Clinical supply utilization management paves way forward

Hospitals’ clinical supply costs are rising faster than volume. According to one prominent healthcare newsmagazine the typical hospital has seen its clinical supply cost shoot up 10 percent to 14.5 percent in fiscal 2014 because “Providers are seeing more newly insured patients who often require a higher level of service, requiring more equipment and technology and driving up hospital supply and labor cost.” This is a scenario that isn’t sustainable!

Time to reinvent

We are all looking for an edge in our supply chain expense management outcomes that will leapfrog us into even greater supply chain expense savings. This is how healthcare organizations will counter the rising supply and labor costs they have been experiencing. Some believe this leapfrogging effect will happen through regional group purchasing organizations, self-distribution or out-of-the-mainstream strategic sourcing, but I don’t think so. I believe the way forward to new and even better double-digit savings is with clinical supply utilization management.

Point of service control

Supply Chain and Value Analysis professionals customarily have tried to manage and control their healthcare organization’s supply expenses remotely, but have been ignoring the fact that the value is created or lost in your hospital or hospitals at the unit or department (or point of service). So doesn’t it make sense that your clinical managers and directors could be your best cost managers, with your assistance, since it is they who are directly or indirectly generating the majority (83 percent to 85 percent) of your hospital or hospital’s supply expense budget? If you follow this logic, Supply Chain and Value Analysis managers need to partner with our clinicians to develop a clinical supply utilization system to make these savings happen organically.

Share savings workload

Supply Chain and Value Analysis managers have been doing a great job on price and standardization savings for decades, but too often they are hitting the wall on removing waste and inefficiencies from their healthcare clinical supply streams. This is because your clinicians push back with a vengeance if they are challenged in any way. Yet it has been our experience, if and when clinicians can see for themselves that specific products, services or technology costs are beyond acceptable limits, 97 percent of the time clinicians will take corrective action. Yes, it does take a little longer for the other 3 percent of clinicians to get on board. The overall effect of this self-correction feature is that your tug-of-war with your clinicians is over!

Empower your clinicians

Right now at your hospital your clinicians are receiving comprehensive data on their labor cost to effectively manage this expense driver, but are receiving little or nothing on their supply expenses. If you would take a look at your hospital’s budget variance reports, they only tell part of the story. A clinician could be within their budget parameters, but still be spending way too much (11 percent to 23 percent) on their supplies. This can all change with timely, intuitive and visual data your clinicians can understand and then act on.

Furthermore, very few clinical supplies and technologies are changed without agreement of your clinicians. The reason for this is that any clinical change must be owned by these same individuals. What data visualization does is return control to the hands of your clinicians with the result that they are more accommodating to changing their products, services and technology because it was their own decision to do so. Remember, a picture is better than raw statistics.

Training, coaching and mentoring

The new role of Supply Chain and Value Analysis professionals in clinical supply utilization management is to train, coach and mentor your hospital’s clinical staff on how to interpret their reports, investigate their variances and then change their products, services, technologies or their staff’s behavior. You will find this new role much more rewarding than the push and pull relationship you have had with your clinicians in the past. This is how to step up to the plate and hit a home run for your healthcare organization this year.

A new day is dawning

As I stated, it’s my estimate that 83 percent to 85 percent of your hospital or hospitals’ supply chain expenses are in your clinical supplies, services or technologies. This is where you want to focus your time and energy to reduce your healthcare organization’s supply expenses this fiscal year. But substantial and meaningful cost reductions aren’t going to happen without your clinicians leading the charge to reduce their own unit or departmental supply expenses with your help. Remember, people like the changes that they bring about themselves.