EXECUTIVE BRIEF Integrating dynamic sourcing in
ness and fi nancial operations. In order to best keep pace with the marketplace, hos- pitals and health systems, consequently, should look toward creating greater ex- ibility, transparency, and decision making around supply chain pricing, sourcing, and purchasing.
I
Nearly all other industries view their supply chains to be mission critical to the fi nancial success of their organiations. Hospitals, however, have proven this to be contrary to their operational strategies, which is re ected in their inherent lack of resources and their decision to outsource many supply chain functions, especially sourcing.
For hospitals and health systems to most effectively and efficiently address this spend, they need to take control of their supply chains by deploying sourcing tech- nologies and analytics as part of a dynamic sourcing model. hifting from a traditional static contracting model, which many systems use today, to a dynamic sourcing model that facilitates periodical pricing negotiation, could result in securing best available market pricing from contracted
n the ever-changing world of health- care, the costs of medical supplies and equipment uctuate, impacting busi-
and non-contracted suppliers and improv- ing budget goals and fi nancial outcomes.
Pandemic supply chain plight and opportunities The COVID-19 pandemic has brought transparency to the adverse effects of not viewing supply chain as a mission-critical element to fi nancial success. In many cases, hospital supply chains failed to provide adequate support from the onset of the pandemic, including their outsourced partners, such as distributors and group purchasing organiations (POs). nd to make matters even more challenging, many hospitals decided to double down on this strategy by furloughing supply chain resources. COVID-19 has shined a bright light on the critical importance of hospital sup- ply chains, which likely has leadership strongly desiring to change their current supply chain landscape and is causing a degree of uncertainty as to an appropriate and a viable solution.
How the dynamic sourcing model works
First and foremost, hospitals need tech- nologies in place that provide real-time
hospital supply chain purchasing Technology and data provide greater pricing visibility, contract negotiation, and cost savings
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visibility into current market pricing for supply purchases made across POs and peer organiations. This visibility is vital to ensuring that hospitals are paying the lowest possible price available based on their spend volume and market share. Transitioning to a dynamic sourcing model is the most logical and stable method for hospitals and health systems to instill con- tinuity within their supply chains. Technologies that capture last price paid from closed receipt invoices, representing thousands of hospitals across every PO and self-contracting integrated delivery network (ID), provide full pricing trans- parency. The fastest way to cost savings is to pay the appropriate market price from incumbent suppliers. Paying current com- petitive market pricing for medical, surgi- cal, and pharmaceutical supplies leads to greater procedure margin and sustainable cost control. The best of the best likely have access to fi ve to eight percent in cost savings through simply paying the low- est available qualifi ed price, where most hospitals likely have access to north of 12 percent available cost savings.
VIP products in hospital care ospitals buy millions of products to take care of patients. imilar to the auto indus- try, hospitals need to give greater scrutiny with regard to purchasing supplies. They need to become more competitive and engaged in their supply chain operations, as well as pursue fair market pricing. The slowest way to cost savings is to convince medical staff members to use products they do not want to use. Physi- cian preference items (PPI), purchased services, and specialty drugs, respec- tively, continue to be the three largest non-labor operating expenses. These three areas also offer the greatest oppor- tunity for cost savings, mostly due to the fact of how these items are being procured and managed.
More often than not, especially with
PPI, suppliers do not provide their most competitive pricing to POs, since they believe they will need to provide lower
46 January 2021 • HEALTHCARE PURCHASING NEWS •
hpnonline.com
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