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heroHealthcare providers may need super human strength to maintain margins in 2014.  On top of existing financial pressures, the one-two punch of flat/falling patient volumes and reduced reimbursement will leave organizations scrambling to lower operating costs up to 30% [i] to replace lost revenue.

But like the Batman logo shining in the night sky, there is hope—the healthcare supply chain.  Let’s review…

1. The Supply Chain Comes to the Rescue

The healthcare supply chain has emerged as the best source of new savings and capital, helping providers resuscitate their profitability.

  • You’ll see more emphasis on supply chain savings, especially through enterprise-wide strategic sourcing initiatives
  • Value, not cost, will be the key determinant, with efforts to increase efficiency, transparency, accuracy and integration all along the healthcare supply chain

2. High-Cost Physician Preference Can Dash Needed Supply Savings

Whether the projection of medical supply expense surpassing labor in 2020 [ii] comes true, there’s no denying that supply costs are growing faster than wages or benefits.  The catalyst?  Expensive devices [iii] —AKA, physician preference items (PPI).

A single item can represent as much as 50%-72% of a procedure’s total cost [iv] and left uncontrolled, can be the Kryponite that destroys savings.

  • The success of healthcare supply chain initiatives will depend on managing PPI and engaging physicians
  • New procurement solutions  will identify and prevent these high-cost, out-of-system purchases from being made to begin with

3. Is it a Bird…A Plane…Or the Cloud?

That cloud in the sky could just be the healthcare cloud market, expected to grow at a cumulative average rate of 20.5% from 2010-2017. [v] Increased adoption stems from expanded healthcare networks, government mandates and the advantages of reduced upfront costs, faster uptime, automatic updates and a lower total cost of ownership than on-premise counterparts.

  • You’ll see increased adoption of nimble, specialty SaaS solutions ahead of ERP—especially for procurement

4. Employee Empowered Savings

New cloud-based, Google-like procurement systems will empower buyers to make the best-value purchasing decision every time.

  • SaaS procurement systems will drive a hospital’s formulary by directing purchasers to the preferred product—before they buy

5. Bad Inventory Management Turns Good for OR and Specialty Areas

Some of hospitals’ highest cost/impact areas lack accurate, automated inventory control and charge capture.  Monitoring and tracking implantable medical devices (IMDs) is still done manually 70%-73% of the time, [vi] causing lost charges, poor data and lots of paperwork and rework.

  • Providers will automate processes with Point of Use (POU) solutions —driving savings and improving data collection/integration
  • POU’s low-touch RFID technology will ease clinician involvement

6. Big Data Is Brought Down to Size

Gathering, accessing and drawing conclusions from big data is a monumental task.  But new procurement systems can bring in big savings from healthcare supply chain data.

  • Cloud-based procurement systems harness algorithms and artificial intelligence engines to help facilitate timely, informed decision-making and savings identification
  • These systems break down data silos

7. The Villains of 2013 Return in 2014

  • Slipping Margins and Weakened Finances will continue through 2014 and 2015.[vii]
  • Tighter Reimbursement will cut into revenues
  • Flat Volume is the New Normal, says Standard & Poor’s [viii]

Conclusion

The supply chain can be your financial hero.  By embracing some of the new healthcare supply chain trends and technologies, you can create new efficiencies and savings that will drive profitability for your entire organization.  Chalk up one for the good guys.

Download our formulary procurement white paper to learn more about increasing the efficiency and profitability of your healthcare supply chain.

 


[i] Supply Side Economics: Purchasing practices at hospitals and health systems continue to evolve, with the supply chain continuing to be a target for large non-labor savings; Jaimy Lee, posted August 18, 2012; http://www.modernhealthcare.com/article/20120818/MAGAZINE/308189932

[ii] “Strategic Supply Chain Management”, Hospitals &Health Networks magazine, December 2011.

[iii] Controlling Supply Costs: Supply Expense growth outpacing all others; The Advisory Board Company; website accessed Jan 13, 2014. http://www.advisory.com/Solutions/Spend-Performance-Solutions/Controlling-supply-costs

[iv] Controlling Implant Costs: HFMA Roundtable; 2006.

[v] Healthcare Cloud Computing Market – Global Trends, Challenges, Opportunities & Forecasts (2012-2017) Report July 2012 summary; marketsandmarkets.com

[vi] Seeing Device Costs Clearly; Research by Bob Kehoe, Hospitals & Health Networks; 2011 (as part of their Fiscal Fitness / Supply Chain series.)

[vii] U.S. Not-For-Profit Health Care Stand-Alone Ratios: Operating Pressures Led to Mixed Results in 2012; RatingsDirect® Standard & Poor’s Rating Services: August 8, 2013.

[viii]  Beth Kutscher and Melanie Evans; The new normal? Shift to outpatient care, payer pressure hit hospitals; Modern Healthcare; August 10, 2013