Tag Archives: utilization management

9 Reasons for Inefficiencies in Supply Management

by Tracey Chadwell, Senior Director, Advisory Solutions, Intalere

In recent blog posts, we discussed the idea of supply utilization management and building a sustainable process to identify gaps in supply chain strategies and create new behaviors that bring savings to your healthcare facility’s bottom line.

One area of particular scrutiny is waste in the supply chain. Waste and inefficiencies in the consumption of products is where 79% of all new supply chain savings are hidden. That includes things like inferior products, value mismatches and misused, misapplied, or misappropriated products, which must be identified and eliminated.

In some cases, supply chain can evaluate, select and contract for a product/service/technology, but hospital staff use too many, use wrong products, choose feature-rich products, waste products, or vendors upsell new, higher cost products inside the new contract. That is why a cross-functional team with representation from supply chain, finance, operations and clinical segments, along with a process that includes checks and balances, is so important.

Furthermore, redundancies in supplies and unnecessary deviations in inventory processes lead to variations in practice, many times sacrificing clinical and operational excellence for personal preference or comfort.

What are some of the main reasons for waste in the supply chain that we need to guard against?

  1. Tradition – Products, services and technology need to be reviewed regularly to ensure relevancy beyond the old adage of, “this is what we’ve always used and it’s been fine.”
  2. Poor or inaccurate performance specifications – Most items are purchased from manufacturer-supplied data, not based on required performance expectations, and, therefore, are either over- or under-performing, resulting in waste and inefficiency.
  3. Wasteful and inefficient practices – Excess inventory, discards, redundant motion, unnecessary practice variation, irrational consumption.
  4. Old technologies – Some products may be inefficient or need maintenance to keep operational. It’s important to evaluate “useful” life to ensure these products are still meeting needs.
  5. New technologies – Conversely, new products and tech purported to be faster, better, cheaper may be less reliable, more supply intense and, thus, more costly.
  6. Lack of accountability – No one “owns” the value chain to oversee the life and cost of an item used by numerous departments.
  7. Lack of input from key stakeholders – Customers aren’t consulted prior to product or service decisions, so inappropriate use or changes occur. Comprehensive stakeholder involvement helps identify flawed thinking or assumptions so better decisions can be made.
  8. Feature-Rich Products – Value mismatches provide more than what is functionally required. For example, pacemakers with over 100 features that cost 50% more, when only 10-15% of its features are medically indicated.
  9. Standardization vs. Customization – It’s rare that one product is able to meet all requirements of all users without incurring waste, inefficiency and a higher cost than necessary. Customization, or building products according to individual specs, will meet the requirements of approximately 80% of the users. The other 20% require higher or lower specs to fit their needs, which may mean buying different products for them. Doing so may actually reduce waste and inefficiency by 10-15%, thus lowering overall costs.

Identifying and understanding these possible hurdles and how best to make critical adaptations, create new behaviors, and revise policies and procedures to mitigate them, is an important part of bringing sustainable savings and a strategic supply chain to your organization.

We Can Help. Intalere helps you better understand the strategic nature of supply chain and provides resources that can assist in bringing efficiency and savings to every area of your supply chain. Reach out to see how we can help. Contact Customer Service at 877-711-5600 or customerservice@intalere.com  or your Intalere representative.

Supply Utilization Management (SUM) – Part 2: What it Takes to Achieve Improvement

Peter Cayan

By Peter Cayan, Vice President, and Tracey Chadwell, Senior Director, Advisory Solutions

In part one of our supply utilization management discussion, we began by defining the concept of supply utilization management and explained how so many aspects beyond initial price affect your true cost. In this post, we’ll review how you can build a culture to achieve sustained improvement in support of the quadruple aim of improving patient outcomes, improving patient experience, improving care team experience and lowering the overall cost of care.

An Intalere member at a regional medical center in the western U.S. uses an analogy to explain how to achieve “improvement” to his staff by using the sport of throwing darts. This sport requires practice and dedication, and the more you focus on throwing at the bullseye, the tighter the group will be over time. You might not ever get all the darts in the little red dot, but it will be pretty close.

This, generally, is the goal of any process improvement program – get everyone in the organization to throw those darts (products and services) as close to the bullseye as possible. Hence, maximizing the pursuit of “the aim.”

Utilization management is your bullseye and theoretically your darts could represent any of the products and services that exist within the organization. The end-state goal should define what it is the team wants to achieve. If the team is not involved in formulating the target plan, and goal, buy-in will be hard to achieve.

A key element of getting to “yes” here is the critical requirement of having a defined, transparent and measurable decision-making process. Without this key fundamental team process, all bets are off for hitting the bullseye. It takes the whole organization to make this happen. You want to stack the opportunities and build a standard for identifying prospective wins and tracking progress throughout the organization.

You must develop a function-oriented, systematic team approach for providing, designing or investigating the right functions (primary, secondary and aesthetic) for the products, services and technologies that are required to operate a healthcare organization. Your process should be one which:

  • Takes product/service/technology evaluation and management of supply expense from subjective to objective.
  • Uses a formal, customized and collaborative process.
  • Is data driven (related to clinical efficacy, safety, quality).
  • Is supported by clinical documentation and an evidence-based approach.
  • Determines true requirements/function/purpose.
  • Benchmarks against best practice.
  • Promotes the standardization of products that are clinically efficacious and provide the highest quality care, customer satisfaction and safety to patients in the most cost-effective manner.

Ultimately this builds a long-range planning process that identifies gaps in supply strategies and is successful in creating new behaviors that allow for adaptation, evolving policies and procedures that tackle hurdles threatening success and ultimately yield savings that are real and achievable.

We Can Help. Intalere helps you better understand the strategic nature of supply chain and provides resources that can assist in bringing efficiency and savings to every area of your supply chain. Reach out to see how we can help. Contact Customer Service at 877-711-5600 or customerservice@intalere.com or your Intalere representative.

Supply Utilization Management (SUM) – Part One: The Untapped Well

Peter Cayan and Tracey Chadwell, Intalere leaders

By Peter Cayan, Vice President and Tracey Chadwell, Senior Director, Advisory Solutions

While controlling cost and reducing variation will always be mission-critical functions to any and all supply chain managers, these tip-of-the-iceberg savings represent only about 37% of the total lifecycle cost of supply purchases. The preponderance of your product, service and technology life cycle costs, or 63%, is in your deployment and utilization, or how your commodities are employed by staff in your healthcare organization. 

Total lifecycle management has a beginning, middle and end. At the beginning, there is your value analysis process (i.e. deciding on best value); the middle is your utilization management system (i.e. controlling when and how the product is used) and at the end of the lifecycle you need to economically and ecologically dispose of the product.

While most hospitals, IDNs and other healthcare providers have focused on the beginning and end of this total lifecycle management process, only a few healthcare organizations have a system in place to rein in the middle of this process, or utilization, where most of their lifecycle costs are incurred. This fact could be costing your healthcare organization a significant amount of money each year.

Defining Utilization Management

By definition, utilization management is control of the wasteful and inefficient consumption, misuse, misapplication or value mismatches in the products, services or technologies you are buying. It’s all those things that happen after you deliver products to your customers. 

Waste and inefficiencies in the consumption of products is where 79% of all new supply chain savings are hidden – inferior products, value mismatches, and misused, misapplied, or misappropriated products must be identified and eliminated. What happens?

  • We evaluate, select and contract for a product/service/technology, then staff will often use too many, misuse or waste products, or choose feature-rich products that are more expensive. In addition, vendors may upsell new, higher cost products outside the new contract.
  • Redundancies in supplies and unnecessary deviations in inventory processes lead to variations in practice, many times sacrificing operational excellence for personal preference or comfort.

Let’s say, for example, that your I.V. pump set cost is $4.65 each and you use 100,000 sets per year. Then this $465,000 represents your annual utilization cost for this I.V. set. If your clinical staff is misusing or misapplying, or the I.V. set is a value mismatch (i.e. lower cost alternative available, but not being employed or purchased) of 10%, you are losing $46,500 annually in what we call a utilization misalignment.

Now, multiply this factor by the 7,000 to 15,000 products, services and technologies that you buy annually to help you to understand the impact of how not having a system in place to effectively, efficiently and easily manage and control your supply utilization is compromising your overall cost efficacy.

That’s why price is just the tip of the iceberg to be considered in your spend. This is because you could actually pay more for a product but have a lower utilization cost (e.g. electrode, bath system or lab test, etc.) and still be way ahead of the game. This fact is important to remember as we move to value-based purchasing.

In our follow-up post, we’ll take a look at what it takes to achieve real improvement.

We Can Help. Intalere helps you better understand the strategic nature of supply chain and provides resources that can assist in bringing efficiency and savings to every area of your supply chain. Reach out to see how we can help. Contact Customer Service at 877-711-5600 or customerservice@intalere.com or your Intalere representative.