Six Ways Supply Chain Can Use Analytics

Analyze your contracts and spend data to identify savings opportunities.

Analyze your contracts and spend data to identify savings opportunities.

COVID-19 is continuing to devastate hospital volumes, revenue, and operating margins. Hospital operating margins for January–November 2020 were 56% lower compared to the same period in 2019. Meanwhile, expenses are higher as staff care for fewer, sicker patients who are spending more days in the hospital.

Healthcare organizations need to control costs to survive this financial crisis. Supply chain spending is one of the largest healthcare expenses, accounting for about a third of the average hospital’s overall operating expenses. A Navigant analysis of supply chain costs in more than 2,000 hospitals found that the average hospital is spending $12.1M more than it needs to on med/surg and pharmaceutical supplies, medical and implantable devices, and maintenance supplies. 

How can you save money on supply chain purchasing? Start by examining your spend data to determine where you’re currently spending your money. Then use AI-powered analytics tools to identify savings opportunities.

Related blog: Spend Management: Positioning Yourself for Success in a Post-Pandemic World

Six Ways to Use Analytics

Analyze existing and prospective contracts and spend data to:

  1. Document your spend over time. Organize and standardize your spend data, classifying it by category, to determine where your money is going. Using spend analytics, compare what various departments or facilities within your health system are paying for the same supplies and services. If there are discrepancies, find out why. Is there no contract, or are there multiple contracts—with different prices and terms—stored in different departments?
  2. Identify overspending and revenue leakage. Use spend analytics to detect spending outliers and off-contract spend. Spot-check your existing contracts against national pricing benchmarks to determine whether you’re getting the best deal.
  3. Analyze prospective contracts before signing them. Compare quoted offers to knowledgeably analyzed, appropriately vetted, consistent, accurate, and unbiased benchmarks. This ensures they are competitive compared to multiple GPO, non-GPO, corporate, and special conditions related to purchase. Examine benchmarking data for list price, component price, warranty terms, and other measures. 
  4. Pinpoint savings opportunities. Start by organizing, categorizing, and benchmarking your spend activities across your organization (refer to #1). Then continuously monitor your contract assets, spend data, and payments to vendors to identify spend categories with the greatest savings potential. Renegotiate your contracts accordingly.
  5. Measure supplier performance. Measure your suppliers’ performance using key performance indicators (such as contracted price vs. invoice price; delivery in full and on time) to be sure they are delivering high-quality products and services at the best prices. Reconcile your invoices against the contract terms to identify overcharges.
  6. Detect auto-renewals and redundancies. Auto-renewals can be costly contractual obligations when the terms are unfavorable, or when you no longer require a particular service. You may not need certain print and fax services if your administrative staff are working remotely. In the case of a merger or acquisition, you may wind up with duplicate services. If the newly merged healthcare organizations are in the same geographic area, you won’t need multiple contracts providing the same laundry and waste management services. Artificial Intelligence (AI)-powered technology quickly scans contracts to find those with auto-renewal clauses. This lets you track critical dates, review, and determine necessity prior to contract renewal. Contract analytics spots redundant contracts and pricing that is higher than benchmarks, helping you determine which contracts should be canceled or shouldn’t be auto-renewed.

TractManager’s spend management solution includes spend analytics, contract and quote analysis, invoice reconciliation, and extensive benchmarking data. Improve your operating margins by 3% or more with our spend management software and services.

To learn more, read our white paper titled Measure It to Manage It: Beginning the Journey to Hospital Financial Wellness.

Author:

Barry Dyer, PMP

Senior Vice President of Consulting

Barry has more than 25 years of experience in management consulting, system implementations and process improvement.

 

Related Blogs:

Related Resources:

TractManager’s Contract Analytics tool helped a Northeast U.S. health system analyze 6,000+ contracts in six weeks instead of two years, saving more than $320K in staff salaries.

TractManager’s Contract Analytics tool helped a Northeast U.S. health system analyze 6,000+ contracts in six weeks instead of two years, saving more than $320K in staff salaries.

Manually reviewing the overwhelming volume of data contained in your contract assets to ensure compliance is a daunting and incredibly time-consuming task, which most organizations do not have the time or resources to undertake ...

Measure It to Manage It: Beginning the Journey to Hospital Financial Wellness

The financial health of your healthcare organization needs to be your top priority. Analyze clinical, financial, and operational data to uncover opportunities to improve your processes, systems, and bottom line.

Share This