Save money by boosting supply chain

Nick Fabrizio, principal, MGMA Healthcare Consulting Group Nick Fabrizio, principal, MGMA Healthcare Consulting Group

“A larger hospital or health system could save a significant amount of money.'

Software is making supply chain automation a long hoped for reality and the biggest reason your hospital is likely to get on board is money.

Many hospitals and health systems already have some level of supply chain automation, said Todd Nelson, director of healthcare finance policy, operational initiatives at the Healthcare Financial Management Association. However, “the sophistication of the software varies widely as dollars are not always allocated to this area ahead of other capital needs,” he said.

[See also: Amazon model for supply chain service.]

Sophisticated supply chain automation is not for every hospital and health system, noted Nick Fabrizio, principal, MGMA Healthcare Consulting Group. Larger hospitals and health systems rather than smaller organizations are the most likely to achieve ‘significant’ savings.

“A larger hospital or health system could save a significant amount of money however, a small community hospital would not get the same discounts,” Fabrizio said. “Some smaller hospitals find better prices by working with three to four vendors and having them beat each other up on costs.”

Still, if there is money to be saved and efficiencies to be gained by automating, there will more of it, he said.

Not only will there be more supply chain automation, said Rachel Hall, executive director of Ernst & Young’s Health Care Advisory Practice, it will eventually be the norm. “… it's critical to helping control unneeded, extraneous spending in healthcare,” she said.

[See also: 4 ways to high performing supply chain and How BI can improve the supply chain.]

“The investment consideration should not be ‘if’ the investment is necessary, but how much savings can be achieved by hospitals once automation is achieved,” she said.

Automating orders for standard supplies like gloves and gauze is a no brainer, and many hospitals already do this, she said, but investing in sophisticated automation systems also allows hospitals to significantly impact their supply chain spend because these systems give hospitals the capabilities to ensure adherence to their item master and contracted rates.

This article was first published in Healthcare Finance News, sister publication of Healthcare IT News.