5 Savings Opportunities That Fall Through the Cracks for Supply Chain
In healthcare, supply chain teams are tasked with keeping costs in check through a variety of cost savings methods and initiatives. But many of the legacy methods of doing this are resource-intensive, slow, and highly manual. Most supply chain teams are somewhat resource-constrained, too, which limits the number of initiatives or cost savings projects that can be done at any given time.
We’ve identified 5 savings opportunities that often fall through the cracks for healthcare supply chain teams, either due to capacity issues or the difficulty of executing the savings opportunities manually or with legacy GPO tools. And don’t worry – we’ve also outlined solutions you can use to successfully tackle each challenge.
1. Smaller Spend Categories
Most hospital systems that are allocating time for cost savings initiatives understandably focus on the larger spend categories. They focus on total joints, spine, CRM, trauma and maybe a couple others. It makes sense to focus here first because these are the categories with the biggest budgets, and therefore the biggest savings potential.
But there are as many as 20 smaller categories that tend to go untouched. Each of these smaller spend categories contains significant savings, even if they don’t compete with the larger categories listed above.
Supply chain teams in these hospitals would be eager to actualize savings in these smaller categories. What’s missing is the bandwidth to do more.
Without powerful tools and actionable visualizations, the large category projects can take as long as nine months. With a timetable that long, by the time a spend category is done, it’s practically time to start again.
Because the larger categories become all-consuming, supply chain has no bandwidth to tackle smaller categories, even if they know there are savings to be found within them. They tend to rely on the GPOs, and hope to get the best price possible. They don’t dig any deeper to accomplish better cost savings – because they simply don’t have the capacity.
Smaller Spend Categories Solutions
The solution to the missed opportunity of smaller categories is a better suite of tools, one that makes it easier to do the work in smaller categories. For smaller category work to be viable, automation needs to drive analysis, bid events and RFP’s so these projects are easier. Otherwise, the possible savings wouldn’t justify the effort. Curvo provides category-level benchmarks and industry-leading visualizations and easy-to-use automation of bid events, giving your supply chain team the capacity to tackle more categories faster. When small categories can be addressed quickly, the savings can be incredibly impactful.
2. Price Creep
Price creep is another significant savings opportunity (or cost avoidance opportunity) that tends to fall through the cracks for supply chain. Not every price increase is illegitimate, of course. Inflation and other market pressures are real. But so are those less necessary (and more negotiable) price increases, the ones we’re calling price creep.
Price creep can occur for several reasons. First, there’s a frustrating lack of transparency from the manufacturer to the provider. Most of the time, manufacturers don’t provide any notice that prices have gone up. Providers have to discover it themselves on the invoice. For this reason, many providers are slow to react to price changes.
Another component is the way that manufacturers want to deal with negotiations once providers notice a price change. When a manufacturer agrees to lower a rate, they rarely want to issue a new invoice, but instead promise a credit on the next invoice. This creates trust challenges as well as logistical and tracking headaches, because supply chain now has to monitor and track those credits.
To add to the challenge, distributors and GPOs aren’t good at pointing out price creep, either. There’s little incentive to do so, since those entities make more when they charge more. Further, there’s too much of a “that’s just how it is” mentality.
Price Creep Solutions
There is a manual solution to price creep, but once again it is a significant resource drain. Your team can export data monthly, and then perform month-to-month price comparisons.
Curvo offers a far better solution, one that produces alerts and notifications when price changes occur. By bringing this data to the surface, Curvo empowers hospitals to push back against price creep much more quickly and easily.
3. Things that Fall Off Contract
Items falling off contract can be a significant source of price creep, so this savings opportunity is closely tied to the previous one. Many hospitals use some form of contract calendar software to stay aware of when items are scheduled to fall off contract.
The problem is that most of these software solutions aren’t particularly proactive. They tell you which contract is coming up, but they don’t usually list out what those contracts contain.
Hospitals that aren’t using a contract calendar essentially rely on distributors and GPOs to notify them that something is going off contract. This, too, is problematic, because the distributors and GPOs rarely send these notifications fast enough. Hospitals need a 90-day runway to work through contract issues, so the 30-day notice from a distributor isn’t sufficient.
Contract Issues Solutions
Curvo’s solution to things falling off contract is a part of its price creep reports. Curvo notifies users when a price goes up, and these alerts allow users to identify entire contracts that have expired. With some customers, we’ve built in a more proactive contract calendar as well, one that queues up contracts 90 to 120 days out.
Also, with Curvo, users can quickly identify the cost impact of those price increases because the information is automatically tied to utilization numbers. This connection allows Curvo customers to prioritize which contract issues to solve first.
4. Utilization Changes
As new products hit the market, physician utilization changes naturally. Sales reps tend to push the latest and greatest (and most expensive). Given the contract-based nature of healthcare supply chain, those newest products may not be included in the contract your team signed three months back. A new item may well be worth using, but the costs tend to be significant when the item isn’t included on contract.
This is an area that’s hard to catch at the data entry level, and it’s nearly impossible to catch quickly after that point.
Utilization Changes Solutions
With Curvo, all new purchases are easy to identify. They can be easily flagged for review. Curvo also provides GMDN and GIC data enrichment, giving your team even more ability to find and flag those new, off-contract items.
5. Price Parity Across Facilities
Multi-hospital systems and multi-site healthcare organizations face a challenge their smaller, standalone counterparts don’t: price parity across facilities. Most larger systems come about through mergers and partnerships of formerly standalone institutions. As a result, individual hospitals within a system often have their own systems and software as well as individual item masters.
Getting these systems to talk to each other can be a massive challenge. Combining data from multiple facilities into something coherent and usable is similarly challenging. Because of these challenges, large healthcare systems often don’t achieve price parity across facilities. One facility may achieve an impressive price for a particular item while another facility overpays.
Healthcare systems want to get the best price possible – at every facility, not just at one of them. But doing so manually is difficult. To overcome these challenges manually requires significant technical knowledge. A healthcare system would need to build its own API or export data to a database where a skilled analyst could manually run queries.
Price Parity Solutions
Here, too, Curvo offers innovative solutions. With unbiased data solutions and automated visuals that help quickly identify parity opportunities, Curvo helps your healthcare system pursue savings through price parity.
Maximize Your Savings Opportunities with Curvo
If the missed opportunities above sound familiar, we can help. Curvo has helped many healthcare systems maximize these opportunities rather than miss them. Ready to see what Curvo can do for your organization? Schedule a demo today.