Healthcare Value Analysis Hospital Consulting and Benchmarking for Supply Chain Savings

If you want to see beyond the clutter, fog and noise that saturates our day-to-day business decisions the best way I know to do so is with metrics. Specifically, a metric is a set of measurements that quantify results thereby telling us more about our supply chain operations. This insightful information will then enable you to make your big and little decisions with confidence, congruity and speed.

One caveat! The difficulty in using metrics is that you need to choose the RIGHT ones to get the RIGHT results. I find the ideal methodology to do so is Activity-Based Costing: Linking a product or service to an activity or cost driver to uncover significant actionable information.

For instance, if you wanted to have a meaningful metric to analyze your office supply total in-use cost you would use full-time equivalents (FTEs) divided by your office supply spend to arrive at this measurement. You can then benchmark this metric against your peers to determine whether your total in-use cost for office supplies is within acceptable limits. This is a much more scientific method than guessing!

Why FTEs? Because people drive the cost up or down on office supplies, consequently there is a direct relationship between your office supplies spend and the number of people your healthcare organization employs on a full or part time basis.

Get the idea? Anytime you want to measure something you need to first indentify your COST DRIVER for the product or service you are measuring. You then divide your cost driver by your supply spend or labor cost to arrive at your metric. This methodology can become much more complicated than my example of office supplies when a number of variables are involved, but this is the basics on how you would choose the RIGHT metric to keep you from going off track.

I know that this topic boarders on being academic, but it really has real world applications in supply chain management. If you master the basics of this concept, it can make your job easier, more productive and will allow you to become a saving machine. That’s why metrics matter!

P.S. To enable our subscribers to receive our new Supply Utilization Revolution book more quickly, we are now making it available electronically at absolutely no cost to you., but the information is priceless!

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March 4, 2010

Healthcare Expense Reduction: A Systematic Approach

The phrase “Healthcare Expense Reduction” can have many different interpretations. It could mean getting the best price, benchmarking to find the best practice, searching for the best value products, services or technologies or reducing your inventory levels to near zero. However, I would suggest that “Healthcare Expense Reduction” if done correctly needs to be all of these things and much more.

In point of fact, from our empirical experience it requires a systematic approach to reducing your healthcare organization’s supply chain expenses to get it right. This concept is analogous to what the insurance industry calls BLANKET COVERAGE, a single unifying policy that covers any and all of your risk or exposure to unforeseen calamities. This BLANKET COVERAGE idea holds true with “Healthcare Expense Reduction”; To get it right you need to cover all of your supply expense categories of purchase – all at one time.

To get you started on this journey, we have listed seven core elements of a successful “Healthcare Expense Reduction” unifying system. We advocate these core elements for you to obtain the highest return-on-your-investment of time, effort and resources in order to attack ALL of your supply expense savings simultaneously.

You will notice that these seven core elements described herein are actually interconnecting programs which you should have in place which cover the total spectrum of your “Healthcare Expense Reduction” efforts as follows:

1.   Utilization Management Program

2.   Value Analysis Program

3.   Contracts Administration Program

4.   PriceCheck™ Program

5.   Inventory Management Program

6.   Linen Management Program

7.   Forms Management Program

As this list suggests for your “Healthcare Expense Reduction” to be effective you need to have complementary and synergistic expense reduction programs in each of your supply chain disciplines, not one-time events. This way you can be assured that you have “Plugged all of the leaks” in your supply expenses before they become mile-high gushers or raging rivers.

This isn’t just a theory, but the actual system that we have employed ourselves over the last 23 years to assist hundreds of healthcare organizations in reducing their supply expenses to absolute minimums, and then to keep their expenses under control -- going foreword.