What We Can Learn From Walmart - Healthcare Expense Reduction

In 2005 Wal-Mart’s President Lee Scott set an ambitious goal of creating a new corporate culture at Wal-Mart that would result in zero waste in its stores, leaner supply streams and that would eventually lead to Wal-Mart being a “good steward for the environment”.

His initial “Targets include(d) spending $500 million a year to: increase fuel efficiency in Wal-Mart’s truck fleet by 25 percent over three years and doubling it within 10 years; reduce greenhouse gases by 20 percent in seven years; reduce energy use at stores by 30 percent; and cut solid waste from U.S. stores and Sam’s Clubs by 25 percent in three years. He said improving fuel mileage in the trucking fleet by one mile per gallon would save more than $52 million per year” alone.

What does this mean to you? Healthcare organizations’ budgets are also weighed down with waste and inefficiency in their facilities, supply streams and energy cost. These need to be addressed as vigorously as Wal-Mart is doing with their “green” initiative.

I’m not just talking about the environment here; it’s about the survival of your healthcare organizations in the 21^st century. Our nation’s healthcare cost is unsustainable ($9,996 per employee, $16,771 per family) for the average employee, family and company. If our healthcare industry doesn’t take action now to reverse this trend, we will bankrupt our nation in less than 10 years.

What can we do about this? As supply chain professionals, we can lead the charge to have ZERO WASTE in our healthcare organizations. A good starting point would be to recycle everything that can be reprocessed at your healthcare organization. This one act will not only save your healthcare organization about 50% of the original cost of the product being recycled, but will lean your supply chain by reducing your inventory handling cost -- not to mention the added expense of your infectious waste removal. It is safe, it is easy and it makes sense to do so!

I could cite other examples of how our clients are reducing their waste to ZERO without affecting their quality, but I’m sure you get the idea. To meeting this challenge head on, we in fact need to change our CULTURE too from “overindulgence” to ZERO WASTE in warp speed or we will pay the price for our intemperance down the road! Supply chain professionals are in the ideal position to get this ball rolling in the right direction.

P.S. If you would like to learn more about this concept, I would suggest you download my HPN article “Zero Waste Should Be your Goal” to hone in on your own waste and inefficiency in your hospital’s supply streams.

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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.