To fully optimize organizational performance, community hospital CEOs can learn to recognize symptoms of weakness and strength in their supply chain

It’s common knowledge that supplies often comprise 25 percent or more of a typical hospital budget, creating the second largest spending category. Compared to larger institutions, community hospitals with less buying clout might see an even greater percentage going to supplies.

The CEO’s role

Establishing a great supply chain requires fine-tuned orchestration of a complicated matrix of materials, logistics, inventory management and timing. Although complex, supply chain excellence is vitally important for operational efficiency and ultimately the bottom line. The pandemic made it clear that community hospital CEO attention is paramount for optimal supply chain performance.

Considering the business-critical nature of the supply chain operation, CEOs are advised to compare their organization’s supply chain to other similar facilities while educating and overseeing their materials managers in order to make educated decisions and positive changes.

When CEOs aren’t actively engaged with their supply chain operation, potential savings and other benefits might be missed.

CEO actions that enhance community hospital supply chain performance

There are many barriers to optimizing the supply chain. In many hospitals, resource and manpower shortages make the process seem overwhelming or insurmountable. In some cases, powerful physicians or other leaders with specific supplier preferences may block the evaluation of alternatives. Other times, long-term GPO relationships may have inherent inertia that prevents an unbiased review of the alternatives.

Six steps to help a community hospital improve the supply chain:

1. Start by hiring the best supply chain professionals available.
2. Get personally educated and involved.
3. Reward supply chain behavior that benefits the entire company.
4. Invest personal time in learning about recent advances in the supply chain field.
5. Use external benchmarking data.
6. Get advice from outside experts.

Questions to measure CEO supply chain engagement

Not sure where you stand? Ask these questions to understand how you measure up.

Do you understand supply chain operations?

An engaged CEO must understand supply chain operations well enough to know why changes will drive organizational efficiency and cost savings.

Does your material management executive have a strong supply chain background and education?

The supply chain is more complex than ever, and supply chain leaders need formal education, significant experience, or both. In order to attract and retain qualified talent, supply chain management leadership needs to be a valued career path within the organization. Increasingly, these individuals have a place on the executive team.

What is your hospital’s current GPO relationship?

It’s important for the CEO to understand the purchasing process at a high level. Ask what contracts are in place, how often are those contracts reviewed and what selection criteria are used. Also find out if the prices your facility pays are competitive and purchased through established contracts.

If your team is managing relationships with several group purchasing organizations (GPO) as well as supplemental independent suppliers, consider the manpower time required to individually handle purchasing research, contracts and other supply-related work in-house. Ask how much time your team could save by working with one preferred provider.

Do you set and review metrics and benchmarking so that all hospital leaders understand their role in optimizing the supply chain?

Conduct external benchmarking to understand where you stand. Otherwise, it’s impossible to set goals for improvement. A CEO needs to push for a supply chain benchmarking and best-practice analysis—and personally review the results.

Do you stay current on supply chain technology enhancements?

As long as supply chain management remains a black box to the CEO, deficiencies will likely occur. Understanding the latest supply chain practices, technologies and trends help CEOs evaluate the performance of a supply chain executive and a GPO. This knowledge also enables CEOs to evaluate the business case for new technology.

Are supply chain implications considered during strategic planning and new initiative development?

Supply chain expertise should be central to planning efforts. CEOs, if fully engaged, demand that relevant business planning and negotiations anticipate and explicitly address important supply chain ramifications.

Strengthen the Supply Chain with CHC Supply Trust

CHC Supply Trust brings access, savings and support – including a tailor-made GPO – to community hospitals. CHC Supply Trust is community-hospital centric and solely focused on the successful procurement of quality supplies, pricing structures, and contracts. By combining the purchasing power of 100+ community hospitals, CHC Supply Trust uncovers economies in the supply chain and reduces in-house supply procurement costs. For member hospitals, that translates to typical savings of 15 to 20 percent compared to their previous supply expenditures.

Proven Experience

Years ago, Community Hospital in McCook, Nebraska, switched from a nationwide hospital network to CHC Supply Trust, a move that helped the hospital save approximately 18 percent on its supply spend. The facility initially saw savings of $532,000, followed by savings of $334,000, just on orthopedic implants.

A bad experience with a national hospital network GPO “drove us to CHC but it’s kind of like being driven to heaven,” says Troy Bruntz, President and CEO, Community Hospital. “The more we’re with CHC (Supply Trust), the more we regret that it took us so long.”

Community hospitals find that CHC Supply Trust delivers Tier 1 pricing that is typically reserved for large healthcare systems. This group buying power puts community hospitals on the playing field with bigger hospital players in terms of pricing and accessibility to supply resources.

Careful analysis of an individual hospital’s supply situation also yields savings by illuminating redundancies, inefficiencies and other places to save money. Since embarking on a turnaround plan in 2018, Southwest Health System (SHS), in Cortez, Colorado, worked with CHC Supply Trust and identified $2 million in savings on supplies while creatingopportunities for supply chain optimization.

Find Out How Much Your Hospital Can Save

CHC offers a Complimentary Supply Spend Analysis that includes comparing prices on items a hospital already purchases to CHC Supply Trust pricing for the exact same items. This analysis shows a conservative estimate of how much members can save with CHC Supply Trust.

Trusted Partner

CHC Supply Trust, through its partnership with HealthTrust, achieves savings with a number of strategies, including offering the top four or five products in each category as identified by clinicians and hospitals. Clients also get the benefit of cost/benefit analysis, clinical outcomes data, durability assessment, and insurance coverage on purchases.

Because member hospitals commit to purchase 85% of their materials through CHC Supply Trust, HealthTrust is able to negotiate lower prices while hospitals are able to reduce inventory and associated inventory management costs. The arrangement also reduces the hospital’s burden of vetting products. Meanwhile, HealthTrust works to create supply contracts that are favorable for hospitals.

At Hunt Regional Healthcare in Greenville, Texas, supply savings have supported upgrades, new equipment and investments that “we could not otherwise consider,” says Lee Boles, vice president finance/chief financial officer. “That means a lot for a small hospital like ours.”

Take Action

The CHC Supply Trust team is ready to help optimize your hospital’s supply chain. Contact us today to request a complimentary supply spend analysis and find out how much your hospital can save.

For more information, contact: Phil Trent, VP Business Development, ptrent@communityhospitalcorp.com or 972.943.1204.

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