The only way to insure that your healthcare organization has the lowest possible non-salary cost is that it must change its culture from a “Price” orientation to a “Function” or “Value-Based” Orientation (figure 1), so that sustainable non-salary savings can flow easily and consistently without turf battles and wars being fought over moving a paper clip from one desk to another.  This paradigm shift can only happen when and if you are ready to BLAST, CREATE AND REFINE your present non-salary cost management processes, so that you can have, in good times and bad, abundant and quantifiable non-salary savings to meet your profitability objectives for any given year.

Don’t Fall Into The “PRICE FIRST” Trap!

We all fall into the “Price” first trap vs. measuring “function over cost” (figure 2), because measuring the price of any product, service or technology is easy and effortless to do. For example, my wife and I went out the other day looking for a toaster oven because our current toaster oven was at the end of its useful life. 

Only to find, much to our surprise, that even when you are buying a mundane toaster oven you need to make about 10 or 12 different choices among the models available, such as, size, shape, timer, electronic controls, raised legs, crumb tray, color, etc., before you can take your toaster oven home with you.  What do you think we based our decision on? Well, you guess right, since we were busy and tired shopping all day – instead of looking at cost over function first as I teach my students – my wife and I based our decision on PRICE FIRST, because it was easy and effortless, only to get the toaster oven home and have it break within a week of our starting to use it. 

Don’t laugh too loud about my snafu, in view of the fact that this is how most healthcare organizations are making their buying decisions – looking at PRICE FIRST vs. measuring “Cost over Function” – when buying their products, services and technologies.  

The Formula For Success: Cost Over Function = BEST VALUE

Now that your GPOs are offering multi-vendor contracts instead of the easier to justify single-vendor contracts on the products, services and technologies  that you purchase, PRICE FIRST orientation buying won’t work any longer for you.

For you to continue to be successful in the new millennium you will now need to employ a “FUNCTION” orientation to meet your customer’s requirements consistently and reliably and value justify all of your GPO purchases to them. This can only be accomplished through functional analysis to determine the BEST VALUES for your department heads and managers.