Nickels and Dimes Add Up
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Central Washington Hospital dumps paper processes to find supply chain savings.
Neither Drew Carey nor Bob Barker was running the game, but participants at a leadership retreat for Central Washington Hospital had just as much fun as the contestants on The Price Is Right. Only their version of the long-running game show wasn't played with Rice-a-Roni or washing machines—it was with medical devices, ortho implants, and office supplies.
"People were surprised with the cost of implants and things like that," says Chief Financial Officer Steven R. Jacobs. But participants were even more surprised by the products the hospital used that were essentially for the same purpose.
The game was part of a presentation that outlined savings the hospital planned to achieve through the elimination of paper processes and the realignment of value committees within the 1,400-employee, 206-licensed-bed acute-care hospital in Wenatchee, WA. Prior to contracting with Lawson Software, the hospital used a supply chain and inventory management system that was heavily reliant on paper-based processes. The software only solved the paper problem, however. The heavy lifting was in paring down the value committees, made up of clinicians tasked with standardizing a dizzying array of products.
For instance, says Jacobs, "one thing we discovered is that we were buying 11 different types of scrub hats for surgery." Standardizing such a trivial item might not seem like it would achieve much, but it saved $5,000 over the course of a year. Multiply those savings by the multitude of items a hospital orders in a year, and you have substantial savings.
"We knew through our own audits that we had vendors not following contract prices. That was costing us a fair amount of money," says Michael Romine, the hospital's director of finance. "We improved our efficiency by going from paper-based to electronic, notably in our distribution system."
There was other money on the table in terms of tracking supply returns. "We found we had returned items—not just supplies, but office equipment—and we weren't taking the credits with vendors," says Romine.
Since Central Washington went live with the new software and the streamlined value committees last fall, the hospital has already saved $500,000 and hopes to realize savings of $1 million to $2 million annually on supplies.
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