Supply costs are one of the fastest-growing cost centers for hospitals. Yet 18% track no supply chain metrics at all, according to a recent industry survey. As health supply chain management expenses surpass labor costs for most hospitals, optimization becomes more important than ever. These spiraling expenses tend to hit community-based hospitals hard because many don’t wield enough purchasing power to command preferred pricing. Other hospitals, though larger or part of a health system, face unique health supply chain management challenges and concerns despite their greater purchasing power.

Holding the line on supply chain costs is, or should be, a top priority for community hospitals, regardless of size. Lower supply costs and tighter, more efficient health supply chain management can increase hospital margins without decreasing quality of care. By reducing supply costs and better managing the supply chain, a hospital can expand its savings margin and free up funds for capital improvements and strategic hires.

3 Approaches That Reduce Health Supply Chain Management Costs

Here are three approaches to help hospitals achieve health supply chain management improvements and increase cost savings.

1. Collaborate with key stakeholders to negotiate better pricing. The highest percentage of supply costs is often associated with a hospital’s operating room. Get everyone to the table with manufacturers — hospital executives, physicians and surgeons — to negotiate for more favorable prices on physician preference items, such as orthopedic implants and cardiac rhythm medical devices.
2. Evaluate your group purchasing organization (GPO) options to maximize cost reduction. Today, almost all hospitals have one or a variety of group purchasing contracts in place. However, few review them regularly, which can increase health supply chain management costs over time. It’s important to understand the savings your hospital can qualify for and select the GPO with the most benefit for your specific needs.
3. Analyze your materials management practices to get the most savings from your GPO. This process should include monthly or quarterly reviews to ensure your hospital is receiving previously negotiated prices from suppliers. It’s also helpful to cross-reference hospital procurement data with your GPO contract list to identify opportunities for greater savings potential by converting to new products. Involving a multifunctional team of department leaders in this process helps ensure buy-in from all health supply chain management stakeholders.

CHC Supply Trust is the supply chain services arm of Community Hospital Corporation and CHC Consulting. We offer a full spectrum of supply chain solutions tailor-made for community hospitals, including Tier 1 GPO pricing, regardless of hospital size or annual spend. CHC Supply Trust offers a Complimentary Supply Spend Analysis. Then, you to compare the cost of items already being purchased to CHC Supply Trust pricing for the same exact items. This analysis provides a conservative estimate of how much new members can save simply by purchasing those items through CHC Supply Trust. CHC Supply Trust members typically save between 10 and 20 percent annually over rates charged by other GPOs.

Learn more about CHC Supply Trust’s full spectrum of supply chain services including the Complimentary Supply Spend Analysis.

By Jon Pruitt, SVP CHC Supply Trust November 13, 2018 Financial Performance, Supply Chain