When developing a cost containment strategy it is important to be mindful of the fallacy that a “best practice” is singular. A “best practice” cost position is conceptualized as the result of many small functional and clinical cost management initiatives.

Related topics

• Performance Improvement
• Improving Healthcare Quality

...that between 1987-2001, growth in hospital labor productivity was lower than that for economy-wide labor productivity in each year except 2001?

...that hospitals can overpay suppliers from 2 to 7 percent for contracted medical-surgical supplies?

...that gainsharing programs allow physicians to share in supply cost saving through some combination of percentage of payment, hourly fee, or fixed fee and to play a significant role in the planning process to achieve those savings?

...that the estimated cost to a hospital for losing a physician is about $250,000?

...that although malpractice premiums have risen to 15-30 percent around the nation, the rise varies greatly by state with some of the hardest hit states seeing a 26-73 percent increase?

...that low-dollar co-pays and deductibles can be charged to a patient’s home or cellular telephone bill, resulting in collection cycles of 60 to 75 days and average monthly post-discharge collection rates of 70 to 85%?

Supply chain management is often an overlooked subject in healthcare even though it holds great potential for direct cost savings. Many organizations focus almost exclusively on clinical areas when addressing performance improvement opportunities, thereby short-sighting their goal to improve overall operations.

With median operating margins running at a 1.8% deficit, hospitals must aggressively look for new ways to reduce operating costs. Hospitals able to develop supply chain plans that are both comprehensive and favored in the allocation of resources and technology will yield significant savings within each management area of the supply chain, including:

• Product Selection
• Product Sourcing
• Product Distribution

Review and analysis of current systems and processes surrounding these elements will reveal the impact of supply chain savings opportunities for a particular organization. (continued...)