From the Managing Editor’s Desk Why Early Prevention is Better Than the Cure with Healthcare Supply Utilization Management By Robert W. Yokl, Sr. VP, Supply Chain & Value Analysis — SVAH Solutions
We all get excited when we identify a nice big utilization and/or value analysis savings opportunity. We get even more excited when we can make effective change with value analysis and utilization management tools to drive out these savings and show major results for our organizations. But there is a major point to these savings opportunities that may not be apparent to everyone. What should be apparent is the fact that this has been happening over a long period of time and thus has been damaging the organization’s bottom line. If these big savings opportunities had been found earlier by making a simple correction, wouldn’t that have been better?
How Long Has the Big Savings Opportunity Been There? Let’s say you find $255K (on a $1 million annual spend) in savings in endomechanical costs, $422K (on a $650K annual spend) in pulse Oxisensors, $700k (on a $1.6 million annual spend) in outside reference lab, or any other supply or purchased service utilization savings. Ask yourself, how long was this going on before we found out about it and then did something to correct it? We should be able to answer this question with any product category that we purchase with a simple utilization management system that should be in place now. In this case, the endomechanical dollars lost had gone on for two years at $510K in total, the Oxisensor dollars lost went on for three years at over $1 million, and $700K reference lab had gone on for just one year in overspend for a total of an aggregate missed savings opportunity of $2.21 million on a spend of $4.25 million. Wouldn’t it have been dramatically better for the organization if they were able to find the $2.21 million in savings when it was only a quarter ($553K) or an eighth ($276K) of the size that actually occurred? These were real savings examples at real hospitals just like yours. Consider that hospitals purchase over 500 major categories (plus 1,000 more minor categories) in supplies and at any given time there may be utilization misalignments (waste, inefficient use, value mismatches, over-consumption, etc.). In our studies that we have performed over the past 15 years at hospitals and health systems across the country, we have found utilization misalignments in up to 75% of organizations’ 500 major categories of purchase. That could be as many as 375 major product categories that have utilization misalignments! About 80% are smaller savings opportunities and about 20% are major savings opportunities. Each should still be managed and dealt with.
Volume 8/Issue 2
Healthcare Value Analysis & Utilization Management Magazine
6
