Supply Savings Invigorate Community Hospitals

Community-based hospitals are the lifeblood of smaller communities.

These facilities not only provide access to local health care, but they also stimulate the local economy, helping create jobs in the hospital and the community. However, many rural facilities face significant financial and operational challenges. They see a larger share of Medicare and Medicaid patients and operate on thin margins. For these hospitals, examining ways to reduce expenses is critical.

Supply spend is the second-largest cost for hospitals behind labor. Nearly 80 percent of providers who participated in a Modern Healthcare survey on supply chain issues said reducing medical and surgical supply costs is a formal part of their organization’s strategic plan. Holding the line on supply chain costs is a top priority.

Let’s look at three approaches to help control supply spend.

  1. Collaborate with key stakeholders to negotiate better pricing.The highest percentage of supply costs is often associated with a hospital’s operating room. Get everyone to the table with manufacturers — hospital executives, physicians and surgeons — to negotiate for more favorable prices on physician preference items such as orthopedic implants and cardiac rhythm medical devices.
  2. Evaluate your group purchasing organization (GPO) options to maximize cost reduction. Today almost all hospitals have one or a variety of group purchasing contracts in place, however, the benefits offered vary significantly. For example, size is a disadvantage for smaller hospitals, which often pay more for the same products or supplies because their volume is much smaller, and they cannot access best-tier pricing based on dollar spend. It’s key to understand the savings your hospital can qualify for and select the GPO with the most benefit for your specific needs.
  3. Analyze your materials management practices to get the most savings from your GPO. This process should include monthly or quarterly reviews to ensure your hospital is receiving previously negotiated prices from suppliers. It’s also helpful to cross reference hospital procurement data with your GPO contract list to identify opportunities for greater savings potential by converting to new products. Involving a multi-functional team of department leaders in this process helps ensure buy in.

To access better tier pricing, CHC has partnered with HealthTrust to introduce a program designed specifically for community hospitals, CHC Supply Trust. This offering helps smaller hospitals to improve their bottom line with a reduction in supply costs, estimated at 10 percent savings annually. Participants also get support with the onboarding process and optional consulting and analysis services to maximize the benefit received.

Read other community hospital blog posts on the CHC Website.