag behind. 

One of the key differentiators is innovation.

That is, the successful organizations are the ones that are willing to be creative, take calculated risks, do things outside the norm and look beyond their comfort zone in order to serve their patients and drive results.

Some hospitals avoid innovation, because they simply don’t know where to start. Click To Tweet

Here’s a tip, look at your immediate hospital community. Reach out so that you can get ideas, directly from those who interact and engage with your hospital the most. Each community is different and each hospital has its own set of needs, so getting this perspective is an obvious starting point.

What’s innovative in New York City is likely completely different from what’s innovative in a rural community in Georgia. So realize that the word “innovation” has different meanings and simply copying and pasting another hospital’s procedures likely isn’t flexing your creative muscles to their full capacity and is more-or-less a shortcut to innovation.

An example of specific and strategic innovation is a hospital who has a very large parking lot. We’ve seen a real-life instance where this hospital hired someone to drive around in a golf cart to pick up patients and drop them off at specific areas in the hospital. This was a specific need of their community because of the way the hospital was laid out and is an instance of embracing the kind of innovation they actually needed.

Get creative. Look at everything from parking, to food, to telehealth and telerehab.

Chances are, innovative solutions are sitting right under your nose.

What’s one area of your hospital that you’ve improved by embracing innovation?

Working Against World-Class Supply Chain Superiority

This is the final part of a three-part series on world-class supply chain. Missed the first two? Click here for part 1, and here for part 2.

There are certain things that are simply working against world-class supply chain superiority, and you need to be aware of them.

If you’ve followed our series so far, we’ve provided several ideas and strategies to achieve world-class supply chain superiority in part one and part two. However, just as important, what are the elements working against you?


Let’s start with your staff – specifically the idea that you need to decrease the amount of people working in the organization. This isn’t true, in fact, your employees can be your greatest assets if you know how to leverage them properly.


Not having specializations in your departments is another common obstacle in achieving a world-class supply chain.

You need to make sure that the right people are in the right roles. Click To Tweet


Strategy is the next thing you need to consider. If you don’t have one, and if you’re simply maintaining the status quo, or your entire day consists of putting out fires, chances are you’re not being strategic enough and ensuring you’re following through with the strategy.


A lack of integration is something else you may be lacking. If your different departments aren’t coming together on a consistent basis and collaborating, you’re likely missing out on many opportunities for growth and success.

C-Suite Involvement;

Finally, ensure that your C-Suite is playing a vital role in supply chain initiatives. In order to truly create a successful supply chain, your organization needs to have an “all hands on deck mentality and philosophy.

There you have it! You now have several strategies that help you achieve a world-class supply chain and also common pitfalls to keep an eye on.

What’s another element that either works for or against achieving success with your supply chain? Let us know in the comments.

More on Achieving a World-Class Supply Chain

As promised, we’re continuing our discussion on achieving a world-class supply chain.

If you missed part one, click here for the first post in the series.

Achieving supply chain superiority can be difficult without a better supply cost management system. If you’re unsure of the efficiency of your current arrangement, this might be something you want to reassess sooner rather than later.

You also want to be looking at large companies like Apple, Google and Dell and learn from them. These companies, not surprisingly, have world-class methodologies in place which you can model.

Developing relationships with suppliers is also fundamental. People are willing to go the extra mile for a friendly face, so keep your interactions positive and be easy to work with.

Next, take a look at what you want to outsource versus what you want to handle inside your organization.

Each hospital has its own unique strengths and weaknesses and you need to be able to identify what to keep on your plate and what needs to be delegated elsewhere. Click To Tweet

Finally, commit to asking questions.

  • What can be improved?
  • How can this be done better?
  • What isn’t working?

When you’re asking questions like these, you’re not giving into the day-to-day status quo and keeping growth on your mind.

Which of these suggestions are you committed to implementing? Let us know in the comments.

Look for part 3 of this series where we’ll be discussing things that work against achieving a world-class supply chain.

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.

Don’t Skim Over Purchased Services

It’s critical that hospitals take the time, make the commitment, and lean on expert resources for cost savings. You never want to simply skim over purchased services.

For example, if conducting a sleep study, it’s important to map it to reimbursement. Hospitals will often cite a 10%-15% discount they receive as “good enough”, but upon deeper analysis the study was still run at a loss or at the very least they were not as profitable as they should’ve been.

To gain clarity, you need to be sure that you look at your purchased services agreements at a granular level. Click To Tweet

Look at the invoices, look at the contract, and then match those invoices to the contract. You need to be understanding utilization, looking at reimbursement when you can, and benchmark. If you’re simply looking at a price, you’re not doing your due diligence to ensure you’re optimizing costs. There are so many different components you need to be keeping a pulse on.

You also need to be looking out for hidden fees. Again, one of the many disadvantages of simply looking at a price is that you may not catch the fees that you didn’t even know you were paying! When you’re able to truly understand and pull apart each component of a final price, you’re much more effectively able to map the purchased service to reimbursements.

In fact, to remain profitable in the long-term, this should really be a non-negotiable in your process.

Yes, it takes expert resources to be able to fully understand all of the moving parts, but let’s take this further and think about the next time you go to negotiate a price or contract.

If you don’t understand these many components, how can you effectively negotiate? How can you be sure that you’re not paying for something you don’t need? How can you ensure that savings aren’t hiding right under your nose?

Here’s the short answer: you can’t.

What’s your process to ensure you’re clear on your purchased services and that you map them to reimbursements when applicable?

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

Are You Neglecting the Operating Room?

When it comes to getting a clear picture of your costs, are you neglecting the operating room?

The OR accounts for up to 70% of a hospital’s revenue, between 55% and 65% of its margin, and 50% of a hospital’s costs.

It goes without saying that it’s vital to look at trends in the operating room for improving financial performance.

1. Let’s start with standardization.

Organizations can achieve substantial savings when they limit the number of vendors for functionally and/or clinically equivalent products and implement a system that encourages compliance to establish contracts.

2. OR utilization or value-based selection.

The goal of value-based selection is to meet the needs and expectations of all stakeholders. That includes patients, doctors, hospital executives and, that too, at the lowest possible cost.

Here’s an example:

You’ll see a wide variation in mesh costs, specifically, anywhere from $4,000 to $32,000 or more. You’ll have to decide the right time for which mesh would be appropriate and patient specific. But, that is a $28,000 variation in cost, so by looking at your goals and sitting down with your physicians and your clinicians, you’ll understand when it is appropriate to use that $4,000 mesh and when it’s appropriate to use the $32,000 option.

The “one-size-fits-all” approach could be doing you an injustice! Click To Tweet

3. Cost-per-procedure.

It’s absolutely essential to truly understand what you’re being paid by procedures and understand what the costs are, as well as where the opportunities exist to reduce costs while still maintaining or exceeding patient care.

It’s also important to keep a pulse on owned versus consigned inventory. ORs usually have a tremendous amount of inventory and they’re often mixed between the two. And, when a hospital loses track of this, it can understandably lead to discrepancies or confusion around costs. 

Here’s a final point you can apply very quickly. Research shows that when pricing labels are put on products in the OR, individuals are more price conscious. Consider placing this into immediate effect, and measure the difference this simple practice can make.

There are numerous other angles to consider when it comes to operating rooms.

What’s another important element to look at? Share your thoughts in the comments.

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

Should You Use Outside Consultants?

Should you use outside consultants, or use your own internal team and resources for your projects?

It’s a common question, and it’s often a conversation point for the many different hospitals we speak with.

Here are a few things you want to consider:

1. They Possess Expertise

When you use outside companies, you bring them in for their expertise.

They’re subject matter experts. They’re performing this kind of work on a consistent basis. They see trends, best practices from around the world, and from different industries.

Expert guidance takes the guesswork out of the best steps to move forward. Click To Tweet

2. They Offer Support

The other thing to consider is that an outside consultant can bring value to your organization with the support that they offer.

Healthcare is ever-changing. There are so many things to juggle at once, including new requirements and mandates, new technology, shifts in reimbursement and countless other elements you may not even be thinking about! It can be overwhelming when you don’t have an outside perspective and the extra “pair of hands” of offer support.

3. They Provide Mentorship

The third area to think about is surrounding mentorship, notably that the right outside consultant is able to offer it. We’ve often been asked to come in to help on a project, whether it’s cost savings, or profitability, or a performance improvement project. But, we’ve also been asked to assist with the mentoring of key people. This can be a real key in choosing the right consulting partner and provide staff with fresh eyes and thinking to help them grow and develop as members of your team.

4. They Get Things Done

Finally, outside firms are also able to help with fast-tracking projects.

Yes, you may have the internal resources to work on a specific project, but as is the case with all fast-paced industries, priorities shift, and the internal resources are forced to juggle tasks and this often leads to delays or rush work. An outside firm, however, is able to be given a deadline and then is held to meet or exceed it. As projects get accomplished quickly, savings accumulate, and profitability increases, not just as a direct result of the completed projects, but also by internal resources not being forced to constantly push back tasks to make room for new ones.

So, should you use an outside consultant? If the benefits above are appealing to you, then the idea of an outside consultant should be as well.

Let us know in the comments, do you rely on internal resources or choose to work with outside companies?

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

Are You Optimizing Generic Drugs?

There may be a big opportunity here for you in the name of optimizing generic drugs. In fact, even moving the needle just a little bit could create dramatic results for you. 

Let’s start by sharing an important statistic.

In the United States, 92% of all prescriptions are being utilized in its generic format. Click To Tweet

Although the US already has achieved a higher level of generic utilization than any other country, there is still room for increasing generic efficiency within many therapy classes.

Optimizing generic use will be crucial in controlling spending, considering both Medicaid expansion and our aging baby boomer generation.

What we’re suggesting is that if the US could move their generic utilization by 6%, and that means a 10 billion dollar opportunity in costs control, what does that mean for your organization?

Think of creative, innovative ways you can move the needle by 1% to 6% in the next year. It’s achievable, and could also lead to dramatic profitability increases in your organization.

Share your thoughts in the comments, what’s one way you can move the needle in this area?

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

Five Quick Cost Reduction Areas

Our firm has been responsible for hundreds of strategies, solutions and ideas for expense reduction.

Let’s take a look at five which can be actioned right away, or at least reviewed or looked into.

The first is unclaimed funds. You can go on your state’s website and look up your organization to see if you have unclaimed funds that are due to your hospital. Check your hospital name and check other affiliations. This may be a near instant way to bring revenue right back to your hospital.

The second, take a look at merchant cards. Your hospital and your affiliates accept credit cards. A great way to recapture some money is to reduce the cost of those fees. Merchant card reviews should be done on a periodic basis, and it’s a great way to drive revenue.

The third, and it often gets overlooked…bank fees.

These fees should be looked at monthly and negotiated on a monthly or quarterly basis. Click To Tweet

We’ve had clients that have saved hundreds of thousands of dollars just by re-negotiating their bank fees.

Your real estate leases is the next item on the list. Again, this is an area that’s often overlooked. There are significant costs in CAM charges, the ones that get assessed on an annual basis for electricity, snow removal, lawn maintenance, and other fees that sit outside of the actual rent cost. It’s imperative to keep a pulse on this.

Again, our clients have saved hundreds of thousands of dollars just by taking an annual look at their real estate leases.

And finally, workers compensation costs. This is an area that needs to be audited on an annual basis. There are financial miscalculations, wrong classification codes, and wrong experience modification codes. You can drive additional savings and additional revenue by taking a deeper look into this area.

Get a handle on your expenses before they get out of hand!

What’s one other quick, but overlooked area to review potential savings?

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

Are You Working With the Right Firm?

Would it surprise you to know that most consulting firms offering purchased services expense reduction have only been providing this offering within the past few years?

If you’re considering bringing on a consulting firm to help you with your purchased services expense reduction, there are some questions you should ask.

The first question is, how many of these types of contracts have they analyzed? The second is, will they give you a sample of your choice to perform at no charge so that you can see an example of their work? The third, who are the analysts that will be working on your project and will you get a complete bio, which includes their experience and the results that they have achieved? And finally, I realize this is a sensitive one, are the consultants receiving any kind of compensation for the recommendations they’re making from the vendors? And that could be commissions or admin fees if they’re a GPO. It’s important to get clear on these elements.

Let’s segue quickly to some of the powerful results our firm has been able to achieve in purchased services.

Outsourced rehab: 14%-18% reduction.

Outsourced dialysis: 16%-23% reduction.

Patient satisfaction surveys: 6%-12% reduction.

Speciality lab testing: 7%-14% reduction.

Software maintenance contracts/software license renewals: 10%-15% reduction.

Pharmacy Compounding: 5%-8% reduction.

Document storage solutions: 14%-19% reduction.

And, there’s nothing better to substantiate the percentage examples above for what our clients achieve than a mini case study in two areas. One is sleep care. For some additional context to this, we had an IDN client with 1,032 beds that asked us to look at their outsourced sleep management agreement. We reviewed this pending renewal proposal from a regional sleep lab vendor. We were able to benchmark and provide best in class pricing, but we also performed an extensive retrospective review of the invoices versus the contract, which revealed enormous opportunities and some mistakes that we were able to identify. Ultimately, we reduced our client’s costs by 14.2% and we secured a credit of over $90,000.

A second case example is merchant cards. We have a current client with 450+ beds. We were asked to look at their merchant card rates. They had a $24 million annual spend, and we assisted them in reducing this cost by 32%, and also securing a one-time credit of $30,000 from errors that we picked up performing a retrospective analysis.

The key distinction is that there are differences between consulting firms.

The critical point for you is that you get the most out of your purchased services expense reduction by partnering with the right consulting firm. Click To Tweet

So, make the right choice!

What is one area that you’d like to review to reduce costs and spending?