Healthcare News & Insights

Control rising hospital costs by analyzing the supply chain

With increased scrutiny being placed on the cost of health care, controlling rising healthcare costs should be of utmost importance to hospitals. One area where inefficiencies are a significant contributing factor to climbing costs is the hospital supply chain.

78716941Most estimates place the cost of supplies and devices as the second-largest expense for most hospitals, just behind the actual cost of labor, as discussed in a post written by Dr. David Nash on KevinMD.

And there’s evidence that hospitals are incurring even higher costs for supplies as a result of the Affordable Care Act. A new rule requires device manufacturers to pay an additional excise tax, and many of those manufacturers have passed this cost on to hospitals directly.

A website created by the Healthcare Supply Chain Association, Medical Device Tax Watch, lists the names of medical supply vendors that are openly passing the new tax onto hospitals and other providers.

To cut costs in this situation, hospitals have to be proactive with the vendors they choose for supplies during contract negotiations, looking for every possible opportunity to keep their supply costs as manageable as possible. Communication is key for the best compromise.

Also, supply chain personnel should regularly review contracts and invoices, and compare what’s being charged to what’s written in the agreement so hospitals aren’t paying hidden or unexplained fees. Any discrepancies should be brought to vendors’ attention immediately.

Efficient use of resources

Besides reviewing contracts with vendors, it’s also important for hospitals to take regular inventory of all supplies on hand. Know when items are getting low, and when they’re in abundance, and adjust future orders accordingly.

Supply chain staff should also be closely monitoring how items are used and whether they’re being used appropriately. This goes for all supplies and devices, from gauze pads and bed linens to cardiac stents and drugs. Taking initiative in this manner will cut down on waste and avoid unnecessary orders.

Ask the right questions

Another way hospitals can save costs is by putting more research into the purchasing decisions for expensive devices used in areas such as orthopedics and cardiology. As Dr. Nash says in his piece, often these devices are purchased based solely on a provider’s request, with few other factors taken into consideration.

One way to handle these requests (and all supply purchases in general) is to have the requesting provider fill out a form answering various questions about the product, such as:

  • What will this product be used for?
  • What alternatives exist to this product?
  • Why are you choosing to use this product?
  • What are the advantages/disadvantages to using this product over others?
  • How will this product help patients?

Hospitals may also ask the provider to disclose any conflicts of interest that may make using the product problematic (e.g., financial interests). Then informed decisions can be made about whether ordering the device is the hospital’s best bet, or if a better option is available.

One Florida hospital system, Sarasota Memorial Health Care, uses a similar questionnaire with its clinicians when they request various devices, as described in an article in Manatee-Sarasota Medical News, and it’s resulted in smarter purchases that emphasize value, providing the best patient care at a reasonable cost.

Smart analysis of supply chain data can be used to a hospital’s advantage when it comes to reducing costs relating to supplies and devices. By looking into just how supplies are used, and rooting out any inefficiencies or inappropriate usage, hospitals can make better purchasing decisions in the future.

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