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Finding Deeper Supply-Chain Savings

Rene Letourneau, for HealthLeaders Media, April 11, 2014
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In deference to its physicians, MLH has not limited physician preference items as severely as other supplies.

"We have standardized general med-surg products like gloves and catheters. When we get to physician preference items, it becomes more interesting because of physician training, and we haven't gone down to one item. We have to understand the clinical needs as well and what physicians need to get the best patient outcomes," Torres says.

"The reason I've been successful is because I have established relationships with our clinicians based on trust and respect," she adds. "We're not clinicians, so we rely on our clinicians to guide us and help us."

Looking beyond a GPO

In addition to working with its GPO to cut costs, Torres says MLH also looks on its own for better prices.

"We leverage our GPOs contracts for the large majority of our med-surg products. About 30%–40% of our spend is through local contracts," she says.

MLH has also found some significant savings through reverse auctions, Torres says. "Basically, there are companies out there that will take your spend and your parameters and host an online bidding process."

Although Torres says this approach is "simple," she also says it can reap important savings. For example, during a recent reverse auction for trash can liners, MLH saved $200,000 by using that method of negotiation.

"When you think about how many trash can liners we use in healthcare, it represents a 6%–7% savings based on the volume of the purchase," she says.

Pulling as much cost as possible out of the supply chain will be critical to health systems' long-term financial success as payment models change, Torres adds.

"I think it is one of the hubs of how we are going to move into a more value-based purchasing system in healthcare," she says. "You have to have a core understanding of your supply chain costs in order to manage it in a more efficient way."

Reprint HLR0414-8


This article appears in the April 2014 issue of HealthLeaders magazine.

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