The healthcare industry is filled with acronyms and technical terms. It can seem like we’re talking in a secret code. One of the newer terms is “preemptive formulary management”.
So how is it different from other eprocurement systems? And how does it bring your health care supply chain savings?
Let’s start with the term formulary management. Most of you are familiar with the term formulary for your pharmacy department—basically a list of payer-approved medications.
In a similar way, preemptive formulary management for medical-surgical products is a pool of approved products. The difference is these are your organization’s approved products, meaning these are the products you want your people to purchase based on your preferred contracts and pricing; i.e., your product formulary.
Now comes the “preemptive” part.
A preemptive formulary management system is the only eprocurement system that verifies the price and contract up front—before users buy. This virtually eliminates off-contract purchases and the rework they demand.
Let’s say your floor nurse, Nancy, needs to reorder exam gloves. Based on her search terms, the systemwill review all of your available product and contract options, and suggest the best product choice. The system automatically looks through thousands of items and millions of contract lines to determine the exact contract line to use.
Here’s how it works.
A preemptive formulary management system follows a unique series of steps to collect and prepare your data:
Step 1: Content Normalization: First, the system normalizes and enriches your data, so it’s structured the same and contains sufficient information for detailed comparison. It captures all your internal item master, contract and purchase history information (even the 40%-50% that falls outside your item master) and external data (like GPO contracts and vendor catalogs) to create a single source of data truth.
Step 2: Descriptive Attribution: Now, the system collects all the attributes for a product—data elements like product code, price, vendor name, even colloquial names. The system aligns all these attributes in descending order—from general to specific. For example, the product description for Nurse Nancy’s gloves might read: “Glove Exam Esteem XP Medium Nitrile Length 12in Blue Latex-Free Non-Sterile Powder-Free Textured Fingertips”.
Notice there are no cryptic, code-like abbreviations like with other eprocurement systems. That’s because with preemptive formulary management there are no character space restrictions! You can use real words. And the number of attributes is virtually limitless. This is critical when comparing complex products with multiple and/or similar values. For example, with interventional catheters which have several size values—for overall length, versus catheter or introducer length.
Step 3: Product Family Identification: Once your product attributes are structured in a consistent, logical way, the system can automatically group like items together; (i.e., product families); and help you identify functional equivalence. It does this by comparing the “driving attributes” for items. In Nancy’s case, these attributes would be glove type, composition, length, latexity, coating, etc.
Now you can easily compare items for standardization—apples to apples. It even flags opportunities to save!
Step 4: Formulary Level: And finally, the system assigns a formulary level to denote the favorability of that product, promoting the highest-level products first:
- Level 1 = products held in inventory
- Level 2 = products in the item master but not in inventory
- Level 3 = non-item master items under contract
- Level 4 = non-item master/non-contract items
Once the data is in order, the system puts all its smarts to work for you. Using artificial intelligence (AI) and sophisticated algorithms, a preemptive formulary management system “learns” your products and preferences, and suggests the best choice based on your specific formulary and contracts. (Think of it like the data engines for consumer shopping sites like Amazon that suggest new golf balls or books based on your buying history.) Then, the system automatically calculates your cost savings for choosing the “preferred” product and detects non-approved/rogue purchases.
This unique approach to eprocurement provides many benefits:
- Saves time – Users can quickly find items
- Increases product/vendor standardization – Value analysis teams can easily compare like items
- Improves contract compliance and reduces non-sanctioned products – Management can control purchases network-wide
- Drives new savings – Every purchase is on price, on contract, on target to your financial goals
With a preemptive formulary management system, you can crack the code on your healthcare supply chain savings. Find out more in our new whitepaper: Using preemptive formulary management to control user supply access at the point of requisition.