In an Oct. 19 webinar titled "Achieving Competitive Advantage Through Supply Chain Excellence," Jim Webb, senior vice president of operations at Provista, a leading GPO, discussed how ambulatory surgery centers can save money and gain a competitive advantage by focusing on their supply chains.
According to data from the 2007 ASC Financial Benchmarking Survey, supplies are the second-highest expense for surgery centers after staffing, Mr. Webb said. While cutting down on staff can hinder the quality of care, managing the supply chain effectively can boost the bottom line without affecting care.
"From a supply chain perspective, you can either try to cut costs in labor, which will hurt you from the care perspective, or you can try to cut your supply costs," he said.
Supply chain costs are not going to go down, Mr. Webb said. In fact, they will most likely go up.
"Healthcare costs from a supply chain perspective are going to go up simply because of the new technology that is coming into the market, the new drugs that are coming into the market and even the new procedures that are coming into the market," he said. "The proliferation of new products and new technology are going to continue to drive your cost up. That's where we really need to focus our efforts."
As more competitors — namely large chains, hospitals and specialty centers — enter the ambulatory surgery market, having control over the supply chain is even more important, Mr. Webb said.
Tracking supply chain metrics
One way to reduce supply chain costs is to improve inventory management policies and procedures. Mr. Webb said next year, surgery centers will be tasked with automating processes such as inventory management. Although the conversion process can be time-consuming, automation also provides the center with valuable information that can be used to track metrics.
"The rewards are going to be far greater than any effort that you put into it," he said.
Mr. Webb suggested three supply chain metrics that surgery centers should track:
• Supply cost as a percentage of net revenue
• Supply cost as a percentage of total expenditure
• Supply cost per case, by physician and by procedure
"The best place to benchmark yourself is against your own performance," he said.
If an ASC calculates its supply cost at 20 percent of net patient revenues, and 18 months later calculates the supply costs at 18 percent, the center is headed in the right direction, Mr. Webb said.
Making the most of a GPO relationship
GPOs can also help centers track metrics, and Mr. Webb urged surgery centers to look at GPOs, even if they have already.
"If you’ve seen one GPO, you've seen one GPO," he said. "Assess the GPOs and find the one that best meets your needs in the market."
In addition to being able to take advantage of a large purchasing power, GPOs can also reduce the administrative cost of contracts. If an administrator spends six hours with each contract for 90 contracts a year and assuming a 260-day work year, that person is spending 25 percent of his or her time doing contracts. If that person spends 16 hours per contract, which Mr. Webb thinks is more accurate, he or she would be spending 69 percent of their time on just contracts. A GPO can take provide this service at an extra cost. If the price is right, Mr. Webb said, go for it.
Mr. Webb stressed that center leaders should share their goals and objectives, such as annual corporate goals and personal professional goals, with the GPO. He also said a center needs to invest time with the GPO account executive, and if the GPO account executive isn't willing to invest the time as well, look elsewhere.
"GPOs are going to have to raise the bar in what they do," he said. "I think that you need to expect more from your GPO no matter who it is. You need to find a GPO that will meet your needs and help you reduce your costs."
Download the recording of the webinar here.
Download the PDF version of the webinar here.
Related Articles Featuring Provista:
11 Tips for Effective Negotiations With Suppliers
5 Best Practices for Successful Physician Conversations About Supply Chain Improvement
Provista Named Sponsor of 18th Annual Ambulatory Surgery Centers Conference
According to data from the 2007 ASC Financial Benchmarking Survey, supplies are the second-highest expense for surgery centers after staffing, Mr. Webb said. While cutting down on staff can hinder the quality of care, managing the supply chain effectively can boost the bottom line without affecting care.
"From a supply chain perspective, you can either try to cut costs in labor, which will hurt you from the care perspective, or you can try to cut your supply costs," he said.
Supply chain costs are not going to go down, Mr. Webb said. In fact, they will most likely go up.
"Healthcare costs from a supply chain perspective are going to go up simply because of the new technology that is coming into the market, the new drugs that are coming into the market and even the new procedures that are coming into the market," he said. "The proliferation of new products and new technology are going to continue to drive your cost up. That's where we really need to focus our efforts."
As more competitors — namely large chains, hospitals and specialty centers — enter the ambulatory surgery market, having control over the supply chain is even more important, Mr. Webb said.
Tracking supply chain metrics
One way to reduce supply chain costs is to improve inventory management policies and procedures. Mr. Webb said next year, surgery centers will be tasked with automating processes such as inventory management. Although the conversion process can be time-consuming, automation also provides the center with valuable information that can be used to track metrics.
"The rewards are going to be far greater than any effort that you put into it," he said.
Mr. Webb suggested three supply chain metrics that surgery centers should track:
• Supply cost as a percentage of net revenue
• Supply cost as a percentage of total expenditure
• Supply cost per case, by physician and by procedure
"The best place to benchmark yourself is against your own performance," he said.
If an ASC calculates its supply cost at 20 percent of net patient revenues, and 18 months later calculates the supply costs at 18 percent, the center is headed in the right direction, Mr. Webb said.
Making the most of a GPO relationship
GPOs can also help centers track metrics, and Mr. Webb urged surgery centers to look at GPOs, even if they have already.
"If you’ve seen one GPO, you've seen one GPO," he said. "Assess the GPOs and find the one that best meets your needs in the market."
In addition to being able to take advantage of a large purchasing power, GPOs can also reduce the administrative cost of contracts. If an administrator spends six hours with each contract for 90 contracts a year and assuming a 260-day work year, that person is spending 25 percent of his or her time doing contracts. If that person spends 16 hours per contract, which Mr. Webb thinks is more accurate, he or she would be spending 69 percent of their time on just contracts. A GPO can take provide this service at an extra cost. If the price is right, Mr. Webb said, go for it.
Mr. Webb stressed that center leaders should share their goals and objectives, such as annual corporate goals and personal professional goals, with the GPO. He also said a center needs to invest time with the GPO account executive, and if the GPO account executive isn't willing to invest the time as well, look elsewhere.
"GPOs are going to have to raise the bar in what they do," he said. "I think that you need to expect more from your GPO no matter who it is. You need to find a GPO that will meet your needs and help you reduce your costs."
Download the recording of the webinar here.
Download the PDF version of the webinar here.
Related Articles Featuring Provista:
11 Tips for Effective Negotiations With Suppliers
5 Best Practices for Successful Physician Conversations About Supply Chain Improvement
Provista Named Sponsor of 18th Annual Ambulatory Surgery Centers Conference