If you’ve had the opportunity to see the movie “Money Ball,” you learned that the secret to success in baseball is achieving a high on-base percentage. For success in the healthcare supply chain, it is an “on- the-shelf ” percentage.
Do your healthcare professionals have what they need at their fingertips when they need it, without stockpiling excessive and costly inventory? Some might suggest this is easier said than done. But these naysayers probably aren’t using sophisticated healthcare analytics.
Armed with real-time product intelligence, today’s supply chain professionals are becoming sophisticated cost engineers and, as such, are often increasingly summoned to the C-Suite to help address growing legislative and financial pressures.
Few would argue that saving your hospital millions is smart business; however, the net result extends far beyond improving operating profit margins. Every dollar saved is a dollar that can be invested in delivering better patient care. In today’s healthcare reform climate, it is not enough to carve out costs; hospitals must simultaneously improve care as well. While that may seem a tall mountain to climb, the availability of sophisticated analytical tools means hospital executives don’t have to guess which path to take.
The analytics advantage
Frequently dubbed “business intelligence,” analytics involves collecting, aggregating and storing vast amounts of relevant and related information in a central repository or data warehouse. Using tools that identify, categorize and classify item, coupled with supply product expertise, data is converted to knowledge, giving users detailed insight into their own utilization patterns while also improving their decision-making process around clinical acceptability and quality.
Ultimately, the best analytics tools give executives an integrated, enterprisewide comparison that creates a clear picture of pricing and price fluctuations, as well as procurement costs, practice patterns, clinical outcomes and other metrics. Employing a healthcare analytics arsenal using a single or a portfolio of products is often an iterative process that can be effectively accomplished in straightforward, common sense stages.
That said, healthcare analytics tools are not a cure-all but instead, should be applied as part of a more rigorous, integrated approach if you’re seeking to reduce costs, improve margins and deliver better patient outcomes.
Here are three key steps hospitals can take to start climbing the proverbial mountain:
Step 1: Understand your data
Hospital item masters, for example, often contain thousands of line items for hundreds of supplies in virtually countless categories. Often, a single, identical supply item like latex-free gloves or sutures is indicated by multiple identifiers, hindering efforts to calculate an accurate, item-specific supply spend. A firstrate healthcare analytics methodology will help you analyze, scrub, consolidate, categorize and classify your item master supply chain data to improve its quality and accuracy. Once you’ve cleansed your data, you can better determine types and quantities of items you are buying to better understand your supply spend and embark on a more cost-efficient purchasing program.
Having an accurate and up-to-date item master is the foundation of an effective analytics program and provides the basis for optimizing unit-based and organization-wide supply spend. Accurate and consistent data also leads to more efficient operations, reducing logistics expenses and storage- related inventory costs while improving labor efficiencies. In my experience, healthcare organizations that adopt this initial methodology can shrink their annual supply costs by between 1 percent and 3 percent.
Step 2. Link data with decisions
Having accurate, comprehensive and up-to-date data is just the starting point. Knowing how to use it is equally important and ultimately will drive financial and operational excellence.
To test your analytics current capability, ask yourself these types of questions:
If you can’t answer these kinds of questions with the click of the mouse (and most supply chain executives can’t), you’ll likely benefit from linking your data to healthcare analytics tools that are based on regularly scheduled reports from a robust database integrated with a strong, business intelligence platform. Don’t worry, the best analytics tools deliver this information via easy to interpret dashboards complete with bar and pie charts.
Integrating this type of solution to the enterprise’s existing analytics program can be accomplished quickly, with most systems becoming fully functional in six months or less, depending on other requirements such as staff training.
While adopting analytics may seem complicated and time-consuming, the results are staggeringly impressive. For example, at one large Midwestern member of VHA Inc., the hospital’s director of supply strategy identified about $1 million in cardiac service line physician preference supplierrelated savings during a two-hour long training and introductory period on a VHA healthcare analytics tool. Extrapolate that savings into other services lines and you can easily envision serious savings from improved supply chain visibility.
Analytics also takes the guess work out of the negotiation process. Instead of relying on a sales rep assuring that “you’re getting the rock-bottom price,” you’ll know for sure when you aggregate your spend data (identifiers removed) with thousands of other hospitals. An effective healthcare analytics tool can benchmark your pricing and, more importantly, show you how the price you are paying for a specific device or product ranks or compares with prices other hospitals are paying. This factual knowledge and market-comparative pricing provides you with fact-based data upon which to effectively negotiate with salespeople for better pricing, especially on costly physician-preference products.
Step 3: Advance clinical effectiveness
Analytics tools also are proving a powerful mechanism through which to recognize, understand and correlate patient costs against clinical outcomes. As healthcare moves from fee-for-service to a pay-for-performance model, this knowledge will be critical to measure, compensate and reward hospitals for effective clinical outcomes, while flagging clinical underperformers.
Analytics also can help influence physicians, nurses and other clinicians who are scientists by nature and respond best to facts. The data can help your clinical staff recognize procedures that yield the best outcome and at what price. For example, in 2010, Genesis HealthCare in Zanesville, Ohio, saved $1.4 million during an orthopedic implant project by employing analytics-driven information to negotiate lower device prices, followed later by an additional $90,000 savings in cardiac rhythm management and $65,000 savings on electrophysiology catheters.
Integrating patient information systems both hospital-wide and, eventually, system-wide with robust analytical tools also will enable supply chain managers, CFOs, CMOs, CNOs and other hospital leaders to get a clear picture of physician-specific procedure costs and link them to outcomes. As payments shrink, hospitals can use this analytical data to more effectively engage physicians in constructive conversations that will lead to consistent, cost-effective care while helping hospitals achieve a successful clinical and cost-effective transition to performance excellence.
Mr. Downing is chief sales and marketing officer for VHA and is responsible for sales and member service functions connected with all the products and solutions VHA offers its members to help them with cost management and quality improvement activities. Downing also oversees the teams responsible for VHA’s marketing and branding efforts, member recruitment and retention efforts and the staff members at two VHA regional offices: VHA Georgia and VHA Pacific Northwest.
Do your healthcare professionals have what they need at their fingertips when they need it, without stockpiling excessive and costly inventory? Some might suggest this is easier said than done. But these naysayers probably aren’t using sophisticated healthcare analytics.
Armed with real-time product intelligence, today’s supply chain professionals are becoming sophisticated cost engineers and, as such, are often increasingly summoned to the C-Suite to help address growing legislative and financial pressures.
Few would argue that saving your hospital millions is smart business; however, the net result extends far beyond improving operating profit margins. Every dollar saved is a dollar that can be invested in delivering better patient care. In today’s healthcare reform climate, it is not enough to carve out costs; hospitals must simultaneously improve care as well. While that may seem a tall mountain to climb, the availability of sophisticated analytical tools means hospital executives don’t have to guess which path to take.
The analytics advantage
Frequently dubbed “business intelligence,” analytics involves collecting, aggregating and storing vast amounts of relevant and related information in a central repository or data warehouse. Using tools that identify, categorize and classify item, coupled with supply product expertise, data is converted to knowledge, giving users detailed insight into their own utilization patterns while also improving their decision-making process around clinical acceptability and quality.
Ultimately, the best analytics tools give executives an integrated, enterprisewide comparison that creates a clear picture of pricing and price fluctuations, as well as procurement costs, practice patterns, clinical outcomes and other metrics. Employing a healthcare analytics arsenal using a single or a portfolio of products is often an iterative process that can be effectively accomplished in straightforward, common sense stages.
That said, healthcare analytics tools are not a cure-all but instead, should be applied as part of a more rigorous, integrated approach if you’re seeking to reduce costs, improve margins and deliver better patient outcomes.
Here are three key steps hospitals can take to start climbing the proverbial mountain:
Step 1: Understand your data
Hospital item masters, for example, often contain thousands of line items for hundreds of supplies in virtually countless categories. Often, a single, identical supply item like latex-free gloves or sutures is indicated by multiple identifiers, hindering efforts to calculate an accurate, item-specific supply spend. A firstrate healthcare analytics methodology will help you analyze, scrub, consolidate, categorize and classify your item master supply chain data to improve its quality and accuracy. Once you’ve cleansed your data, you can better determine types and quantities of items you are buying to better understand your supply spend and embark on a more cost-efficient purchasing program.
Having an accurate and up-to-date item master is the foundation of an effective analytics program and provides the basis for optimizing unit-based and organization-wide supply spend. Accurate and consistent data also leads to more efficient operations, reducing logistics expenses and storage- related inventory costs while improving labor efficiencies. In my experience, healthcare organizations that adopt this initial methodology can shrink their annual supply costs by between 1 percent and 3 percent.
Step 2. Link data with decisions
Having accurate, comprehensive and up-to-date data is just the starting point. Knowing how to use it is equally important and ultimately will drive financial and operational excellence.
To test your analytics current capability, ask yourself these types of questions:
- How quickly can I determine the products that comprise my top 10 supply-chain expenses?
- How much do I spend on costly physician preference items like defibrillators, hip and knee replacements and devices and products used in cardiac and spine-related procedures? Who are the manufacturers of those products?
- Where does my organization rank compared to its peer-group facilities, within its geographic region or nationwide on the prices it pays for those supplies?
If you can’t answer these kinds of questions with the click of the mouse (and most supply chain executives can’t), you’ll likely benefit from linking your data to healthcare analytics tools that are based on regularly scheduled reports from a robust database integrated with a strong, business intelligence platform. Don’t worry, the best analytics tools deliver this information via easy to interpret dashboards complete with bar and pie charts.
Integrating this type of solution to the enterprise’s existing analytics program can be accomplished quickly, with most systems becoming fully functional in six months or less, depending on other requirements such as staff training.
While adopting analytics may seem complicated and time-consuming, the results are staggeringly impressive. For example, at one large Midwestern member of VHA Inc., the hospital’s director of supply strategy identified about $1 million in cardiac service line physician preference supplierrelated savings during a two-hour long training and introductory period on a VHA healthcare analytics tool. Extrapolate that savings into other services lines and you can easily envision serious savings from improved supply chain visibility.
Analytics also takes the guess work out of the negotiation process. Instead of relying on a sales rep assuring that “you’re getting the rock-bottom price,” you’ll know for sure when you aggregate your spend data (identifiers removed) with thousands of other hospitals. An effective healthcare analytics tool can benchmark your pricing and, more importantly, show you how the price you are paying for a specific device or product ranks or compares with prices other hospitals are paying. This factual knowledge and market-comparative pricing provides you with fact-based data upon which to effectively negotiate with salespeople for better pricing, especially on costly physician-preference products.
Step 3: Advance clinical effectiveness
Analytics tools also are proving a powerful mechanism through which to recognize, understand and correlate patient costs against clinical outcomes. As healthcare moves from fee-for-service to a pay-for-performance model, this knowledge will be critical to measure, compensate and reward hospitals for effective clinical outcomes, while flagging clinical underperformers.
Analytics also can help influence physicians, nurses and other clinicians who are scientists by nature and respond best to facts. The data can help your clinical staff recognize procedures that yield the best outcome and at what price. For example, in 2010, Genesis HealthCare in Zanesville, Ohio, saved $1.4 million during an orthopedic implant project by employing analytics-driven information to negotiate lower device prices, followed later by an additional $90,000 savings in cardiac rhythm management and $65,000 savings on electrophysiology catheters.
Integrating patient information systems both hospital-wide and, eventually, system-wide with robust analytical tools also will enable supply chain managers, CFOs, CMOs, CNOs and other hospital leaders to get a clear picture of physician-specific procedure costs and link them to outcomes. As payments shrink, hospitals can use this analytical data to more effectively engage physicians in constructive conversations that will lead to consistent, cost-effective care while helping hospitals achieve a successful clinical and cost-effective transition to performance excellence.
Mr. Downing is chief sales and marketing officer for VHA and is responsible for sales and member service functions connected with all the products and solutions VHA offers its members to help them with cost management and quality improvement activities. Downing also oversees the teams responsible for VHA’s marketing and branding efforts, member recruitment and retention efforts and the staff members at two VHA regional offices: VHA Georgia and VHA Pacific Northwest.