Closing the Gap for Competitive Advantage
You might not realize it but competition will be heating up at a furious pace in the healthcare marketplace as Accountability Care Organizations (ACO) mature. This is because ACOs will be after the same customers that your hospital is trying to woo to your facility. And much of their competition advantage will be based on their lower cost of operations.
I just read about a new ACO that is forming in the Northeast that has 1,200 physicians and four hospitals who would like to serve the Medicare and Medicaid population of five counties in New Jersey. If you are a competitor in this ACO service area how many patients does this leave you with to serve?
My point here is two-fold: ACOs will probably dominate the healthcare landscape for many years to come and that being a low cost provider is the ticket of entrance to this new game. This means to me that healthcare organizations must close the gap on their costs if they are looking for a competitive advantage in this new emerging healthcare marketplace.
Supply chain professionals need to understand and internalize the changing face of healthcare. They then need to drive out all of the waste and inefficiency in their supply stream, since there are still billions of dollars to be shaved from healthcare organizations’ supply chain expenses. We actually are now, as an industry, only at the starting gate of vigorous cost cutting that hasn’t even scratched the surface of our supply chain expenses. There is much much more that needs to be cut out of our supply chain budgets to gain a competitive advantage over your competition.
The place to start on this quest to lower your supply expenses is not to benchmark your hospital against global standards (e.g. supply cost/revenues or supply expense per adjusted patient day, etc.) at 30,000 feet level, but instead to measure yourself at the SKU (stockkeeping units) or ground level where your hidden savings is residing. Any other measurement but this, we have discovered is lacking in specificity, quantifiability and actionability that is needed to truly reduce your supply expenses beyond current levels.
To this end, we would urge supply chain professionals to rethink what they have been doing, since the old ways of doing business won’t brand your hospital a low cost provider, but will instead leave it behind in this race to lower our nation’s healthcare costs by billions of dollars for the next few decades. It is a challenge we must all accept as doable if we are to survive and thrive in the new healthcare economy!
Filed Under: Supply Chain
