June 16, 2021
According to a recent Modern Healthcare article and Navigant study, hospitals have a $25.7 billion cost savings opportunity — equating to an individual hospital savings of up to $12.1 million per year or the equivalent of 165 registered nurses.1 This probably doesn’t come as a surprise to any supply chain leader. After all, the most expensive items are chosen by clinicians who likely do not know the price of the product, its efficacy or any other salient details in its procurement.
No other industry has this challenge. To be sure, via value analysis committees and such, we have made some progress. But the hurdle remains. Without transparent data or data that bring an objective lens to optimal clinical performance, hospital procurement is stymied with responses such as: “My patients are sicker,” “My cases are different,” “That’s not a fair comparison.”
So, how do we change the game?
Bring data that surgeons agree with, understand and can trust. Debunk the key questions that are consistently presented when discussing product transitions. Present utilization opportunities only when truly showing comparisons across like cases. Organizations must go deeper than just the primary procedure codes to truly compare cases on an apples-to-apples basis.
Use meaningful outcomes regarding patient quality and surgeon performance to drive discussion around supply transition opportunities. Transitioning products purely for saving money is not enough in the eyes of a surgeon who is solely focused on the best outcome for the patient. Being able to show cost savings opportunities paired with outcomes and quality information will yield more surgeon buy-in: “Yes, this product is less expensive and your peer who is using it has shorter OR times and better patient outcomes.”
This isn’t just a supply cost conversation. It’s a cost + outcomes + efficiency conversation.
As value-based payment models become more popular, make sure you know what’s in it for your physicians. Work with your strategy teams and service line leadership to ensure you understand the financial and quality drivers that can further engage your physician community around opportunity.
For price negotiations between suppliers and hospitals, surgeons are the fulcrum when it comes to competitive price. Local contracts allow for hospitals to be more aggressive in negotiating competitive pricing for key physician preference item (PPI) areas, compared to GPO contracts that hospitals find themselves trying to find the best fit from a volume or tier perspective. Facilitating a physician-driven pricing initiative with supply chain for PPI areas leads to a better result than a solely driven supply chain approach. Suppliers will be more competitive in the process if the hospital and physicians are partnered together around price negotiations and strategy.
Price dynamics within healthcare have been backwards as we have focused on supply cost first and product utilization second. As hospitals and surgeons face more reimbursement challenges, these two focuses must run in parallel.
Olive offers a solution to help drive organizations and physicians toward the best supply cost optimization based on surgeon utilization while improving patient outcomes. Analytics that show true comparisons and bring an objective lens create the foundation that healthcare has been waiting for.
Yes, with the right data, you can have meaningful dialogue with physicians, then unlock the door to eliminate that $25.7 billion in waste.
1. Kacik, Alex. Modern Healthcare; Supply chain tweaks could help average hospital hire up to 165 more nurses. https://www.modernhealthcare.com/operations/supply-chain-inefficiency-marks-257-billion-hospital-savings-opportunity. Published November 13, 2019.
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