Savings can't trump the quality of patient care — the caveat that starts any discussion about cost-cutting in the healthcare industry. But with patient volume on the rise, the enactment of the Patient Protection Affordable Care Act and resource cuts, hospitals and health networks across the country are grappling with increased pressure to uncover more savings in 2013.
Imagine manually sorting through thousands of contracts and line items across multiple departments and facilities — all with varying degrees of detail — and making the difficult decisions about what to cut. That thought alone prevents most hospitals from taking on extensive cost-cutting. Luckily, there's a better alternative that's gaining popularity in the industry.
While the questions are easy to think of, the answers can be eye-opening as hospital leaders discover just how little is known and tracked. The problem only gets worse with multiple facilities and locations. To establish a baseline, more hospitals and health networks are turning toward spend analysis technology to gain this first line of visibility and identify savings — without the manual, heavy time investment from staffers.
Spend analysis shines a light on simple changes that stop money from being thrown away. For example, consider a large hospital network that is far ahead of the curve, with strong controls and processes in place across all departments. By implementing a spend analysis program, it identified $2 million in savings by tracking overpayments made to suppliers over an eight-month period. With thousands of line items and hundreds of contracts, it's nearly impossible for departments to manually review contracts that traditionally are hidden away in file cabinets.
Hospitals also have a unique opportunity to cut costs in areas that do not affect patient care, called indirect spending, which range from office supplies, laundry services to transportation costs. When each department purchases indirect supplies separately, opportunities for volume-based discounts and negotiating power with suppliers are missed. Spend analysis combs through all categories, across all departments and highlights areas for supplier/contract consolidation and savings.
By enriching spending and supplier data with outside information, including physician supply preferences and procedure-level patient outcomes, the worry about negatively impacting patient care is nearly eliminated. Decision-makers can then select cheaper, yet equivalent supplies for physician use.
These swaps may just be a matter of selecting a generic product vs. a more expensive name-brand option, or reviewing physician preferences across all care divisions and identifying opportunities for volume-based pricing with a supplier that already provides a different category of supply.
The additional savings are pumped back into the healthcare facilities and programs to power research, facility improvements and new advancements. Cost-cutting can actually benefit patients and quality of care, when approached with the right tools and mindset.
Dan Warn joined BravoSolution in 2012, after previously serving as Chief Procurement Officer for Blue Cross Blue Shield.
Imagine manually sorting through thousands of contracts and line items across multiple departments and facilities — all with varying degrees of detail — and making the difficult decisions about what to cut. That thought alone prevents most hospitals from taking on extensive cost-cutting. Luckily, there's a better alternative that's gaining popularity in the industry.
Uncover immediate savings
Before any cost-cutting initiative can begin, decision makers must answer (what seem like) basic question about where and how money is currently spent.- How many suppliers do we work with?
- Is each department over or under budget for the year?
- What is the total spent per item category — from surgical equipment to office supplies?
- Are suppliers delivering what was contracted at the agreed-upon prices?
While the questions are easy to think of, the answers can be eye-opening as hospital leaders discover just how little is known and tracked. The problem only gets worse with multiple facilities and locations. To establish a baseline, more hospitals and health networks are turning toward spend analysis technology to gain this first line of visibility and identify savings — without the manual, heavy time investment from staffers.
Spend analysis shines a light on simple changes that stop money from being thrown away. For example, consider a large hospital network that is far ahead of the curve, with strong controls and processes in place across all departments. By implementing a spend analysis program, it identified $2 million in savings by tracking overpayments made to suppliers over an eight-month period. With thousands of line items and hundreds of contracts, it's nearly impossible for departments to manually review contracts that traditionally are hidden away in file cabinets.
Hospitals also have a unique opportunity to cut costs in areas that do not affect patient care, called indirect spending, which range from office supplies, laundry services to transportation costs. When each department purchases indirect supplies separately, opportunities for volume-based discounts and negotiating power with suppliers are missed. Spend analysis combs through all categories, across all departments and highlights areas for supplier/contract consolidation and savings.
Savings fuel innovation
The most advanced hospitals, health networks and even group purchasing organizations are taking spend analysis to the next level to find the right balance between cutting costs and maintaining the quality of patient care.By enriching spending and supplier data with outside information, including physician supply preferences and procedure-level patient outcomes, the worry about negatively impacting patient care is nearly eliminated. Decision-makers can then select cheaper, yet equivalent supplies for physician use.
These swaps may just be a matter of selecting a generic product vs. a more expensive name-brand option, or reviewing physician preferences across all care divisions and identifying opportunities for volume-based pricing with a supplier that already provides a different category of supply.
The additional savings are pumped back into the healthcare facilities and programs to power research, facility improvements and new advancements. Cost-cutting can actually benefit patients and quality of care, when approached with the right tools and mindset.
Dan Warn joined BravoSolution in 2012, after previously serving as Chief Procurement Officer for Blue Cross Blue Shield.