Streamlined supply purchasing practices could boost hospital savings

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Facilities across the nation could cumulatively save $23 billion each year by streamlining supply chain operations and product use, contend researchers who based results on a recent survey of more than 2,300 hospitals.

Better supply chain operations could trim an average of 17.8 percent from a facility’s total supply expense, according to an analysis of the survey results by Navigant, a consulting firm.

Improving supply purchasing is important for healthcare organizations because those expenses are typically the second largest operating expense for facilities, trailing only labor costs. Money saved by reducing supply ordering inefficiency could be thus be directed to increase staff or adding other medical equipment.

Further, hospitals using best supply chain practices have slightly better performance in other facility operations such as handling hospital-acquired conditions and higher value-based purchasing scores.

“We have found, somewhat counterintuitively, that the highest performing providers are simultaneously able to decrease cost and improve quality, in part by reducing clinical variation,” says Rob Austin, associate director at Navigant.

Also See: How to use IT to improve healthcare supply chain operations

“The supply chain represents close to a third of the average hospital’s overall operating expense, and it’s predicted to surpass labor as a hospital’s greatest expense by 2020,” says Christine Torres, system vice president of supply chain management at Main Line Health in Philadelphia.

Top performing hospitals consistently use evidence-based protocols and analytics to reduce variation in pricing, product use and clinical outcomes, according to the Navigant study.

The consultancy also advises hospitals to conduct benchmarking analyses to compare their supply chain performance against peer organizations. The full study, including a supply chain benchmarking calculator, is available for purchase here.

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