Most of us probably think of manufacturing and sales when we come across the term “supply chain.” And although that’s a justified association, supply chains play an important role in many other industries, too. The dictionary definition of supply chain tells us it’s the “sequence of processes involved in the production and distribution of a commodity.” And just think about how many industries besides manufacturing and retail deal with products—playing some role in connecting end users with these commodities.
Healthcare is a perfect example here. Hospitals are doing all they can right now to strengthen their bottom lines—an endeavor that requires cutting costs just as much as it does maximizing revenue.
Want to boost your hospital’s margins? Start with the supply chain, a solution that’s easy to overlook but can unlock significant potential gains.
Hospital Supply Chains: Missed Revenue Opportunity?
How hospitals source health equipment, products and medications matters big time for their bottom line. Even a slight cost difference between Item A vs. Item B can add up to a significant sum over time when you consider its use across patients on a regular basis.
One management consulting firm studied 2,300 hospitals and found that organizations nationwide could save $25.4 billion “if they improve their supply chain operations and harness data.” As Modern Healthcare reports, this translates to an average expense reduction for supply chain costs of 17.7 percent, or up to $11 million per hospital annually.
This study found that the hospitals leading the pack in terms of supply chain optimization are doing a few things right. First of all, they’re employing data-driven physicians capable of identifying cost-effective items and medications that perform equivalently to more expensive alternatives. This allows hospital staff to standardize the products they use in their care. After all, cutting costs in an impactful way requires getting everyone across an organization on board.
Exploring the Relationship Between Cost and Quality
There’s an assumption that products that cost more tend to deliver better results, right? This explains why so many consumers and organizations opt for name-brand products when the generic version performs the same or better.
But the latest wave of supply chain analytics from providers like ThoughtSpot can help organizations dive into data to study relationships between cost and quality. Here’s an example outlined in Becker’s Hospital Review: A hospital starts spending more on a certain product or process, but this increased expenditure is supposed to end up being offset by a reduction in infections. Only data will reveal the relationship here—whether springing for the more expensive initiative did, in fact, result in lowered rates of infection in patients.
This example just goes to show that hospitals today more than ever need a surefire way to study the effects of making changes to their supply chains. Self-service analytics, specifically, equip clinicians, nurses, administrators, pharmacists and more to conduct their own data analyses—asking questions and getting answers in seconds—rather than having to wait for an IT team to produce reports on their behalf. In an environment where time is quite literally money, speedy supply chain analytics can do wonders for a hospital’s margins and outcomes.
Not only does supply chain management matter in terms of cost, but it also affects patient outcomes—something every hospital should be striving to maximize in this healthcare climate.
Although most hospital leaders recognize the potential for supply chain management to ramp up return on investment (ROI), 27 percent of hospitals still have yet to utilize data analytics to evaluate their supply chains for opportunities to improve quality and efficiency. Another 19 percent of hospitals “aren’t even analyzing it at all.”
When you’re searching for solutions to improve hospital margins, consider the supply chain—and how better analytics can help you optimize operations here.