Ship the complexities of consolidation away with freight management

Hospitals and health systems are surviving through an era of consolidation. With rural hospitals closing at unprecedented rates, executives are turning to mergers and acquisitions to decrease costs, standardize care and improve quality.  

However, consolidation does not guarantee seamless processes and ease of operations. Instead, mergers are often followed by growing complexity, duplication of efforts and higher costs. The opposite of the desired goal.

To solve the challenges brought about by consolidation, executives are beginning to centralize purchasing. One opportunity to witness costs savings while centralizing spending is in freight management. During a Jan. 22 webinar presented by Becker's Hospital Review and sponsored by Cardinal Health, Brad Wilson, vice president of OptiFreight® Logistics at Cardinal Health, and India Bellard, supply chain customer services manager at Franciscan Missionaries of Our Lady Health System in Baton Rouge, La., discussed how integrating a freight management solution can benefit hospitals and health systems, especially in the wake of a merger or consolidation.

OptiFreight® Logistics, the Cardinal Health freight management solution, offers expert logistics oversight to help control and reduce costs. The solution manages more than 19 million shipments annually, saving customers a combined $420 million1. OptiFreight® Logistics features an advanced offering to help manage logistics complexities from consolidation. The solution tracks all deliveries, including inbound, outbound, large freight and same-day shipments, providing hospitals and health systems access to data-minded transaction audits, predictive reports and transportation experts.

Why freight management?

In addition to a rise in mergers and consolidations, the industry's shift from inpatient care to outpatient care and the emergence of more hospital-owned physician practices has created a surplus of silos trying to work together as one. However, healthcare organizations can break down some of these silos by transitioning away from individual purchasing in favor of a centralized program.  

"Centralized purchasing has proven to cut overhead costs in half and reduce total operating costs by 5 to 10 percent2," Mr. Wilson said. "It has created new efficiencies, taken advantage of volume pricing and other economies of scale."

Freight management is an essential point of focus when transitioning to centralized purchasing. In many scenarios, hospitals face challenges scaling up transportation models originally designed for single sites. "Some health systems have responded by bringing in separate transportation vendors, such as couriers, as needs arise," Mr. Wilson said. "This is often handled directly by various people in different departments who are unaware of other existing shipping resources." This keeps hospital departments siloed.

By centralizing freight management, hospitals can save on hidden costs. "An estimated 50 to 70 percent of healthcare transportation goes unmanaged3," Mr. Wilson said. "And overpayments on unmanaged freight spend can really add up."

In addition to the cost savings, Mr. Wilson listed three other major advantages to centralized freight management:

  1. Visibility across your entire freight spend
  2. Control over every shipment
  3. Increased efficiency

These benefits can be realized at rural hospitals, multi-state health systems, university medical centers and a five-hospital health system based in Louisiana.

Freight management solutions work

Managing five hospitals, a growing network of clinics, physicians, senior services and an integrated information system, takes creativity, collaboration and centralization. Being a prime candidate for freight management optimization, Franciscan Missionaries of Our Lady Health System decided to implement OptiFreight® Logistics. Since altering its freight management, Ms. Bellard and the health system have seen significant improvements.

"For small parcel shipments, we've seen a 41 percent increase in savings and a 33 percent increase in the amount of freight management," Ms. Bellard said. "For large freight shipments, our savings have increased 36 percent, and the amount of freight managed 40 percent.4"

The health system went one step further to explore new ideas to cut unnecessary overnight shipping costs. Through these various initiatives, Franciscan Missionaries of Our Lady Health System has uncovered tens of thousands of dollars in potential savings.

Now, the health system is turning to data analytics to increase visibility into total transportation spend. By doing so, Ms. Bellard and her team hope to improve compliance, follow policies and procedures and optimize internal fleet resources.

"We believe centralizing our transportation spend will help us see things that we can't see today," said Ms. Bellard said. "We know that visibility is key to making better decisions. Accurate and validated data is essential to giving us that visibility and is pivotal for helping us move our transportation strategy forward."

To learn more about OptiFreight® Logistics, click here.

To view the webinar, click here.

  1. Based on shipments through OptiFreight® Logistics during Jan 1 – Dec. 31, 2017 compared to carrier list rates. Individual savings may vary.
  2. Charles River Associates. “Hospital Merger Benefits: Views from Hospital Leaders and Econometric Analysis.” 2017.
  3. Based on internal OptiFreight® Logistics data.
  4. Based on OptiFreight® Logistics data for Franciscan Missionaries of Our Lady. Individual savings may vary.

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