Finding Deeper Supply-Chain Savings

Rene Letourneau, for HealthLeaders Media , April 11, 2014
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BIDMC has targeted physician preference items as an area to find large savings, Cashton says.

"We go where the money is, which a lot of times are the physician preference items like knees and hips," he says. "We are not talking about small numbers. These are big opportunities."

For the most part, physicians have been receptive, Cashton says. "They do realize more and more the need to bring down costs. … We try to engage them and give them figures and statistics on what the savings would be. They generally have responded if they are involved from the beginning and know what the cost-saving opportunities are."

BIDMC also has tapped into nonclinical areas to find savings, he says.

"We've saved about $1 million in food service, and we're looking at janitorial supplies and all kinds of service contracts like collections, IT maintenance, employee benefits. We are looking at all of our services as well as products. We think we are looking at saving somewhere between $4 million and $7 million in purchase services savings over the next few years," he says.

BIDMC also joined the Northeast Purchasing Coalition two years ago to harness its bulk buying power with other regional healthcare institutions.

"It brings GPO pricing to another level. We get an additional tier by aggregating our purchasing through this group," Cashton says. "In calendar year 2013 we took out about $1.4 million in savings based on this commitment."

Standardization reins in spending

Jeff Baiocco, chief financial officer at Eastern Idaho Regional Medical Center, a 312-staffed-bed institution in Idaho Falls that is part of Hospital Corporation of America, says that, like most providers, his organization has already utilized its GPO to find the easy cost cuts. To find more savings, EIRMC is looking to standardize physician preference items.

"Standardization is the new challenge as we look at trying to reduce variability so that we are not stocking five or six items, but are instead stocking two," he says. "If we can eliminate even one item, it allows us to capture some of the purchasing power that is left to gain. Physician preference item management is really a big part of where we are focusing our attention."

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