Hospitals Could Save $23 Billion Annually by Streamlining Supply Chain Operations, Product Use
September 13 2017 - 8:30AM
Business Wire
Navigant analysis suggests a 17.8 percent
average supply expense reduction opportunity for U.S. hospitals
while maintaining quality; equal opportunities exist across
hospital size, types
Hospitals nationwide could reduce annual supply expenses by
approximately $23 billion in aggregate through improvements in
supply chain operations, processes, and product use, according to a
Navigant analysis of more than 2,300 hospitals. This represents a
17.8 percent average total supply expense reduction opportunity or
up to $9.9 million a year per hospital – an amount equivalent to
the annual salaries of 150 registered nurses, or the cost of 4,000
cardiac defibrillators or five Da Vinci robots.
The analysis also shows lower supply spending does not have to
reduce quality, as hospital-acquired condition and value-based
purchasing scores are slightly better at top-performing supply
chain facilities. Moreover, the chance to realize savings may exist
for all types of hospitals, with opportunities relatively equal
across such characteristics as size, regional location, and whether
the facility is urban or rural, for-profit or not-for-profit, or
system-based or standalone. To view these results, visit
www.navigant.com/SupplyChainAnalysis.
“The pressure on hospitals and health systems to reduce costs
and maintain quality will only intensify, no matter the outcome of
healthcare reform,” said Christine Torres, system VP of supply
chain management for Philadelphia-based Main Line Health. “The
supply chain represents close to a third of the average hospital’s
overall operating expense, and it’s predicted to surpass labor as a
hospital’s greatest expense by 2020. Opportunities exist for all
organizations, even top performers, to improve supply chain
efficiencies while continuing to offer the highest levels of care
to the communities we serve.”
Provider Best Practices
The study found that the top 24 percent* of 2,331 U.S. hospitals
analyzed spent $23 billion less a year than other facilities on
supply chain products and related operations, processes, and
procedures. Savings could be achieved if the remaining 76 percent
of hospitals perform at the level of top performers for supply
chain budget efficiency.
Top performers consistently leverage evidence-based protocols
and data analytics to reduce variation in pricing, product use, and
clinical outcomes. This information better equips supply
departments to:
- Reduce the number of suppliers and
contracts for like items, particularly with products needed for
routine procedures.
- Optimize the type and frequency of
products used based on specific patient circumstances and
cases.
- Engage physicians to standardize use of
implantable devices proven to produce clinically equivalent
outcomes at a lower cost.
- Automate requisitions, purchase orders,
invoices, and other manual supply chain processes that can lead to
documentation errors.
“It’s clear that some hospitals have the appropriate strategies
and processes in place to efficiently manage supply chain budgets
while maintaining high-quality outcomes,” said Rob Austin,
associate director at Navigant. “For example, we have found,
somewhat counterintuitively, that the highest-performing providers
are simultaneously able to decrease cost and improve quality, in
part by reducing clinical variation. Lower-performing supply chain
departments need to leverage these types of proven best practices
to drive care delivery improvements.”
Benchmarking data is also essential, but providers must look
outside their organization to obtain a true snapshot of
performance.
“In-hospital benchmarks and year-over-year improvement goals are
valuable in monitoring internal supply chain performance, but these
measures don’t reveal an organization’s true improvement
potential,” said Paul Weintraub, director at Navigant. “To
accurately uncover efficiency opportunities, providers must look
beyond their facility’s four walls and leverage industry-wide
benchmarking data that compares their supply performance against
that of their peers.”
To access Navigant’s supply chain benchmarking calculator, visit
www.navigant.com/supplysavings.
*Analysis Methodology
Publicly available data from Definitive Healthcare (2015-2017)
was reviewed across four key performance indicators (KPIs) for
supply expense: per case mix index (CMI) adjusted patient day; per
CMI adjusted discharge; as a percent of total operating expense;
and, as a percent of net patient revenue. Hospitals were divided
into 12 peer groups based on CMI and adjusted occupied bed count,
and 560 of 2,331 (24 percent) with savings opportunities of less
than 5 percent of total supply expense across each KPI were
designated top performers.
Navigant’s Healthcare practice is comprised of more than 500
consultants, former provider administrators, clinicians, and other
experts with decades of strategy, operational/clinical consulting,
managed services, revenue cycle management, and outsourcing
experience. Experts collaborate with hospitals and health systems,
physician enterprises, payers, and government entities, providing
enterprise-wide strategic development and performance improvement
solutions.
About Navigant
Navigant Consulting, Inc. (NYSE: NCI) is a specialized, global
professional services firm that helps clients take control of their
future. Navigant’s professionals apply deep industry knowledge,
substantive technical expertise, and an enterprising approach to
help clients build, manage, and/or protect their business
interests. With a focus on markets and clients facing
transformational change and significant regulatory or legal
pressures, the firm serves clients in the healthcare, energy, and
financial services industries. Across a range of advisory,
consulting, outsourcing, and technology/analytics services,
Navigant’s practitioners bring sharp insight that pinpoints
opportunities and delivers powerful results. More information about
Navigant can be found at www.navigant.com.
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version on businesswire.com: http://www.businesswire.com/news/home/20170913005290/en/
Navigant Investor RelationsKyle Bland,
312.573.5624kyle.bland@navigant.comorNavigant HealthcareAlven Weil,
704.995.5607alven.weil@navigant.com
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