10 minute read
THE LAST WORD
Michael Bohon
A Common Mistake Hospitals Make in Their Savings Efforts
Michael Bohon, CPSM, C.P.M., CMRP, Managing Director of HealthCare Solutions Bureau
Decisions, Decisions
You, as the supply chain leader for your hospital organization, have been tasked with reducing the expenses under your control dramatically. Where to start? We’re not talking about 2 –3%. The C-suite is looking for big numbers. The pressure is on.
At a meeting with your team the idea of doing a GPO (Group Purchasing Organization) assessment has been raised. After all, you have not considered this option in a number of years, but how do you pull off this complex venture? You consider the options. You can bring in some consultants to handle the process for you or you can DIY (Do It Yourself). Of course, you will first consider the second option for following reasons:
You have all the data. You are familiar with your current GPO. Your organization will not be anxious to approve the expense of hiring outsiders.
The HealthCare Solutions Bureau’s Seminars and Webinars is a compilation of instructional programs presented by HealthCare Solutions Bureau (HCSB) that are designed to provide supply chain professionals the tools and guidance they need to excel in their work.
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They include detailed training in the art/science of negotiation based To access details of the seminars on the studies of the Harvard Program on Negotiation and the 40+ offered, please click here years of experience of the instructor, Michael Bohon, CPSM, C.P.M., CMRP and training on the fundamentals of inventory management. To access details of the webinars offered, please click here
These programs offer learning and insight that will assist an individual to further the progress on his/her career path or show To access the bio of the leadership skills by managing improvements in his/her organizations. instructor, Michael Bohon, CPSM, C.P.M., CMRP, please click here Seminars can be arranged to meet your schedule at a location of your choosing. Different formats for the timing of the sessions are listed on the links below. To access information regarding
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Webinars can be subscribed to individually or in groups (to reduce programs, please click here the cost) including those that are part of a series. Once the fee for the subscription has been remitted to HCSB the subscriber will be provide a link to the webinar(s). They are then able to watch the programs as many times as they wish in a 30 (or 60) day period. They can be viewed at any time by as many people as they wish. The link can onlybe used by members of the organization that have subscribed to their selection of programs.
Costs are determined by the number of programs in the subscription and the length of time they are available to the subscriber. They are calculated with the limited education budgets available in hospitals having been taken into account.
The Last Word
The downsides of this plan are:
Michael Bohon
You may have never done this before. The process takes a considerable amount of time, one thing your staff does not possess. You are unaware of how to accurately and objectively complete a “market basket” study that compares the available pricing of numerous GPOs. The GPO world has recently changed significantly and what you were used to may not be the case anymore. You may end up with a decision that is not in your best interests.
War Stories
I could provide an endless supply of DIY stories that ended badly. Instead, I will provide just a few.
In the first case, two hospital systems were in the process of merging their seven hospitals. They decided to complete a comparative study of their separate GPOs to consolidate to one. They decided such an effort would not be that difficult and they had good people who would be able to handle it. Ten weeks later, the team that had been assigned the task of the analysis was still in a state of chaos with documents and spreadsheets flying through the air at the large meeting at which a final decision was to be made. Yes, the two systems had brought all their key executives and management to a meeting on neutral territory. After a number of delays, the two CEOs turned to the supply chain analysts and asked for their final determination. With no final resolution of the question in hand, they simply said, “It’s a toss-up!” I was the Purchasing Manager for one of the systems and knew that statement was not necessarily the real case, but it was an answer and one was needed immediately. The executives made their decision and patted each other on the back. One year later the merger came apart and one hospital immediately returned to their original GPO.
In the second case, twelve hospitals in a relatively small region had a loosely-based alliance. They were generally dissatisfied with their current GPO relationship and approached me to discuss my conducting a study to provide data and information for a decision. After a lengthy discussion, they
The Last Word
Michael Bohon
announced they were going to do it themselves. They apparently thought that they had gleaned enough information that they didn’t need outside help. Six months later I contacted them and heard their story. They had split into two factions; those favoring the incumbent and those focused on a relationship with a new GPO. The battle between them became very contentious, especially after one side accused the other of doctoring the numbers to make their choice look better. The last I heard of them they went in different directions and I can find no mention of what was their former alliance on the Internet.
I will forgo the details of all the hospital systems that have come to third-party consultants saying, “We thought we could do it ourselves, but what a mess! Can you help us by doing what we should have let you do in the first place?”
Get the idea?
Bigger Is Not Necessarily Better
In case you have not experienced this fact, let me share with you that all third-party consultant groups are not equal. I am sure you are shocked at this revelation. One of the most common misconceptions is that the bigger they are, the better they are. Not true! In the case of the bigname groups, GPO assessments may only be a very (!) small part of their business and they use people who have a varying amount of experience in this area. They also often have a greater focus on billable hours rather than the outcome of the work.
There are a few consulting groups who have a strong background in this type of work and have been able to provide accurate and objective findings that enable their client to make the best decision for their future. When seeking third party help you should ask them for at least three references and inquire as to the results of the projects. Also, make certain that you are aware of, understand, and agree with their methodology.
The Last Word
Another Way of Doing It
Michael Bohon
It is a generally known and accepted fact that 60 to 70% (or more) of the hospitals that go through a GPO assessment process inevitably stay with their incumbent GPO. The most common reason given is that it was just easier that way. So, what was the purpose and why the expense if that was the probable outcome?
Another possibility is a “GPO Optimization” option. This process allows a third party to mediate your relationship with your current GPO to determine if additional benefits and savings can be achieved. If handled correctly, this method can produce good results at a fraction of the cost and minimize the effect on your organization and staff’s workload. Most consultant groups do not offer this alternative as it limits their billable hours.
Final Thought
Think before you leap into the deep morass of a GPO assessment project. Remember, Value/Supply teams and committees have to deal with the fallout of changing GPOs in the form of 1, 2 or 3 years of contract conversions, in-servicing and value justifying thousands of product changes.
Michael Bohon, CPSM, C.P.M., CMRP is the Managing Director of HealthCare Solutions Bureau. For more information on HSCB’s supply chain educational programs contact bohon@hcsbureau.com.
Finally, A Proven System That Engages Clinical Department Leaders to Save Money in Supply Utilization
Why Do Clinical Departments Need More Proof Than Just Total Spend?
Supply and Value Analysis Managers have been challenged with providing evidence to show where clinical departments’ supply utilization is running over. Normally, when the utilization overrun is brought to the clinical department managers’ attention in the form of spend totals, their first reaction is that patient volumes or acuity was high for the period. That is where the conversation usually ends and that is where huge dollars are tied up in your hospital’s supply chain. How do we provide the proof clinical departments need when it comes to supply utilization?
Clinical departments are not cost management averse. On the contrary, they will help manage utilization costs but require solid evidence when it comes to their major and minor product category overspends. Supply and Value Analysis Managers have been able to keep costs low for many years with various value analysis and contracting strategies but there comes a time when the clinical departments must learn where they need to do better.
Only Clinical Departments Can Control Their Clinical Departmental Supply Utilization
Clinical departments have traditionally managed the supplies that are used for care on their patients but they have been doing this without a solid reporting system to tell them where they can do better based on patient volumes and acuity. With a system in place, clinical departments can now visualize all of their major supply categories and make the necessary adjustments which in turn will save big dollars (11% to 23% supply utilization savings per clinical department) for the hospital.
$3.8 Million for 350-Bed Hospital
Recently, a 350-bed hospital reported clinical departmental savings of over $3.8 million. Why so much savings? Because they had never taken the utilization reporting to the departmental level and thus the savings were low-hanging fruit when it was brought to the clinical department leaders’ attention. Clinical Department Utilization Manager software made it easy to pinpoint the exact category in the exact nursing unit and the exact product(s) that were causing the overspend. Prior to this, they did not have any idea where to look or how to prove the savings to the clinical department leaders.
No More Guessing Where Utilization Savings Are Hiding
In Your Clinical Departments
Goes Beyond Supply Budgets to the Actual Utilization for Each Department by Major Supply Category
No More Pushback from Nursing or Clinical Departments on Savings
Drill Down to the Exact Product that is Causing Your
Utilization Cost Overrun
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Finally, a System that is Truly Designed for Managing the Entire Value Analysis Process for Your Hospital, System, and Value Analysis Committees/Teams
CliniTrack ™ is designed to not only take you beyond the world of Word and Excel spreadsheet documents but to give you a decided advantage in managing your projects, data, and teams. CliniTrack™ is based on the combined experience of a 30-year value analysis company with the rock solid feedback of our customers to make this the best and most effective value analysis software for you, the supply/value analysis professional. Key features include:
Online New Product Request Management
Value Analysis Team/Committee Management
Clinical Product Evaluation Survey System
Clinical Value Analysis Knowledge and Resource Library (benchmarks, SMART VA
Success Models, Savings Best Practices, guidebooks, forms, Value Analysis Training & Videos, and much more!)
