Healthcare Supply Chain Best Practices Podcast

Every supply chain professional is looking for that magic bullet to squeeze a few more dollars out of their supply chain expenses this fiscal year. However, let me tell you a secret I have learned in my long supply chain career about saving money. There are no magic bullets; just proven strategies, tactics, and techniques that strengthen your supply expense management efforts. Here are five that we recommend for you to employ for this purpose.

I was just made aware by my staff last week that they are now seeing annualized price savings for even the most contract compliant hospitals, systems, and IDNs that have shrunk to 1% to 2% from 2% to 4% of overall budget over the last decade. This is a startling change in supply chain economics that I would credit to the positive impact of national and regional GPO contracts over the last ten years. However, these price reductions (1% to 2% annually) aren’t nearly robust enough to move the needle on supply expenses in today’s unstable healthcare economy. That’s why it is mission critical for healthcare organizations to formalize, operationalize, and institutionalize (see explanation video) their supply utilization programs (SUM) to close their price gap. To sell this concept to your senior management, here are four reasons why supply utilization savings are better than price savings in our ever-changing healthcare marketplace:

In any industry there is terminology that is slow to be adopted but then becomes mainstream and functional. One of these mainstream terms that we use in healthcare today is supply chain management, which was created in concept in 1961 but not fully adopted by the healthcare industry until the late 1990s. Another one is healthcare value analysis which was created back in the late 1940s after World War II but did not transcend into the healthcare supply chain world until the 1970s and is not fully adopted as of yet.

Since hospitals have been asked to temporarily shut down primary revenue sources of their operations, such as major elective surgeries, they will need to reduce costs to the lowest possible levels while regaining their bottom lines. Here are just a few ways that I would recommend this be accomplished:

“The pace of decline of profitability margins is slower than it has been in past years, but they are still down. Median operating margins reached 1.7% in 2018, down from 1.8% in 2017. A more sustainable operating margin would be around 2.5%,” said Christopher Kerns, executive director at the Advisory Board. That’s why it is mission critical for supply chain professionals to dramatically lower their supply chain expenses to boost their hospital, system, or IDN’s margins. There are few other options left for healthcare organizations to do so. With this said, here are three keys to dramatically lower your supply chain expenses in 2020 beyond just price and standardization:

The dynamics of value analysis in healthcare have radically changed for the better in the last 20 years. We have watched as healthcare organizations moved from “sole practitioners” managing this VA function to vice presidents (in some healthcare organizations) determining the relative worth of the products, services, and technologies they are buying. Yet, with few exceptions, hospitals, systems, and IDNs have not reached the “Superior Performance Stage” of evolution in this supply chain discipline.

Imagine a bucket filled with a dozen holes. Now, imagine trying to keep that bucket full of water by adding more water to the bucket. Guess what. The holes continue to leak water, creating a vicious cycle that can go on forever. Now, change the word “water” in this sentence to “savings” and you can see how your healthcare organization could be losing millions of dollars annually in wasteful and inefficient consumption, misuse, misapplication, and value mismatches in your supply streams*. To stop this vicious cycle, here are three ways to plug your leaky savings bucket so you don’t lose any saving in the future

During a recent conversation that Robert W. Yokl (SVAH’s VP, Supply Chain & VA) had with a system supply chain executive. This thought-provoking discussion he had with the system supply chain executive was about how he was targeting supply utilization in a new savings initiatives to achieve his organization’s savings goals beyond price strategies. Clearly, he knew what we know and that is that supply utilization management is the next new savings strategy that will take us to new levels of savings beyond price in the healthcare supply chain. But why don’t more healthcare supply chain leaders adopt supply utilization savings as the next big savings opportunity and start building or buying systems to help them achieve this next level of savings? Is it because they don’t believe the savings are there or realizable? Check out the FREE Bonus included with this podcast!

We are excited today to have Kate Vitasek as our guest today who is a faculty of Graduate and Executive Education at the University of Tennessee’s Haslam College of Business Administration. She is the author of six books on the topic we are going to talk about today…Vested® Outsourcing. She has been featured on Bloomberg, CNN International, NPR, and Fox Business News. In addition, her insights have been widely published – including an article in this month’s Harvard Business Review. Find out more about Vested Outsourcing here: Vested Outsourcing Linkedin Profile for Kate Vitasek Twitter – Vested Way

For many in the healthcare supply chain, this this catch phrase (“providing the right product, at the right time at the right place”) has been the cornerstone of the supply chain’s best practices for over 50 years. Yet, we fail to ask these important questions: What happens after the product is in our customers hands? What happens after the contract has been implemented/converted and/or value analysis has chosen the best valued product? We know that the right price is in our ERP/Purchasing Systems, but do we know if the projected savings hit our bottom line? In order to get a better grasp on this vital concept, savings validation needs to occur because the costs ramifications of losing savings cannot be left flapping out in the wind any longer. Here is additional rational for doing so:

My son, Robert W. Yokl, VP of SVAH Solutions, sent me an article the other day from BBC Sports about the Mercedes Formula 1 racing team, who won six consecutive championships, on their “relentless pursuit of excellence”. More specifically, how Toto Wolff, head of Mercedes’s motorsport program, never stops pushing for even higher performance from his award-winning team. Here’s four tips from Wolff that you too can use in your own pursuit of supply chain excellence

The old supply chain adage of getting the right product at the right price to the right customer at the right time has always been a our goal. But what happens after the product is in the hands of the customer, the vendor contract is converted and/or the value analysis study is implemented? We know the pricing is right in our ERP/Purchasing Systems but does the dollars hit our bottom lines as we indend them to? Savings validation is a system to take away the “we believe we are going to saving based on our estimates from the previous year” and replacing it with, here is exactly how much we saved (or not saved) on all of our initiatives.

Value analysis is a systematic process that does not have any software tied to it in any way. You may hear companies call their software Value Analysis Software but it is only software for tracking the project workflow of your various value analysis studies. As one client said to me who had a software in place, “It doesn’t do any value analysis at all.” What we are talking about is the next generation of reporting that is geared towards giving you the tools to make your value analysis job easier, better and quicker while giving you better for decision making – before, during and after the studies have been completed.

After reading an article by David Shannon and Chuck Miller of Bain & Company about “Closed-Loop Savings Verification” processes (CLSV) in other industries, I discovered that this industry best practice also mirrored what is happening in healthcare. More and more, hospitals, systems and IDN’s CFOs are requiring their supply chain professionals to verify their projected savings on every savings initiative. In my opinion, this is because too often savings are reported by supply chain management to CFOs that never hits their healthcare organization’s bottom line. To avoid this from happening at your healthcare organization, here are three powerful tactics to ensure your healthcare organization has a foolproof “Closed-Loop Savings Verification” process that works

Benchmarking is nothing new to the healthcare supply chain and clearly you are thinking right now that, “We Benchmark at Our Hospital/System!” So, you know the value of benchmarking from one level or another, but do we apply this to our supply chain and value analysis initiatives as much as we could? The answer to that question is a big no! Why is this? First and foremost, nobody wants to be compared to another organization and even worse, be told that you are weak or not up to snuff in an area that you should be or perhaps you feel you are. Yes, you have a choice, choose to ignore the benchmark or try to ask, why is this, why are we running high and what can we do to be the “Best Benchmark” instead of the lower comparative?

Healthcare Value analysis training appears to be at the bottom of most VA practitioners to do list, yet it is an imperative that you and your VA teams have basic, advanced and then masterclass value analysis training. Not one-time training, but training on an on-going basis.  One hospital we worked with that has annual VA training for their VA team leaders and VA team members. This is the only way to ensure that your VA training sticks.  If this isn’t your practice too, here are 4 reasons why you must do so before your Hospital VA teams lose their edge

Just like the value analysis revolution that we experienced in the early 2000’s to the present we are now seeing that supply utilization management (SUM) is becoming a major buzzword in the healthcare supply chain.

If you are a frequent reader of our blog, you would know that we are very high on hospital supply chain benchmarking because it will make your supply chain operation better than just good. Yet, for those who still doubt the benefits of healthcare supply benchmarking here are four things you need to know to change this mindset

Every healthcare supply chain organization we know of has either a monthly, quarterly and annual savings reports that they prepare for their senior healthcare management.  Most are prepared on spreadsheets that limit the accuracy, comprehension and integrity of these reports.  Consequently, here are three big pitfalls we see that you need to avoid if you want your savings reports to reflect your real short and long-term savings accurately. Plus we highlight two of the biggest savings areas in the healthcare supply chain that you should be aware of in our Q & A Section

In this podcast we will outline the major reasons why you need to have a VA Strategic Plan in the first place. Plus we will outline the 5 most important Elements to a Successful Value Analysis Strategic Plan. Finally we will highlight the top benefits that you and your organization will reap by having a Value Analysis Strategic Plan in place now and for the future!