Hospital administrators, executives of healthcare systems and other healthcare providers typically rank operational costs near the top of their list of primary concerns, along with patient outcomes and safety. A variety of factors drive healthcare costs, including technology, an aging population, and administrative expenses. Escalating product and equipment costs and pricing also have a significant impact.
Many hospitals and other healthcare providers partner with Group Purchasing Organizations (GPOs) to take advantage of bulk buying discounts for products and supplies. Today, when buying from suppliers, purchasing agents must not only take into account factors like product safety and physician preference --the traditional factors relied upon to make most buying decisions-- but also cost-effectiveness.
Organizations must go even further and deploy product equipment standardization strategies in their supply chains to realize even more advantages and save money.
1. Increases GPO compliance
In many organizations, each department is held responsible for ensuring that physicians and other personnel purchase supplies from the awarded suppliers in accordance with the GPO contract. Standardizing the buying process encourages GPO exclusivity. The “off contract” allowance varies. Some GPOs may require 85 or 95 percent compliance. These GPO’s often encourage higher compliance by offering members higher rebates.
At the other end of the scale, the purchasing department needs to actively manage contract connections. This includes requesting quarterly contract connection reports from both the GPO account manager and the medical distributor. The purchasing department needs to analyze spend data, note price changes, purchase volumes, etc.
2. Decrease the number of vendors involved
The more vendors in the supply chain, the higher your incremental costs for managing the relationship. Staff must spend time managing the logistics of each relationship as well as tracking the performance of each vendor. Physicians and purchasing departments will need to work together to aggregate their purchasing volume to fewer suppliers that can meet the needs of the department while standardizing product equipment.
To address this issue, some organizations have implemented Value Analysis Teams (VAT) comprised of physicians and other staff to help cut the number of vendors. Another group, which provides a similar function, is a Product Review Committee.
3. Decrease staff learning curve for specific product types
Decreasing the number of different equipment manufacturers benefits your staff because they can focus their attention on becoming better acquainted with the specific operation of fewer devices. With less different products to learn about, the staff can feel more comfortable working in different parts of the hospital when product equipment standardization is implemented.
4. Negotiating better pricing on off GPO contract purchases
By standardizing your equipment purchases you can usually negotiate better pricing from your equipment manufacturer when purchasing items that are not on your GPO contract. Standardizing on a product line from a particular equipment manufacturer means that you will be purchasing greater unit volumes from them. This should translate into overall price reductions and increased cost savings.
About CME: CME Corp is the nation’s premier source for healthcare equipment, turnkey logistics, and biomedical services, representing 2 million+ products from more than 2,000 manufacturers.
With two corporate offices and 35+ service centers, our mission is to help healthcare facilities nationwide reduce the cost of the equipment they purchase, make their equipment specification, delivery, installation, and maintenance processes more efficient, and help them seamlessly launch, renovate and expand on schedule.
