by Bryan Ramey, Mitchell Planning Associates, and Mike Gerhardt, Senior Director, Facility Management Specialists, Intalere
Across every industry, benchmarking is an essential tool to help organizations understand key metrics in determining their position in the marketplace. In today’s healthcare hospital industry, Supply Chain departments are using monthly, quarterly and annual metrics such as the hospital’s total patient days versus their total spend for disposable and consumable supplies, medical devices, implants and instruments to gauge not only how they compare to similar hospitals, but also how similar departments within the hospital compare to each other, i.e. Medical, Cardiac, Surgical and Neuro ICUs. But the capital equipment process within hospitals still lacks efficiency and an effective way to drive down the cost to acquire medical equipment.
Hospitals are now being challenged more than ever to find ways of cutting cost and reducing their overall bottom line. Benchmarking medical equipment by utilizing good, reliable data, along with competitive pricing is a way to contribute to the organizational cost reduction goal. After all, over the course of a hospital fiscal year, the total spend for medical equipment ends up being one of the largest cash outflows. Furthermore, medical equipment procured for new hospital construction projects remains to be the second largest line item cost next to the overall cost of actual construction. So a process which incorporates unreliable data and non-competitive pricing, along with bad habits like benchmarking only to “check the box” doesn’t provide much value for the hospital.
So as you begin to procure your equipment during the annual capital process, it’s important that you can trust the information. The data should be transparent and easy to understand, the provider of the data should be knowledgeable about the benchmarks they are presenting, and the benchmarks should be representative of best-in-class pricing. What good is it to compare your potential equipment purchase to quotes that haven’t been negotiated down to the final price when there are resources to help determine what you should actually be paying? Having transparent data and best-in-class pricing strengthens the ability to determine the “end” price so you can “begin” negotiations with the end in mind. Possessing knowledge of final landed costs can produce an additional cost savings of 7-10%.
For example, to be the fastest runner in the world, one must know that the fastest time is 9.58 seconds to run 100 meters. If the runner is unaware of the world’s best time, then he only beats himself for not dedicating the resources to knowing and understanding the facts. The same goes for benchmarking medical equipment. Understanding the data and knowing the actual prices paid will help your Supply Chain team deliver deeper discounts and better deals, hence, making the capital process much more efficient and effective.
Where will you end up? What is your target? What is the outcome? These are questions that should be answered prior to negotiating. How do you determine the appropriate end? Compare to previous purchases, compare to similar purchases, compare to other organizations with like or similar purchases, and compare to best-in-class purchases. For an aspiring Supply Chain team that truly wants to be the best, one must know what constitutes as being the best, how high the bar is set to reach the best, and in the world of procurement, how low the actual price is to be the best in class.
To learn more about Intalere and Mitchell Planning’s Equipment Planning solutions, click here.