Strategic Sourcing and Contract Compliance
The Right Prescription to Control Healthcare Costs and Achieve Higher Savings
As a healthcare CPO, your main goal is to ensure your supply chain is running at peak efficiency in order to achieve top operational performance and the highest quality patient care—all while controlling costs. That’s quite a juggling act!
So, how do you evaluate the effectiveness (let alone control) your supply chain when you don’t have the control or visibility you need to track and manage inventory, contracts and suppliers? Strategic Sourcing and Contract Compliance may hold the key.
Wasteful Healthcare Spending
The cost of providing healthcare continues to rise—worldwide. There are a number of contributing factors, however wasteful spending on supplies and equipment ranks near the top. According to a study conducted by ProPublica, hospitals routinely toss out new supplies and gently-used equipment. While no one tracks the total waste, the University of California, San Francisco Medical Center conducted a study tracking the waste during neurosurgery operations in the U.S. in just one year. The discarded supplies topped $2.9 million.[¹]
Healthcare procurement departments are in prime position to both mitigate increases in expenses and reduce waste, thereby improving overall patient care. By employing strategic sourcing and contract compliance, healthcare organizations will have the control, visibility and options into sourcing activities to turn the tide on wasteful spending.
What is Strategic Sourcing?
Strategic sourcing is the act of transforming your supply chain activities into a strategic function to optimize efficiency, reduce waste and improve overall organizational performance. Strategic sourcing has far-reaching benefits other than just reducing waste. Just imagine how improving the supply chain can affect operational efficiencies to the extent that they could actually affect clinical outcomes and improve patient care—that’s the power of strategic sourcing.
With supply chains accounting for as much as 30 percent of total hospital costs, strategic sourcing has the potential to achieve significant impact. How?
- It stimulates competition between providers
- Provides more visibility and options into sourcing activities
- Forges more strategic relationships with current suppliers by providing an easy process for bidding, on-boarding and account management
- Provides a central location to store and access all supplier information in order to analyze and identify opportunities for savings.
Keeping Costs in Check with Contract Compliance
Technology advancements in healthcare are typically focused on the clinical side. However, organizations that leverage back-office automation and process improvements stand to benefit greatly when it comes to containing costs as it relates to supplier contracts.
According to Gartner research, many healthcare providers can reduce supply chain costs by 10 to 15 percent if they better analyze, plan and control the purchase of goods and services. Back office automation that includes contract compliance capabilities helps increase the visibility and control of supplier contracts by:
- Ensuring preferred suppliers, contract terms, and policies are visible and accessible to the entire organization
- Provides a process for managing contracts, including preventing auto-renewals and paying for products you no longer need
- Accelerates processes involved in contract creation
Skyrocketing healthcare costs translate into higher insurance and patient costs. Being a good procurement steward means doing your part to help reduce waste and contain costs through strategic sourcing and contract compliance. If your organization is not deploying eProcurement to help manage its supply chain, now’s the time to make the change.
For more information:
View our Infographic on Advancements in Healthcare Procurement