Healthcare Value Analysis Hospital Consulting and Benchmarking for Supply Chain Savings

I have often touted Toyota’s steadfast focus on frugality and quality in my articles over the years as a model that should be emulated by all supply chain professionals. I was of course amazed and disappointed when I read in Business Week that “a combination of high-speed global growth and ambitious cost cuts led to the quality lapses that have tarnished the once-mighty brand”. How could this happen?

If you dig deeper into the Business Week story you find that “the company was hijacked…by financially oriented pirates” according to Toyota’s U.S. President Jim Press, into cutting corners, ignoring warnings and turning their backs on their customers. From my experience, this is what happens when any organization becomes insulated, arrogant and puffed up by their success.

I’ve even seen this mind-set in a few healthcare organizations, both large and small who think they have all the answers, ignore their customers’ forewarnings, and push forward anyway with initiatives that only make sense to the people who designed them. Are these organizations on track too to be humbled as Toyota is today?

For example, I frequently call senior supply chain executives only to hear on their voice/mail message that if you aren’t a current vendor of theirs, don’t expect a return call from this organization. I also hear that some regional GPOs only do business with vendors that are already contracted with their national GPO sponsor. As a result, these GPOs are eliminating scores of regional vendors from bidding on their three-year contracts who might just have better prices than their national vendors. Does this behavior seem like open-minded, customer focused, enlightened decision-making to you?

My message here is that once any organization becomes successful, their success can actually become their “Achilles Heel”. This is a fatal weakness in spite of the overall strength of these organizations and can actually or potentially lead to their downfall. Success is a two-edge sword; it can push you forward to become even better or it can make you soft, self-important and complacent. The good news is that “You can make the choice on how you will handle success”!

P.S. If you haven’t ordered your own NO COST copy of our “Healthcare Supply Utilization Revolution” book what are you waiting for? It’s packed full of new and better savings ideas that you will need now that your price savings are slowly disappearing. It’s the future of supply chain expense management that you need to know about!

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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.