The road to ASC financial success: 10 supply chain cost-cutting strategies
Here are 10 strategies for ASCs to effectively cut costs in their supply chain:
1. Select the right business partners. According to Jerry Johnson, vice president, of national accounts, ambulatory surgery center division at Medline, it is important for ASCs to partner with well-established firms who have a track record of sustainability in the marketplace to cut supply chain costs. "Select business partners that understand and commit to the success of the ASC," he says.
Also, looking to partner for the long-term can result in more immediate savings. Short-term relationships are front-loaded with cost recuperation and that prevents more immediate savings realization, says Mr. Johnson. Commit and stick to the commitment through the term of the agreement.
Mr. Billstein finds partnering with a buyer very helpful because they have a good understanding regarding the market that your center is in and they may have unique solutions to problems that you have not thought about.
2. Network with colleagues. A greatly under-utilized cost cutting strategy is networking with other administrators and talking about common problems, says Mr. Billstein.
"We had a tissue provider that went from being a local entity to being acquired by a national service group," he says. "So the prices went up. A number of my colleagues and I talked and they told be about some competing providers who I didn't know about. We were able to shift our business to a lower cost tissue provider."
3. Create physician buy-in. "Truthfully the most influential drivers of savings is the physician staff," says Mr. Johnson. "They also are the ones that are most often the roadblock whether they realize it or not. A physician's willingness to listen to, trial and calmly consider change can make or break the ASC's desire to find products and services that save money."
To create buy-in, physicians need to be educated about the costs of the products they use. "Once they see the costs, many of them are savvy enough to realize that the variability in supplies results in increased costs. So partner with them," says Mr. Billstein.
Physicians are by nature intelligent and high-achievers, he adds, so bringing physicians together and giving cost-per-case presentations at the center will lead to cost savings on supplies. Mr. Billstein suggests blinding the names of the physicians but showing them the cost difference between providers on the same case, which may prompt physicians to ask questions about cost and open up a dialogue.
4. Formulate and articulate a clear mission. The cost-cutting mission needs to be established and adopted at every level. To be successful there must be clearly defined goals for every area related to patient throughput as well as measurements developed to ensure performance at the agreed standards, according to Mr. Johnson.
"It is not enough to intuitively understand the need to produce patient care at the lowest cost," he says. "Every member should be told their goals and expectations in terms applicable to their specific area of the organization."
One way to do this is to hold team meetings, which includes nurses, office staff, administration, physicians and vendors. Tell them the goals and open up the floor for dialogue.
5. Create post-performance scoreboards. These scoreboards should detail cost reductions against goals for the entire staff to see, according to Mr. Johnson. Making everyone's contributions visible helps keep everyone accountable.
"Highlight contributions [from] the broader team individuals that were significant in reaching cooperative goals," he says. "Scoreboards that demonstrate results to the set goal are very effective. The old saying 'inspect what you expect' should not be lost in the efforts to reduce costs."
6. Establish rewards. After setting goals and expectations, set rewards. "Every contributor ultimately asks themselves 'what's in it for me?'" says Mr. Johnson. "So, explain the reward at the same time the goal is announced. If it's a bonus, a raise, a paid day off, a free lunch or any other incentive — name it!"
One center offers a catered lunch for every $10,000 in savings realized and the highest contributor earns dinner for two, says Mr. Johnson. With every staff member pulling in the same direction, goals are reached.
7. Design the ASC storeroom with cost cutting in mind. Surgery center storerooms are often poorly laid out, says Mr. Johnson, and this leads to ineffective materials storage. Designing the storeroom with efficiency in mind will often reduce the number of expedited shipments, the minutes required to prepare a case as well as the errors in picking supplies.
The more limited the storeroom footprint, the more important it becomes to have an expert design plan to make the appropriate handling of supplies easier. "Some vendors provide free consulting on the design and layout of materials holding areas. Improving the storage organization will also help eliminate lost inventory by improved visibility and rotation," he says.
8. Consider reprocessing. "Looking at some disposables that you can reprocess is an effective way to save supply chain costs," says Mr. Billstein. "But ensure that the supplies are appropriate and safe to reprocess."
Some centers are very invested in custom-built packs for specific cases and while that sometimes cuts costs, at other times it may drive up prices, he says. Looking at it on a case-by-case basis and deciding whether you need a custom case is helpful.
"Keep reevaluating your supply chain processes and modifying the custom packs. Really make sure you are using everything that you buy," he says.
9. Reduce expedited shipping. Mr. Johnson notes that last-minute, emergency shipments of supplies can result in great deal of wasted money and thereby erase cost saving efforts. "Look carefully and determine how much capital is [spent] on last minute emergency shipments. Most often it's because the need for supplies was not recognized due to poor inventory management systems," he says.
10. Inspect invoices carefully. Take a deep dive into surgery center invoices and verify the prices expected and agreed upon. Invoices should not be inflated with "invoice charges" and other costs tacked on by the vendor that have nothing to do with product expenses, according to Mr. Johnson.
"Hold every vendor accountable to explain invoice entries that add to the expense of purchasing the product," he adds.
Embarking on cost saving initiatives can be intimidating, however, to ensure the financial health of a surgery center it is a necessary journey to take, and every small step counts.
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