Does your facility have a new year’s resolution? What about a goal or commitment for 2011? With the start of a New Year, hospital leaders shift their thoughts to financial forecasts and whether your facility is tightening its belt or simply looking to shave overall costs in the long run, the most successful approach to cost savings in the New Year is to plan ahead - wisely.
With hospitals developing strategies to enhance the value of care and services they provide while keeping costs low, we are focusing this edition of Off the Shelf on materials cost savings.
While budgets and goals are only one piece of the metric puzzle, your process must address the root issues and opportunities for improvement. To start identifying potential savings opportunities at your healthcare facility, remember the four C’s:
Classify areas of opportunity
Create internal value/buy-in
Calculate potential savings
Classify Areas of Opportunity
Determine your hospital’s annualized savings goals at the beginning of each fiscal year. Identify the major areas of opportunity beginning with major, big expense categories and work your way down. A close look at specific programs will yield the best results when focused on your facility’s big spenders. And remember, tying in realistic savings goals to each of the categories will create internal buy-in and aid in negotiations.
The opportunity for improved pricing presents itself in many forms. Some of the most common include:
• GPO compliance
• Vendor consolidation
• Product standardization
Create Internal Value/Buy-in
Creating internal value and fostering end user buy-in is crucial for any cost savings initiative. This is most effectively accomplished through the creation of a multidisciplinary panel, or Value Analysis Committee, that will determine which cost savings initiatives should be implemented and how.
With participation from physicians, clinicians, management, staff, and administration, your hospital can evaluate whether products and services generate cost savings, improve quality of care, or both. The goal is to identify and implement cost savings initiatives while new products are being critically evaluated, controlling new expenses.
By taking a clinical quality value analysis approach rather than a traditional cookie cutter approach to reducing supply chain expenses, efforts would best support quality of care and patient safety and take into account your organization’s unique challenges and culture.
Calculate Potential Savings
Use internal and/or external resources to verify current usage and spending by category and begin discussions with and collecting proposals from current and prospective vendors. Once offers are in hand, identify possible scenarios which should include potential issues that may foil and prevent implementation. Finally, quantify the financial impact of each scenario and present the information to decision makers.
Once you and your administrative team have decided on a materials cost savings initiative and have established internal buy-in, use the momentum to move forward with implementation as quickly as possible. The longer you wait increases the chance that internal buy-in will diminish and resistance will increase.
In the end, implementing an efficient and sustainable approach to effectively assess and control clinical equipment service costs can help hospitals quickly reduce waste while improving both short- and long-term bottom-line results. Above all, keep the patient in mind when recommending changes for patient products and equipment. The overall goal is to reduce expenses without sacrificing quality.
For an in-depth look at how your facility can start saving today, check out Soyring’s case study on Cost Containment/Reduction. The study identifies key opportunities, solutions, and results related to operational improvement cost savings of a hospital in the Ohio River Valley.
And be sure to check out Dollars & Sense, Soyring’s new web column with Executive Insight Magazine, which offers cost efficient/cost containment strategies and tips for healthcare leaders.