The average hospital spends nearly one-third of its overall operating expenses on supply chain management.
Yet U.S. hospitals overspend on supply chain products and related operations by roughly $25 billion per year, according to data from Navigant. This same study found that the average hospital can cut its average total supply expense by 17 percent to 18 percent, and often the percentage can be even higher.
Transforming a hospital or health system's supply chain is a long-term journey, but you can see impactful results early on. It is critical to make a long-term plan that is both comprehensive and realistic, with well-defined objectives and benefits in mind for the organization.
Leaders from Select Medical, the largest provider of post-acutecare, based in Mechanicsburg, Pa., and Ivalua, a procurement software company, recently discussed how Select Medical transformed its supply chain during a March 11 webinar hosted by Becker's Hospital Review and sponsored by Ivalua.
Select Medical operates more than 100 critical illness recovery hospitals, 30 inpatient rehabilitation hospitals, 1,750 outpatient centers and 500 occupational medicine clinics across the U.S.
The leaders were:
- Ken Wilson, vice president of procurement at Select Medical
- Vishal Patel, vice president of product marketing at Ivalua
Four key takeaways from their discussion:
- Supply chain affects every department of a hospital, but goals and objectives are often misaligned across departments, resulting in siloed and inefficient supply chain management, Mr. Patel said.
- Ivalua's platform covers the full source-to-pay process. The platform enables the management and control of all spend, such as basic indirect, low and high preference items, and helps to improve self-contracting capabilities directly with suppliers. Ivalua can be an asset in overcoming the master data challenge that many healthcare organizations face. It also improves visibility into costs and utilization — which may reduce clinical variation with data — and helps organizations build leading supply chain practices, according to Mr. Patel.
- Select Medical used Ivalua's platform to help it create a center-led, best-in-class procurement program. The health system examined its procurement processes and found they were decentralized and had minimal corporate oversight or proactive decision-making, Mr. Wilson said. The health system also had minimal access to detailed purchasing data. By using Ivalua's platform, Select Medical was able to get a 360-degree view of its transactions from a supply-and-buy angle and visibility into every step of the process. The platform enabled proactive decision-making and ensured that dollars spent were qualified.
Select Medical's guiding principles for the entire project were:- Purchasing tool has to be extremely intuitive for users to gain high adoption
- A platform that will allow for the processing and capture of all categories of spend
- Integration into existing systems
- Project should result in AP efficiencies, not inefficiencies
- Platform must support a scalable organization and be sustainable from a technology perspective
- Spend analytics at both line items and aggregated views
- Select Medical was able to save millions through year-end 2020. The health system also has more than 15,000 contracts abstracted and loaded within Ivalua's platform and more than 900 suppliers electronically enabled, according to Mr. Wilson. During the COVID-19 pandemic, Select Medical used Ivalua's platform for initial capture of personal protective equipment inventory product categories and dollars, which supported the development and operationalization of a new corporate warehouse and distribution center, as well as a long-term PPE inventory strategy.