Every healthcare supply chain organization we know of has monthly, quarterly, and annual savings reports that they prepare for their senior healthcare management. Most are prepared on spreadsheets that limit the accuracy, comprehension, and integrity of these reports. Consequently, here are three big pitfalls we see that you need to avoid if you want your savings reports to reflect your real short and long-term savings accurately:
1. Assuming Nothing Changed During Term of Agreement: One fact of life is that things change (volumes, policies, procedures, etc.) and people change (who provides the services) in a healthcare organization during any given year. Therefore, any savings projection you had at the beginning of a new contract or change in practice is irrelevant unless changes within the commodity group you are tracking are factored in. Let’s say a new policy change requires a higher level of gloving for surgical cases. This will increase your surgical glove utilization cost by 170% and increase your per case cost too. How would you know this happened without validation of this change?
2. Not Verifying Savings Projections on a Quarterly Basis: Savings projections aren’t a one-time event. They need to be verified, at least on a quarterly basis, to ensure that none of the variables we just talked about changed. For instance, one of our clients thought that a price increase in their prefilled syringes would cost them 9% annually, when it ended up saving them 2.6% over the term of their agreement. Isn’t this the information you need to manage your contracts more effectively?
3. Believing that Initial Savings Projections are Fixed: As you can see, no savings projection is fixed due to variables that are out of your control over the term of your agreements or changes in practices. Like a savings projection of 47.6% on reprocessed blood pressure cuffs, when the initial projection was only 25%. Wouldn’t you like to take credit for these extra savings?
Accurate supply chain savings reports are mission critical for any healthcare organization today, since your CFO depends on them for their budget projections. If your savings projections are off target even by a few percent, this can change your CFO budget assumptions noticeably. I don’t think you want to answer to your CFO for these budget corrections. So, get your savings projections right the first time by verifying them quarterly and then reporting any changes in your savings projections at that time.