Controlling PPI Spending Update: Best Practices in Action

Controlling PPI Spending Update: Best Practices in Action

Blog updated June 2023 -

The Physician Preference Item (PPI) category continues to be a good target for healthcare sourcing strategies. Our new blog content expands on the original post about PPI spend control tactics for the medical supply chain. The updated version is supported by the actual experience of a large health system that operates over 90 hospitals in 22 states.

Four PPI Spend Best Practices in Action

The original blog talked about these four necessary practices in controlling PPI spending:

  1. Negotiating
  2. Improving Standardization and Communication
  3. Including Physicians in Decisions
  4. Incorporating Technology

This updated information draws on the story of a large non-profit health system that put these best practices to work. Outdated spend management strategy had held the health system back, and the vice president of supply chain was ready for change.

1. Negotiating

New sourcing capabilities and enriched data have empowered healthcare executives to spot and reclaim millions of dollars in wasteful overspending. Knowing where the best opportunities are helps supply chain negotiators focus their efforts.

With a custom Curvo DaaS solution, this particular healthcare organization could work with data in many useful ways and by physician request. Custom views gave unique insights and network-wide comparisons, which led to stronger physician back up for supply chain recommendations. That ultimately translated into more provider power at the negotiating table.

2. Improving Standardization and Communication

During data enrichment, Curvo data groomers use the proprietary GIC system to standardize clinical product data. Activities on the hospital’s sourcing analytics portal are based on these classifications and other data enrichments. As a result, users can accurately compare orthopedic devices and make better decisions.

Curvo experts helped the health system build better communications tools using analytics solutions on the end-to-end Curvo Platform. Compelling visualizations draw on rich Curvo data, and GIC designations fill in gaps and standardize data for shoulder, hip, knee, spine and other procedure types.

The supply chain and the clinicians benefit from utilization practice comparisons across all of their hospitals. Cost-per-case graphs compare averages for different facilities for set periods.

3. Including Physicians in Decisions

The supply chain management (SCM) team wished clinicians were more involved in PPI decisions. SCM wanted to collaborate with physicians on best outcomes for patients, but struggled with lack of visibility outside the department.

Attracted by strategic use of data and visualizations, the physicians in this hospital system now willingly engage in dashboard exploration. “The training sessions I've been doing on this dashboard involve the clinical folks, which is where we always wanted to be, so that's been great,” said one operations executive.

Trusted information and physician engagement resulted in savings and more for this health system. With physician buy-in, the system completes more successful new contracts. “Now we do wonderful projects,” she declared. “You save half a million dollars on one project. It's really important work actually.”

4. Incorporating Technology

The healthcare organization sends PO data to Curvo and receives enriched data back. The Data-as-a-Service (DaaS) is the “secret sauce” that gives the SCM team its power. “You can't really get there without that enrichment,” said one of the project team members.

Working with Curvo, the organization created a custom, data-driven sourcing environment. The process improvement team was hands-on with the technology and now uses its own in-house solution to work with the data.

“Once it’s in here, we can look at it however we want without doing an Excel pivot table or whatever,” they explained. “That's really key. It was very difficult before. This is worlds better. There's so much more.”

Continue on now with the original blog content and its expert advice on PPI spending best practices. Then get the full case study for a deeper dive into how the healthcare system overcame outdated spend management with technology and collaboration.

4 Ways to Regain Control of Physician Preference Item (PPI) Spending

Today’s hospitals and health systems are challenged to remain profitable while providing improved patient care. Targeting the amount spent on supplies, in particular Physician Preference Item (PPI) spending, provides an effective way to reduce unnecessary spending.

This is one of the main ways to create savings significant enough to make a real impact on a hospital’s budget and profits, since PPI makes up 40-60% of the total cost for supplies, according to Definitive Healthcare. New strategies are emerging that empower healthcare executives to reclaim millions of dollars in wasteful spend and reallocate that money to improved functioning for their organization and better care for patients.

1. Negotiating

Supply executives know that negotiating can help them bring prices down, yet it takes time and effort to pursue new contracts or renegotiate current ones. Nonetheless, it’s generally worth the effort since savings on a better contract add up quickly and create considerable change over time. It’s possible that executives are leaving a lot of money on the table, and they will only receive that money if they ask for a new Physician Preference Item contract.

They need to find ways to focus on negotiations to realize savings. It’s often possible to cut down on price by cutting out middlemen that add fees, such as sales representatives and group purchasing organizations (GPOs). Hospital administrators can often negotiate directly with manufacturers or distributors, especially for PPIs compared to simpler medical supplies.

Some hospitals have adopted a system with no sales reps, which involves having the manufacturer directly train the staff on an item. Nonetheless, with so many products and vendors, this method is not always possible. Another strategy is hospitals sometimes start with a short-term contract before deciding whether to move into a longer one with a particular vendor.

2. Improving Standardization and Communication

There tends to be a lack of standardization between the different levels of the medical supply chain, which leads to incredible waste. In Becker’s Hospital CFO Report, Emily Rappleye explained that a lack of efficiency within the supply chain leads to $5 billion of wasted product per year. By the different parts of the supply chain, such as manufacturers and distributors, working together and sharing data, they can reduce waste and improve the process. An example would be the use of radio-frequency identification-based technology (RFID) to give different parts of the supply chain real-time data and analytics on products. Different parties can then all access the information through the same platform.

Standardization and sharing of information can facilitate cost savings within hospital systems and between different health organizations. Rappleye gave the unique example of BJC HealthCare, Cardinal Health and Cook Medical sharing resources between organizations, which enabled them to cut down on waste and costs. They already had strong data on purchasing but not on the use of the products. By creating a system for shared data between organizations and better real-time data through RFID, they achieved results that included $17,000 in credits and a 57 percent inventory reduction for one hospital, as well as a significant reduction in expired products across numerous hospitals.

Hospitals pay a huge range in prices for the same item. Data collection and sharing helps hospitals see what others are paying so they can better negotiate. By having a better idea of costs and communicating that with surgeons, University of California was able to save more than $60,000 within four months within a test program, according to Definitive Healthcare.

3. Including Physicians in Decisions

Empowering physicians to be part of the PPI process helps to improve spending and makes it easier to initiate change. Definitive Healthcare explains that providers often choose supplies based on personal preference, yet they might make different decisions when armed with more information. Supply chain leaders need to provide physicians with real, actionable data and recommendations. When they are prepared with this information, they act as strategic members of the organization and earn the trust of physicians.

President at Initiant GPO, John Streger, spoke about meeting and communicating with spine surgeons in practice to share information on vendors, requested items and prices, which can be more effective than just telling them they need to use certain vendors and having them question that. “So, we go through a process structure-wise where the surgeons and value analysis or administrative person helps design that strategy. We gain commitment to that strategy, and then we go to market with that strategy and then bring that back.”

Sales representatives tend to target physicians directly, which can influence physicians to choose certain products and vendors. It can improve a hospital’s system when administrators share different options with the physicians to help them make the best choice for patients and the hospital rather than following a sales pitch.

Another method for saving on Physician Preference Item costs is to have a committee of doctors that considers PPI requests each month. Doctors have to make sure a PPI is valuable before presenting it to the committee, and the committee votes on requests. Supply chain and logistics consultant at Health Future, Leslie Flick said that by having committees with physicians, “What we are able to establish very quickly with that vendor community is that we know better than they do what our physicians actually think about their products.”

4. Incorporating Technology

Hospitals face many challenges in improving their PPI sourcing systems. They often don’t have the time or staff to fully review different options and lack an established system for handling PPI requests and items.

Technology can help with many of these problems and assist hospitals with moving forward to a new method. A clinical sourcing platform can create an efficient system for hospitals and health systems to collect information on different PPIs and vendors, pick the best options, bid and track everything. It can make it easier and faster to save money on PPI spending.

Generally, the contracting cycle of a PPI takes too much time because of manual sourcing of information. Hospitals can simplify negotiations and the contracting cycle by leveraging technology to manage the process.

Streamlined Solutions Are Available

If you’re ready to harness price and market data to move your sourcing strategy to new levels of efficiency and cost savings, schedule a demo with us today!

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