Hospitals could save $11M per year by streamlining supply chain services
- U.S. hospitals could save $25.4 billion a year by streamlining their supply chains and eliminating unnecessary cost, according to a new Navigant Consulting analysis.
- Per hospital, this translates to a 17.7% average supply expense reduction, or about $11 million annually — enough to build two outpatient surgery centers, pay the salaries of 160 registered nurses or pay for 42 primary care physicians, according to the report.
- The analysis looked 2,300 hospitals and compared the top quartile's supply chain costs with those of their peers. Top-performing hospitals encouraged collaboration between clinicians and supply chain, finance and IT departments to coordinate value-based contracting and engaged data-driven physicians.
Data analytics is also key. The highest-performing hospitals leveraged actionable data to tie costs to patient outcomes, the report found.
According to Navigant, lowering supply chain costs did not result in lower quality of medical care. In fact, hospitals with tighter supply chains showed certain advantages over their peers. For example, top-performing hospitals averaged 5.3 on hospital-acquired condition scores, compared with 5.5 at other hospitals. They also outperformed peers on value-based purchasing scores — 36.8 versus 36.1.
"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," Rob Austin, director at Navigant, said in a statement.
The analysis comes on the heels of a Kaufman Hall survey showing limited progress in reducing hospital costs and adapting organizational cost structures to changes in reimbursement and care delivery. While about two-thirds of respondents reported 3% or higher reductions in supply chain and other non-labor costs, 61% reported no progress in service rationalization and 46% cited progress in reducing inappropriate clinical variation — both areas with potential to impact use of supplies and, ultimately, costs.
Efforts to control supply chain costs could provide opportunities for outside entities with expertise in moving products about. Earlier this year, The Wall Street Journal reported that Amazon was talking with an unnamed major Midwest health system. The e-Commerce giant has already been selling some healthcare products and IT equipment to hospitals, integrated delivery systems and physician offices, and is pitching its Amazon Business platform as a way for organizations to save money by shopping across multiple suppliers.