STRATEGIC VALUE ANALYSIS® IN HEALTHCARE

Advancing Healthcare Organizations to the Next Level of Supply Chain Savings

Savings Beyond Price -Weekly E-Zine- July 21, 2005

by Robert T. Yokl, President and Chief Value Strategist

5 Reasons Why Purchase Services Aren’t Top Of The Mind With Supply Chain Professionals

Supply Chain Professionals Need To Hone Their Skills To Make An Impact On Their Purchase Services Spend As Well!

Even though 33% to 53% of hospitals’ total annual purchases are in their purchase services (e.g. consultants, IT contractors, temporary labor, advertising, marketing, service contracts, preventive maintenance contracts, outsourcing contracts, etc.), very few supply chain professionals have attacked this area of their hospital’s operations.  Since this category of purchase represents billions of dollars a year nation-wide; why is this happening?   Here are five reasons that I have observed to give you some insight into this challenge if you are to cultivate and harvest savings from your purchase services:

1.         Management Doesn’t Believe This is a Purchasing Function

Traditionally, hospital administrations have seen their purchasing department’s role as only buying things -- not services. Therefore, the responsibility of buying services is left to their department heads to figure out. In most cases, purchasing doesn’t even know a purchase service contract is being negotiated until they are asked for a purchase order number (if you are lucky) to process the contract’s payments. 

To reverse this negative trend, supply chain professionals must educate their executive management that they can add tremendous value to the purchase service contracting process, if they are permitted to manage this mission critical activity in consultation with their department heads.

2.         Contracts Not Centralized in Purchasing

Most hospitals and systems don’t have a central depository in their purchasing department where all purchase service contracts are maintained.  So, if you don’t have them, how can you manage them?

From a legal point of view, all purchase service contracts should have an original copy on file in your hospital or systems’ purchasing department. No ands, ifs or buts about it! 

3.         Visibility of Spend Data Hard to Track

Since most hospitals, and systems’ purchasing departments don’t receive an original copy of their purchase service contracts, they don’t enter them into their MMIS systems and therefore they hard to track.

If your hospitals or system is making a purchasing commitment for anything, it MUST be entered into your MMIS systems, so they can be tracked. Otherwise, why did we purchase these MMIS systems in the first place?

4.         Department Heads Believe This is Their Domain

No department head will share the responsibility for the preparation, execution and quality assurance of their purchase service contracts with your purchasing department because they think this is their domain.

Again, it’s your job to convince your executive management that you can add value to your purchase service contract process.  More importantly, you will be the policeman to insure that your hospital’s or system’s purchasing policies and procedures are followed to the letter.

5.         Purchasing Not Staffed To Take On This New Workload

It is rare to find a purchasing department that has the staffing to take on a new contract administration function, but that doesn’t mean it shouldn’t be done. 

I would recommend that all hospitals and systems have a contract administration function, even if it means that your material manager or purchasing manager is required to do it. The stakes are just too high to ignore this crucial function. And large healthcare organizations need a full time contract administrator to manage this mission critical function. To do less than this is to delegate this responsibility to your departments who are less prepared and less skilled at this activity than you are.  

In summary, our empirical experience has shown that savings of 17% to 35% can be achieved if healthcare organizations attack their purchase services aggressively, systematically and analytically. All you need to do is hone you skills, manage your time, and make it a priority to make an impact on these purchase service spends too! 

Click Here to Access the NO Obligation Free Non-Salary Survey to find out what your savings opportunities are for your organization.

MAILBOX 

Can you tell me how a value team differs from a value analysis committee?  We are currently forming the latter and I foresee our physicians becoming quickly frustrated and impatient with a committee format.  We are constantly bombarded with new products and technology but do not have enough hours in the day to properly evaluate everything.  Any insight you can share with me would be appreciated.  T.L.

First of all, I would suggest that you download my White Paper “Strategic Value Analysis: Savings Beyond Price” at http://www.strategicvalueanalysis.com that will give you detailed information on the difference between a value team and a value analysis committee.  However, the big difference is that a value team will be more responsive to your physician’s requests than a committee.  Since committees are risk adverse, time wasters and promote group think; very little or nothing of value gets accomplished. I would also suggest that you establish an ad hoc team to investigate why you have so many new product requests, because this is a symptom of a “dysfunctional” supply chain organization.  You shouldn’t be having this challenge and you need to fix it before you establish any team or committee, since it will just compound your problems.

Good luck,

Bob Yokl, Sr.

Chief Value Strategist

Strategic Value Analysis In Healthcare

800-220-4274

bobpres@strategicvalueanalysis.com

P.S.  If anyone else has a burning question that you would like me to answer, please call or e-mail me and I would be delighted to answer it.

There is Still “Gold in Them Thar Hills”

Technology Is Making It Much Easier To Save Money On Your Energy Bills

26% to 29% Energy Savings Are Possible With New Energy Sourcing Tools, Systems and Providers

One of the utmost expenditures in your healthcare organization is your energy cost (oil, electric and gas), which will take an even bigger bite of your operating budget in the years to come.  The good news is that technology is making it easier for you to save on your energy cost by using third-party energy sourcing tools, systems and providers (including reverse auctions). Here is a list of some of these third party energy sources: auction.energywindow.com; electricitygastele.com; and energynet.com you can contact for more information. If you think it’s not your job as a supply chain professional to pursue these savings – THINK AGAIN!

NO COST Tele-Seminar (1-Hour) July 27th

Strategic Value Analysis: Saving Beyond Price ($99 value)

On this call you'll get a new perspective on Savings Beyond Price in a way that gives you an advanced set of tools and tactics that creates partnerships with your clinicians and allows you to achieve more of your savings goals BEYOND PRICE!

Are your supply chain initiatives on life support?
Has all the ripe fruit been picked from your vineyard?
Has your savings stalled or fizzed out altogether?

Then join the leading authority in healthcare supply value analysis Robert T. Yokl on Wednesday, July 27 at 2: 00 PM Eastern,  1:00PM Central Time on the phone and learn:

• Why a new era of cost and quality management has arrived.

• Why value analysis is more important that every before.

• How you can move from “Price Thinking” to function, customer and quality thinking.

• Learn the six step system to turbocharge your savings and quality gains.

• Where to find savings beyond price at your healthcare organization

All you need is a telephone. We'll email your phone number for the Tele-Seminar. The Tele-Seminar is NO COST TO YOU!  Robert normally speaks for about 40 minutes and then will open the line for any question you'll have about savings beyond price.  We will give you detailed instructions once the program begins.

Click Here to Access the NO Obligation Free Non-Salary Survey to find out what your savings opportunities are for your organization.

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