Dan DeLay
Senior Vice President, VHA Inc.
Spend $1.20, save your health care organization $4 million. Most management decisions don’t present themselves as simply as this. However, that’s actually a decision that materials managers and purchasing directors at hospitals make every day. Consider this… Regular hospital slippers cost about 60 cents a pair. No-slip slippers cost nearly twice that. As a former practicing trial lawyer now health supply chain expert, I can tell you which pair I’d recommend--purchase the more expensive no-slip slippers in order to avoid serious health consequences and potential litigation from a patient fall.
Even the most common products used in health care are subject to scrutiny these days, and not just because it could result in lawsuit if someone perceives you were doing things on the cheap. The real reason for knowing and understanding what your organization is purchasing is because supplies represent between 25 percent and 50 percent of the costs hospitals incur when providing care, depending upon where they’re located. The slipper example seems ludicrous because the cost is minimal, but when you think about the domino effect, even the most inexpensive items become essential to examine. From a financial perspective though, minimizing supply costs--especially for big-ticket items--is essential for hospitals.
I can hear you thinking…. How in the world can a hospital examine the millions of items it purchases every month, especially the rogue items that don’t go through purchasing? The answer is simple--put one person in charge of purchasing everything. No one buys anything without that person’s rubber stamp of approval. Well okay, that won’t work. A better solution is to connect all those disparate purchasing activities to one IT system that will manage the flow of data and enable you to analyze purchases and look for trends in purchasing patterns that could signal spikes in costs or potential risk management issues. Unfortunately, we're not quite there yet in health care, but we are getting close. In the meantime, at least once each year, pull a list of the top 100 items your organization purchases, order a couple of pizzas and invite your in-house or external risk management team over for the afternoon to review your organization’s purchasing behavior. It doesn't cover everything, but it's a start.
The best health care organizations will look at purchasing not just from “a penny saved is a penny earned” perspective, but also with a view that “an extra penny invested is a wise penny spent.” In this case, 60 cents buys you priceless peace of mind.
