Hospitals are leaving $25B in savings on the table

The savings opportunity for the hospital supply chain has jumped to $25.4 billion per year, meaning some hospitals are leaving millions in savings on the table, according to a recent study from Navigant.

Managing a hospital supply chain can be complicated, from maintaining supplies to delivering services to patients. But many hospitals are missing out on key efficiencies in this area, leading to higher spending. In 2017, the savings potential in the supply chain was $23 billion, which means the $2.4 billion increase in 2018 represents a 10.2 percent difference year over year.

“Even with ongoing eff­orts to improve supply chain processes and product utilization, it’s clear that significant savings opportunities remain for many hospitals and health systems,” Navigant Director Rob Austin said in the study.

Navigant looked at 2,300 U.S. hospitals and sought the savings price by matching them against the performance of the top quartile of hospitals for supply chain budget efficiency. Total supply costs include medical and implantable devices, medical, surgical and pharmaceutical supplies in the patient care departments, and building supplies and operation.

For an individual hospital, that savings figure means an opportunity to reduce average total supply expenses by 17.7 percent, or about $11 million, according to the survey. That’s equivalent to the price of building two outpatient surgery centers, paying the salaries of 160 registered nurses or paying the salaries of 42 primary care physicians.

Top savings areas

For many hospitals, focusing on reducing the unnecessary use of drugs and products can help reduce overall supply costs, in addition to reducing pricing variation.

Surprisingly, the top performers were lower spenders relative to their supply chain costs, meaning lower spending did not indicate lower quality—a finding that was the same in 2017. Top performing hospital also had higher average value-based purchasing performance scores.

Higher performing supply chain departments also engaged data-driven physicians in the survey on standardizing the use of physician preference items and medications proven to produce clinically equivalent outcomes at a lower cost. They also enhanced collaboration among physicians, nurses and other clinicians with supply chain, finance and IT departments with suppliers on value-based and other contracting efforts. The high performers also leveraged actionable data to tie costs to patient outcomes and employed staff that knew how to analyze it.

“Those health systems with the highest performing supply chains are combining data analytics, collaborative clinician engagement, and deep subject matter expertise to drive care delivery improvements to the benefit of the communities they serve,” Kevin Connor, vice president of supply chain management of TriHealth, said in the study.