Proven Methods for Accelerating Cost Reduction. Richard Peters, Sr. Director of Surgical Services, Provista
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1 Proven Methods for Accelerating Cost Reduction Richard Peters, Sr. Director of Surgical Services, Provista
2 Presentation objectives Importance of Cost Reduction Sources of Supply Chain Inefficiency Tips to Accelerate Cost Reduction A Better Supply Chain Management System
3 The Storm is upon us! Reimbursement Pressures Mergers & Acquisitions Healthcare reform Payor Case Rates Pharmaceutical Shortages Reduced Volume of Surgeries Physician Relationships Staffing Challenges
4 Adapting to Market Conditions 60% 50% 40% 30% 20% 10% 0% What Surgery Centers Are Doing To Prepare for Healthcare Reform 55% 42% 13% 10% 2% 2%
5 Adapting to Market Conditions Surgery Center Strategies for Success 70% 66% 60% 50% 40% 30% 20% 10% 0% 14% Aggressively cut costs 9% 9% Aggressively expand services and revenue Improve managed care contracting practices 0% Reduce staff A combination of these 2% Other Source: Provista ASC Market Survey December 2011
6 Supply Chain Impact on an ASCs Expenses Miscellaneous expenses 30% Salary & benefits 36% Building lease & depreciation 9% Source: 2007 ASC Financial Benchmarking Survey Medical supplies, implants & RX 25% Every dollar you remove from supply cost increases your cash flow. Increase your profitability Or Invest in new service lines or specialties, upgrade equipment, etc
7 Sources of Inefficiency Splitting up your supply volume Suppliers Distributors Group Purchasing Organizations Lack of dedicated supply chain expertise Insufficient supply management processes and controls Minimal usage of information technology
8 Accelerating Cost Reduction 50% Supply Chain Initiatives Next 12 Months 40% 30% 20% 34% 24% 19% 27% 10% 0% 6% 6% 2% 3% Source: Provista ASC Market Survey December 2011
9 Tips to Accelerate Cost Reduction Join a group purchasing organization and create a work plan to address areas of concern Product Standardization Commitment Programs Utilize Supply Chain Management Systems
10 Group Purchasing Join / Select your primary Group Purchasing partner Partner with the GPO to take full advantage of their offerings Develop a joint supply savings plan Articulate your supply savings goals Identify and share your top spend items Identify and share your top used items Discuss capital expenditures or construction activity Outline services you utilize Set realistic goals for each quarter (or as frequently as needed)
11 Standardize Use your supply volume as leverage to access better pricing Examine your ability to standardize 1. How many distributors are delivering product to your ASC? 2. How many GPO partners are you accessing? 3. Start with commodity items to get some quick wins 4. Identify the number of suppliers you use in each product category (Are you using more than 2 suppliers?) 5. What is your ability to commit more volume to one or two suppliers? 6. Engage your GPO representative and the distributor to find out how standardizing impacts your savings
12 Commitment Programs Commitment drives additional savings Various forms of commitment programs Formal standardization programs Supply networks Shared resources Aggregation Networks Understand your obligations Connect with your group purchasing representative for more information about their programs
13 Supply Chain Management Systems 76% use manual systems to track & monitor supplies! How Surgery Centers Manage Their Supply Chain 60% 50% 53% 48% 40% 30% 20% 10% 23% 18% 5% 0% Source: Provista ASC Market Survey December 2011
14 Evaluating your Supply Chain System Evaluate your existing systems and ask yourself the following questions Can you order all supplies from the system? Does the system work with bar-coding technology? How easy is it to pull reports from the system? Can the system alert you when stock is low? Does the existing system help you track back orders or open orders? Do you know you are paying the right price? If your answers above are no consider a dedicated supply management technology for the best results and added efficiencies
15 A Better Supply Chain System Rewarding Performance Supply Chain Processes Supply Chain Management System Internal Components of a New System
16 A Better Supply Chain System Reward Program Award Certificates Recognition Lunches Bar-coding systems Par Levels Rewarding Performance Gift Cards Authority & Control Product Formulary Inventory management Supply Chain Processes Supply Chain Management System Electronic P.O.s & Receiving Load Preferred Vendors Locally Negotiated Contracts Load your Group Purchasing Contracts Internal Components of a New System Single portal for all orders
17 A Better Supply Chain System Suppliers Distributors Group Purchasing Organization External Components
18 A Better Supply Chain System Seek EDI connections Negotiate and understand payment terms and other contracted value adds Suppliers Understand if the supplier works with your other supply chain partners Seek EDI connections Set expectations around product substitutions Negotiate service levels and understand your distributors value added services Distributors Group Purchasing Organization Link up with your Group Purchasing representative Request reports and set up your business reviews Request/download contract summaries Identify any special programs and/or pricing discounts available Sign up for web access and notifications External Components
19 A Better Supply Chain System Suppliers Rewarding Performance Distributors Supply Chain Processes Group Purchasing Organization Supply Chain Management System
20 Summary: Accelerating Cost Reduction Consider implementing the suggestions below to create a model that accelerates your cost reduction initiatives Explore using programs that drive additional value and price discounts (Standardization and commitment programs) Invest in technology to provide visibility and transparency Create & monitor inventory management policies and procedures Continually improve operational efficiencies (EDI, automation, etc ) Utilize supply chain experts Work closely with your suppliers and distributors to create mutually beneficial partnership Join and more importantly partner with a GPO partner to reduce costs
21 Questions? Richard Peters, Senior Director of Surgical Services Provista Direct Line
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