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GE Healthcare Camden Group Insights Blog

Reducing Utility Costs: 4 Ways to Gain Buy-In From Your Hospital COO or CFO

Posted by Matthew Smith on Sep 11, 2017 4:38:30 PM

By Camelia Walker, MBA, Senior Consultant, GE Healthcare Camden Group

Hospital facility directors and managers can deliver value to their organizations by implementing energy efficiencies. In addition to the annual recurring savings from reduced utility bills, the organization can benefit by gaining community recognition, improved air quality for patients and staff, and extended equipment life. The process outlined here will increase your chances of obtaining approval to commence an Energy Consumption Reduction Program that will save the organization money and increase budget capacity for other facility needs through annual recurring savings.

1. Benchmark and Assess – Identify Opportunities

Analyzing the hospital’s existing operations by benchmarking its current energy spending is a necessary first step. While benchmarks will not provide all of the answers, they do provide a good starting point to give you some idea of current performance. After completing a high-level benchmark study, a detailed site tour audit with the facilities and operations staff will help identify where specific energy consumption reduction opportunities exist. Contracting with a seasoned energy specialist (also referred to as a certified commissioning provider or retro-commissioning agent) will help identify and categorize the opportunities. An energy specialist can assist in developing a detailed assessment that should, at a minimum, have these component parts:

  • Detailed infrastructure assessment
  • Benchmark detail
  • Energy conservation measures
    • Energy usage
    • Savings opportunities (energy and dollars)
    • Estimation of costs associated with implementing improvements
    • Energy model and validation methodology

An easy way to view the scope of work is to divide the work into three categories of opportunities:

walkertable.png

2. Identify Resources and Tools

Once the assessment has been completed and the energy measures have been agreed upon, the scope of work can be tailored to meet the organization’s goals. The next step is needed to capture the opportunity, grouping them into internal and external resources. Engineering Departments that have both the internal talent and the bandwidth can be deployed immediately to implement energy measures. The CFO and COO will be looking to the facility department to get the job done in the most efficient and cost effective manner, and utilizing internal resources is a good way to start. For more complex diagnostics or optimization measures, or for facilities that don’t have the resource bandwidth internally, identify which contractors should be used to complete the work. If possible, look at using the contractors that are most familiar with the facility and systems.

Consider using an energy specialist to guide you through the implementation. Depending on the specific needs and the bandwidth of the facility department, an energy specialist can help manage the project, facilitate the work with contractors and staff, and ultimately expedite the implementation of the energy measures. Additionally, contractors and staff can help build skill sets through knowledge transfer among the organization’s facility staff so that they are able to manage the systems and sustain the gains. Identify what tracking and validation tools you will use to measure success. There are many tools available - some are free while some have fees associated with their use. If you use an energy specialist, ask what tracking tools they use and be sure to inquire about weatheradjusted tracking and whether validation is included. Make sure that results are measured in the same way that the baseline savings targets were designed. Use the same units, nomenclature, and methodology.

3. Build and Sell the Business Case

After the assessment is complete and the resources and tools are identified, a business case should be developed to capture the benefits and risks associated with implementation. What is the return on investment? Be sure to show all upfront costs and how long it will take to recoup the costs before the annual recurring savings occur – the CFO/COO will want to build the upfront costs into the budget.

If time permits, obtain bids or commence the RFP process for the work so that when the business case is presented to the finance department, there is confidence in the budgetary estimates. The CFO/COO will want to know what energy measures are considered operational and which are considered capital items to be depreciated, i.e. what measures will extend the useful life of the equipment. Be sure to also highlight the non-monetary benefits such as patient, staff and visitor comfort, reduced complaints from visitors and staff, reduced mechanical maintenance calls and extended equipment life.


Retro.png

Tip: Create a one-page summary document that highlights:

  1. Total savings
  2. ROI
  3. List of Energy measures
  4. Bids received or other work done to date
  5. Implementation and savings realization timeline
  6. Operational vs. capital expenditures

Note: It is important to limit the summary to one page. Keep it concise and visually appealing with graphics and charts that will keep your audience engaged and fully informed.


4. Showcase the Results

Share your progress with the CFO and COO. Identify the energy measures that have been implemented to date and the bottom line savings for the low cost/no cost energy measures. This will demonstrate to the C-Suite the department’s continued performance in contributing to savings. These energy savings can then be used to fund the Retro-Commissioning or other capital work that requires upfront costs. In conclusion, when asking your CFO and COO for funds and resources to support an Energy Reduction Program, building a convincing and detailed business plan and identifying the right team members will influence a hospital’s leadership decision.

The questions and pointers provided in this article help hospitals start the evaluation and assessment process. GE Healthcare Camden Group's integrated Non-Labor cost-reduction solutions enable clients to extract significant costs from their contracted services, and deliver sustainable savings against their bottom line. For clients, this means significant financial and operational improvements.

Non-Labor Expense Reduction


WalkerC.pngMs. Walker is a senior consultant with GE Healthcare Camden Group and has spent the past several years of her career focused on healthcare—specializing in leading teams of operational professionals who are experts at collaborating with clients to identify and drive efficiency improvements and reduce costs. She consistently provides leadership and direction in areas of planning and development in hospitals across the country, and works collaboratively with hospital executives and staff to ensure quality, positive outcomes are achieved. Ms. Walker has been able to showcase her architectural frame of mind by constructing detailed analyses of current perioperative throughput processes, departmental utilization, and physical space audits. She uses this information as a foundation to work collaboratively with clients to improve their perioperative process workflows and programming statements, and design concept plans. She may be reached at [email protected].

Topics: Non-Labor Expense Reduction, Utility Costs, Camelia Walker

5 Keys To Getting Value From Your Value Analysis Process

Posted by Matthew Smith on Sep 1, 2017 4:33:51 PM

By Tom Fox, Vice President, GE Healthcare Camden Group

One of the first questions I ask my new clients is about their value analysis review process. Why? Because that’s the rigorous process every hospital and system needs in order to ensure they’re effectively managing supply expenses.

You, like almost every CFO and Supply Chain VP I speak with, are probably nodding your head right now, saying that you have a methodology in place. But I would like to challenge you on that.

  • What is your value analysis (VA) process, really?
  • Who is involved?
  • Do you include reimbursement analysis as part of the evaluation?
  • What tools do you use to track progress and monitor results?
  • How do you tie these results back to the overall impact on your organization’s total supply cost and net operating income?
  • Does the process include reaching identified cost reduction targets?

The ultimate effectiveness of your VA program depends on your answers.

Many VA programs I encounter focus primarily on the introduction of new products and technology. Others are the opposite – primarily centered on cost savings of existing supplies but ineffective at controlling new product entries into the organization. In order to truly exert some level of control over your supply costs, you have to focus not only on the new products and technologies coming into your organization, but also on how well you are managing existing supplies. In other words, it’s great to excel at minimizing the added costs of new technologies – it’s even better to control those costs while also reducing existing costs.

5 Best Practices For A Successful Value Analysis Process

Best practice #1: C-suite engagement
A C-suite level leader needs to chair and oversee your Value Analysis Review Team. Visibility at the highest level of the organization will ensure the team members feel accountable – and accountability is the crux of success. As the organization’s financial steward, your CFO is typically going to be the best person to chair this team. If that’s not possible due to bandwidth or competing priorities, then ask your COO or CNO to lead this team. And by “lead”, I mean truly lead the process and hold others accountable to targets and results while serving as the go-to person for dealing with barriers and resistance to change.

Best practice #2: Appropriate representation
Value analysis is not just a supply chain responsibility. Supply chain alone cannot dictate that clinicians change their practice, judge the impact on clinical effectiveness and quality, or calculate the expected reimbursement for a new supply. The appropriate engagement of other key stakeholders is of vital importance to the VA team’s effectiveness, and those stakeholders include physicians, nursing leaders, finance personnel, and other support departments like infection control, biomed, food and environmental services, and information technology.

Best practice #3: Clarity of purpose and aligned incentives
In the first meeting, the team needs to develop a team charter which will include the team’s mission, goals, and list of participants. Ideally, these goals will tie back to the participants’ annual incentive plans to ensure alignment with the organization’s goals. Ultimately, the purpose of this team is to ensure your clinicians have the products and technology they need while delivering appropriate cost savings and financial stewardship to the organization.

In subsequent meetings, the team needs to:

  1. Review all new products and technology requests: Hardwire a new product and technology assessment process that includes a review of the cost, reimbursement and clinical impact (outcomes); develop item master controls to ensure compliance; and review new spend versus historical spend to identify new products that may have slipped through the cracks
  2. Review strategic sourcing (contracting) opportunities to include contractual compliance monitoring
  3. Review product utilization by commodity to identify standardization and consolidation opportunities

Best practice #4: 100% process adherence
Make it clear that you expect 100% process adherence. Ensure each and every new medical supply, non-medical supply, drug or purchased service entering your organization goes through the same rigorous value analysis review process. No exceptions. And the only way to be successful at doing this is to continuously monitor your item master, Rx formularies, purchasing reports, distributor reports and invoices. This will likely be the most challenging part of revitalizing your VA program as it will require some difficult conversations with department directors and clinicians who have historically found ways to circumvent the process.

Best practice #5: Culture of accountability
Like I mentioned, accountability is the crux of success. Every team member needs to understand the important role they play in your VA review process. Your physician champions need to understand they are there to represent their colleagues and bring forth their expert opinions. They also need to understand they are expected to champion the team’s decisions among their physician peers and ensure their colleagues adhere to the team’s decisions regarding vendors, supplies and preference card items. Your department heads need to understand that they, too, are expected to respect the team’s decisions and not stray from the approved process when procuring new products or services.

This brings us back to the first best practice I mentioned: C-suite engagement. This will help you instill a culture of accountability into the team itself – and across your entire organization.

Non-Labor Expense Reduction


TomFox_headshot.jpgMr. Fox is a Vice President with GE Healthcare Camden Group with more than twenty years of experience developing strategic vision with C-Suite executives, physicians, and department leaders to transform how healthcare organizations utilize their non-labor dollars. Mr. Fox works closely with clients across the country reduce non-labor costs and sustain those savings over the long-term. He works closely with clients to identify savings opportunities, obtain stakeholder support, and educate staff on utilization to maximize and sustain the savings. He may be reached at [email protected].

 

Topics: Non-Labor Expense Reduction, Tom Fox, Value Analysis

Physician Preference Cards: An OR Director’s Key To Efficiency

Posted by Matthew Smith on Sep 1, 2017 3:27:57 PM

By Don Martin, Senior Manager, GE Healthcare Camden Group

Efficiency and cost management – the metrics by which OR Directors live and breathe. Data on First Case On Time Starts, cut to close times, room turnover, supply usage help administrators keep a close eye on how efficiently their perioperative suites are running. And among the tools every OR Director should use to ensure they’re running efficiently and profitably: physician preference cards.

Preference cards contain clear and concise procedural instructions that, when combined with an accurate record of needed supplies and equipment, prevent unnecessary delays and procedure interruptions. More importantly, they positively impact patient safety and quality by enabling the surgeon, nurses and technicians to focus exclusively on the patient. Preference cards improve surgeon satisfaction, instrumentation and supply inventory management, as well as staff orientation and training.

Discovering Value In Preference Card Data Mining

Physician preference cards provide another significant benefit. Taken together with supply usage data, preference card information becomes a vital source of data for uncovering valuable supply savings opportunities in the operating room. With surgical costs increasing and reimbursements decreasing, hospitals and physicians need to partner to find ways to contain and reduce costs – and a close-up inspection of supplies may deliver big rewards. The key to this effort begins with information – information that can transform simple data into an effective, actionable tool for driving practice change and cost reductions in the OR.

Costs Of Neglecting Preference Card Management

The majority of hospital surgery departments utilize electronic preference cards generated from their clinical information systems and all feature a catalog of surgical supplies and implants needed during a procedure. Hospital leaders at times make the assumption that those preference cards accurately reflect the supplies the surgeon will use during a case. Our experience tells us otherwise. Often we find supplies – sometimes a few, sometimes several – on each preference card that surgeons rarely if ever use. In fact, when we physically display items on a surgeon’s preference card for their review, many are surprised to find certain supplies were being pulled for their case.

Inaccurate and out-of-date preference cards result in real costs: Hundreds of thousands of dollars in wasted supplies and labor jeopardize already thin contribution margins. Fortunately, corrective measures exist to solve this issue, but they require the combined efforts and commitment of OR Directors and surgeons.

Data Is Key To Improving Preference Cards

Relevant, actionable data enables staff and surgeons to quickly identify and evaluate efficiency and cost-savings opportunities. Unfortunately, we frequently hear surgeons say that throughout their years of practice, they have not received empirical data they can use to drive more efficient and cost-effective supply utilization practices.

Information drawn from physician preference cards and historical supply usage data supports surgeon-specific and comparative supply usage analysis. Let’s look at an example. Table 1 shows a partial list of supplies used by Dr. A in laparoscopic appendectomy cases. The highlighted items include supplies provided for the case but never used, or picked in insufficient quantities and requiring the staff to leave the OR to retrieve them during the case. Both represent opportunities for workflow efficiency and supply cost reduction. OR Directors can show surgeons this data and point out how poor preference card management results in case delays, supply waste, and lost time and effort moving unused supplies between the OR and storeroom. In doing so, they will likely gain allies in refining a more selective and efficient case cart build process.

Metrics

Here’s another example. Table 2 shows comparative supply usage data across multiple surgeons for a common procedure. A supply analytic tool like this identifies opportunities to convert a surgeon to a clinically equivalent, lower-cost supply that his colleagues use to achieve similar outcomes. It also identifies opportunities to convert an entire group of surgeons to the same supply, enabling the organization to leverage volume purchasing as well as standardize products and reduce inventory variability. OR Directors can partner with their Supply Chain VP to include not only surgeon supply usage statistics, but also the average cost of supply expense per case for each of the surgeons in the analysis. This approach grabs attention and often motivates surgeons to dig deeper into the data to better understand the reasons behind the cost differences.

Metrics

Our clients have discovered that presenting supply utilization data in this straight-forward and concise fashion invites surgeons to open a dialogue with the OR staff and with each other – leading to a renewed desire to pursue more efficient supply selection and consumption.

Our work with clients has shown us that achieving improved operational and financial results in the OR through effective physician preference cards requires significant effort and focus.

Non-Labor Expense Reduction


MartinD.jpgMr. Martin is a senior manager with GE Healthcare Camden Group with more than 20 years of financial and clinical experience with operational responsibilities for patient care delivery, fiscal management, staff development and government, and regulatory compliance. His collaborative approach guides clients through the complex process of optimizing existing technology to meet healthcare’s Triple Aim: increase operational efficiency, improve the quality of patient care, and decrease the costs of care.

 

Topics: Perioperative Services, Non-Labor Expense Reduction, Operating Room, Supply Chain, Physician Preference Cars, Don Martin

340B Program Omnibus Guidance: Definition Of A Qualified Patient

Posted by Matthew Smith on Aug 31, 2017 4:30:33 PM

By Scott Drugan, Pharm. D., Senior Manager, GE Healthcare Camden Group

The Health Resources and Services Administration released its 340B Program Omnibus Guidance on August 27, 2015, which was published in the Federal Register on August 28, 2015. This 90-page document contains the most comprehensive set of clarifications that have been proposed since the initiation of the act in 1992. The public comment period will extend for 60 days from the date it was published in the Federal Register, or October 27th, and it is anticipated that there will be a considerable amount of comments, both pro and con, to review and consider prior to the final publication of this guidance. The information that follows is not meant to be a comprehensive review nor a legal interpretation and reflect only some of the highlights as viewed by the author on proposed guidance changes to the qualified patient definition.

Definition of a Qualified Patient

As anticipated, the proposed guidance seeks to clarify the qualified patient definition. Currently, the 1996 guidance is a two-part test to determine if the individual is a patient of the covered entity for enrolled hospital qualified entity types, which states the following:

  1. The covered entity has established a relationship with the individual, such that the covered entity maintains records of the individual’s healthcare
  2. The individual receives healthcare services from a healthcare professional who is either employed by the covered entity or provides healthcare under contractual or other arrangements (e.g., referral for consultation) such that responsibility for the care provided remains with the covered entity

The proposed guidance for defining if an individual is a patient of the covered entity for enrolled hospital qualified entity types would be the following:

  • The individual receives a healthcare service at a facility or clinic site which is registered or the 340B Program and listed on the public 340B database
  • The individual receives a healthcare service provided by a covered entity provider who is either employed by the covered entity or who is an independent contractor for the covered entity, such that the covered entity may bill for services on behalf of the provider
  • An individual receives a drug that is ordered or prescribed by the covered entity provider as a result of the service described in statement above
  • The individual’s drug is ordered or prescribed pursuant to a healthcare service that is classified as outpatient
  • The individual’s patient records are accessible to the covered entity and demonstrate that the covered entity is responsible for care

Proposed New Patient Definition Impact on Hospital 340B Programs

The proposed guidance is very clear that the drug ordered or prescribed must be for a healthcare service that is classified as outpatient. The guidance specifically states, “An individual is considered a patient if his or her healthcare service is billed as outpatient to the patient’s insurance or third party payor.” There is also the expectation that for self-pay or charity care patients the classification of the service will follow the same guidelines as for billing a third party payer. Additionally, the encounter between the provider and the patient that generated the prescription or drug order must have taken place at the covered entity; there are appropriate provisions to allow for telemedicine/telepharmacy. Therefore, the following type of prescriptions that may have qualified to be filled with 340B priced drugs within hospital covered entities will no longer qualify for this discounted pricing:

  • Discharge prescriptions
  • Medication utilized in an outpatient setting for which the healthcare service is billed as an inpatient service, e.g., drugs administered in the emergency room for a patient who is admitted as an inpatient
  • Infusion Center drugs in which prescription or drug order does not originate from the covered entity provider – patient encounter

Discharge Prescriptions

Capturing discharge prescriptions within a hospital based retail pharmacy and being able to purchase these drugs at 340B Program discounted prices is very beneficial for these qualified hospital entities. If this were no longer allowed, based on the new proposed guidance, in most cases these prescriptions would be filled with drugs purchased at Wholesaler Acquisition Cost, since the majority of these same pharmacies are filling 340B priced prescriptions for their outpatient population. This would be a very substantial financial hardship potentially leading to the closure of these outpatient pharmacies which benefit the patient’s transition of care. Additionally, the simple fact that discharge prescriptions cannot be filled utilizing 340B priced drugs may be particularly troubling for hospital covered entities with a large population of medically indigent patients. Many of these institutions were able to supply these necessary stop gap medications prior to an outpatient clinic visit. This additional cost to the hospital for these patients may cause them to limit the supply given to these patients.

Additional Outpatient Billable Healthcare Service Considerations

Most covered entity hospitals administer drugs in both an inpatient and outpatient setting, referred to as a mixed use setting, and have software/technology and/or a 340B administrator partner who assists them to determine the amount of their hospital administered drugs are eligible to be purchased at 340B Program pricing. Most systems work by determining if the drug was administered in a setting that is identified as outpatient in the charge master and then accumulating these units until enough was administered to enable an entire package to be purchased at the 340B Program price. However, the new proposed guidance will make this process a bit more complicated as it will not be as simple to merely accumulate the amount of drugs given in an outpatient setting as qualified due to the fact that the healthcare service which is billed for this patient will determine if the drugs utilized while in the outpatient location will qualify for 340B program pricing. A simple example is the patient who is seen in the emergency room, which is identified as an outpatient setting, where he or she has drugs administered, but is also admitted as an inpatient. Although some of the drugs were administered in an outpatient setting, since the only billable healthcare service will be for inpatient, there will be no drugs qualified for 340B Program purchases. Therefore, this aspect of the proposed guidance will reduce the amount of drugs that qualify for 340B Program pricing and lead to an additional level of complexity to an already challenging process to maintain program compliance in a mixed use hospital care setting. 

Infusion Center

Many hospital infusion centers service the healthcare community as a whole and it is very common for these centers to administer therapy to patients who have been referred to them by outside providers. Many of the outside providers may even have privileges with the covered entity hospitals that contain these infusion centers. However, the proposed guidance seeks to clarify that in order to purchase the drugs through the 340B Program for these patients, the prescriptions or drug orders must have been a result of a provider – patient encounter at the covered entity. This may not be the case with all 340B Program purchased drugs in the hospital covered entity infusion center environment today, which may warrant careful consideration moving forward. The proposed guidance change to the patient definition as well as the above highlighted impact to hospital 340B Programs are only some of the considerations that this 340B Omnibus Guidance contains. 

Non-Labor Expense Reduction


ScottDrugan_headshot.jpgMr. Drugan is a senior manager with GE Healthcare Camden Group with more than 30 years’ experience. He helps clients across the country improve their pharmacy costs, profitability, and operating efficiency. His background in pharmacy leadership enables him to bring deep understanding and subject-matter expertise to every project. Mr. Drugan possesses an outstanding record of accomplishment as a pharmacy leader and healthcare executive. His engaging, collaborative leadership style makes him an ideal partner for clients seeking to improve their pharmacy operations, ensure regulatory compliance, implement a complex 340B program, optimize their employee pharmacy benefits, or establish a retail pharmacy.He may be reached at [email protected].

Topics: Pharmacy, Non-Labor Expense Reduction, 340B, Scott Drugan

Battling Extreme Drug Price Increases

Posted by Matthew Smith on Aug 31, 2017 4:04:03 PM

By Scott Drugan, Pharm. D., Senior Manager, GE Healthcare Camden Group

Top of mind for nearly every hospital or health system CFO is the roughly 10% annual increase in the cost of pharmaceuticals. Many of these healthcare executives might be surprised to learn that the main reason isn’t due to new novel therapeutics, but rather to older medicines with extraordinary price increases. These drug manufacturers are not trying to recoup the research and development cost of bringing a drug to market. Instead, as discussed in many news articles including this one by Consumer Reports, they are simply capitalizing on little to no competition for drugs that have an entrenched use in the healthcare environment. Therefore, CFOs and Pharmacy executives must explore every effort to limit the use of these drugs to those cases with no viable alternatives and to compound, dispense and administer in dosage forms developed to minimize the waste.

Limiting the use of these older drugs with the new costly price tags will require the assistance and cooperation of the affected clinical departments. Often the clinicians ordering these agents have no idea that these commonplace drugs are now today’s pharmacy budget-busters. Educating them on this new reality will probably lead to engaged clinical champions. The following two strategies, which we originally shared with Becker’s Hospital Review readers as a Supply Chain Tip of the Week, should significantly lower the overall cost of these expensive medicines:

  1. Develop and implement guidelines that limit the use of these pharmaceuticals to cases in which a less costly alternative is not clinically appropriate.
  2. Develop a means to dispense the optimal amount of drug that minimizes waste upon administration.

Case Study: Multi-Pronged Approach Reduces Drug Costs

These price increases for older injectable drugs with little competition greatly affected one of our clients, a multi-hospital system. This negatively impacted the inpatient pharmacy expense budget more than all the new or novel therapeutic medicines combined. To drive down these costs, we partnered with the Pharmacy Director to identify the fact that many of these drugs had a very high usage rate in the procedural areas, such as the operating suites and EPS Lab.

We worked closely with the key clinical stakeholders in these procedural areas to educate them about these tremendous price increases. This motivated the team to identify less costly therapeutically equivalent alternatives for some of the existing use. Although this did provide savings, the remaining usage still resulted in a substantial expense budget challenge due to the high cost of these drugs.

To continue to drive down savings, the project team reviewed the doses dispensed versus the actual doses administered for these identified drugs. Our goal: to understand if there was an opportunity to reduce the amount of waste. We identified many drug administrations that had a dose substantially less than the dose dispensed, resulting in considerable waste. For example, one drug was dispensed in a 1 mg vial when the dose administered rarely exceeded one-tenth of that dose. This created the opportunity for the pharmacy to compound doses in smaller increments to minimize waste. Importantly, the pharmacy leaders did not try to address these changes in a silo; rather, they partnered with clinical and technical staff to implement the compounding of these drugs in smaller doses, enabling the team to achieve additional savings.

The compounding of these smaller, unique dosages by the pharmacy, while providing savings, started from the same injectable drug with the very high price. Was there a way to produce these same new dosage sizes without using the high-cost injectable drug? The pursuit of this answer ultimately led to the addition of a 503B manufacturer who could produce several of these drugs for a considerably lower cost.

By battling extreme drug price increases in a variety of ways, we helped our client save more than $3.3 million annually. Our client is able to use these very expensive drugs in a cost-effective manner while maintaining exceptional patient care.


ScottDrugan_headshot.jpgMr. Drugan is a senior manager with GE Healthcare Camden Group with more than 30 years’ experience. He helps clients across the country improve their pharmacy costs, profitability, and operating efficiency. His background in pharmacy leadership enables him to bring deep understanding and subject-matter expertise to every project. Mr. Drugan possesses an outstanding record of accomplishment as a pharmacy leader and healthcare executive. His engaging, collaborative leadership style makes him an ideal partner for clients seeking to improve their pharmacy operations, ensure regulatory compliance, implement a complex 340B program, optimize their employee pharmacy benefits, or establish a retail pharmacy.He may be reached at [email protected].

Topics: Pharmacy, Non-Labor Expense Reduction, 340B, Scott Drugan

Control and Maintain Costs Through Non-Labor Expense Reduction

Posted by Matthew Smith on Aug 30, 2017 9:11:08 AM

By Tom Fox, Vice President, GE Healthcare Camden Group

Healthcare organizations must constantly keep an eye on Non-Labor expenses, which typically represent approximately 40% of their total operating expenses. This is an ongoing battle with frequent periods of regression and sometimes a lack of focused oversight leading to missed budgets. Most organizations rely on their Group Purchasing Organizations (“GPO”s) to access competitive price points for supplies and services while using departmental leadership and processes, such as value analysis, to manage existing expenses as well as expenses associated with the various new technologies entering the organization daily.

Non-labor expenses are often not managed with the same rigor dedicated to managing labor expenses. Because of this, many “typical” strategies for managing Non-Labor expenses only address bits and pieces of the total Non-Labor cost equation, resulting in a huge opportunity cost associated with overlooking the full picture. The equation for total expense of a supply or service is PRICE x USAGE, and there are several items that should be investigated in each part of that calculation, such as:

  • Is the product or service truly needed in the first place?
  • Is there an equivalent product or service that could be evaluated that might provide efficiencies?
  • Are you using the supply or service in an appropriate manner, and is the way you are using it based on sound evidence, business case analysis, and/or clinical necessity?
  • Are you delivering the product or service in the most efficient way possible?
  • Are you engaging the right people in the decision-making process?
  • How does the price and utilization of the product or service support your reimbursement model, patient care needs and/or the needs or your internal/external customers?
  • Are you getting the best value out of the product or service you selected?

Simply relying on your GPO to manage these challenges is an incomplete solution. The GPO is focused on maximizing purchasing volume to drive better pricing, and they often encourage the use of contracts they have negotiated, when the contract or solution may not be the best available to you. The fact is, GPOs frequently do not manage a significant portion of Non-Labor spend as they are focused mostly on supplies and select contract services, with more of an emphasis on pricing than utilization.

Traditional non-labor expense reduction efforts end up being a temporary fix if sustainable governance models are not employed to create accountability. Any reset or launch of a sustainable Non-Labor expense management process must be supported by the appropriate structures and effective, repeatable methodology and tools, including:

  • A steering committee, led by a C-Suite sponsor, and focused on total Non-Labor expense management
  • Advisory councils for nursing and physician leadership to effectively engage the right stakeholders in the decision-making process
  • Effective project management workplans that highlight progress and barriers along with tracking documents to summarize overall status of efforts
  • Visibility to real-time impact to the bottom line

The GE Healthcare Camden Group Advantage

Our experience working alongside our clients proves we can generate a reduction of approximately 5-7% on total Non-Labor expenses, and sometimes as much as 8-10%--even with clients actively working with their GPO partners.

Non-Labor Expense Reduction from GE Healthcare Camden Group offers the advantages of:

  • Appropriate oversight of the full non-labor expense management process
  • Proven methodology supported by boots-on-the-ground subject matter experts who promote sustainable process changes that become embedded into your culture and daily work activities
  • Accelerated financial impact that delivers significantly more value than currently experienced with current GPO relationships and existing internal processes

Health System Case Study

The blue button, below, offers an immediate link to a 1-page case study that highlights our recent work with a Southeastern health system which resulted in the identification of more than 150 savings initiatives and $35 million in Non-Labor savings. Please take a moment to review the case study, visit the Non-Labor Expense Reduction area on our website, and contact us to determine the next steps we can take to start you on your expense-saving path.

Non-Labor Expense Reduction


TomFox_headshot.jpg

Mr. Fox is a Vice President with GE Healthcare Camden Group with more than twenty years of experience developing strategic vision with C-Suite executives, physicians, and department leaders to transform how healthcare organizations utilize their non-labor dollars. Mr. Fox works closely with clients across the country reduce non-labor costs and sustain those savings over the long-term. He works closely with clients to identify savings opportunities, obtain stakeholder support, and educate staff on utilization to maximize and sustain the savings. He may be reached at [email protected].

 

Topics: Non-Labor Expense Reduction, Tom Fox

Taking Cost Out Of Supply Chain: Make Versus Buy

Posted by Matthew Smith on Aug 29, 2017 4:16:52 PM

By Janice Davis, RN, Senior Consultant, GE Healthcare Camden Group

As the healthcare industry transitions from volume to value-based care, controlling supply chain costs becomes increasingly important. Supply chain executives must continually seek to reduce cost while operating efficiently in this increasingly demanding environment.

For many organizations, this leads to the question of whether self-distribution would be a viable alternative to a vendor-provided distribution system. Commonly, supply chain experts refer to this as “make versus buy” for the distribution channel. In other words, should the hospital continue to “buy” the distribution service from a vendor or should they “make” their own supply chain distribution channel? The answer very much depends on which supply chain distribution system will best support the hospital’s core patient care business.

The Case For Self-Distribution

In a self-distribution model, the organization assumes the responsibility to obtain supplies and clinical products from the manufacturers and deliver them in correct quantities to the point of consumption (POC). These responsibilities include procurement, warehouse management, inventory control, order completion, transportation, and any other functions that are associated with a distributor. Supply chain leaders must design a self-distribution model robust enough to handle all the services and issues currently handled by the distributor, such as stock outs, back orders, satisfactory fill rates, and customer satisfaction.

However, designing and implementing a self-distribution option is expensive and carries financial and operational risks. All decisions impact the overall actual product expense and the organization must carefully evaluate each decision point to ensure the model meets the overall organizational objective. This requires detailed analysis to evaluate the feasibility of establishing a self-distribution network and determine the characteristics of the network that will meet the strategic goals of both the hospital and supply chain.

To begin the process, the supply chain leader should identify motivational forces driving the suggestion, examine potential supply chain approaches, and assess whether self-distribution would successfully address those issues while supporting the hospital goals and direction. Some situations make self-distribution more feasible. In our experience working with hospitals, healthcare systems and IDNs across the country, we find these situations often make the case for self-distribution:

  • If the organization owns a warehouse, it might make financial sense to use that warehouse as a part of a self-distribution model.
  • IDNs comprising many hospitals with different item files and supply chain processes might adopt self-distribution to standardize products and exert more control over the supply chain.
  • Dissatisfaction with the current operations of a distributor supply chain might encourage the organization to explore the opportunity to “make versus buy”.

The supply chain leader also needs to assess whether key success factors are in place, or whether they need to be developed. In our experience of guiding clients through this process, we recommend various key success factors, including:

  • Executive sponsors: Strong executive sponsors provide leadership and facilitate the decision-making throughout the evaluation, design and decision process
  • Operational knowledge: In-depth supply chain knowledge facilitates the creation of a product management system that minimizes product touchpoints and inventory locations while maximizing efficiency and customer service
  • Robust information systems: A self-distribution system relies upon comprehensive information systems and materials management software support that can electronically manage the information and establish records of transactions and payments, maximize use of Electronic Data Interface, and establish records of transactions and payments

The Alternative: Reducing Supply Costs Through Fee Management

Methodically implementing thoughtful strategies will significantly reduce product expense, effectively reducing the fees associated with product purchases from the usual 7% to 13% overall rate to less than 3%, as illustrated below.

Make vs. Buy

In our experience, this strategy often provides the same or even more savings than building a self-distribution model – with much less risk involved. When implemented in a thoughtful manner, this approach will standardize products and reduce the overall costs. Managing these fees and creating a “blended” fee approach may be the key to reducing expense and improving your bottom line without embarking upon a self-distribution journey.

Supply chain leaders can reduce product fees by meticulously examining product contracts and the fees allocated to individual products within the contract, then increasing products in the product groups with lower fees. For distributed medical-surgical products, for instance, this is accomplished by moving from national-branded items with a fee structure of 3% to distributor-branded items at a zero-based fee structure with increased rebates. When there is no corresponding distributor-branded product, hospitals can renegotiate distribution terms for national branded items. This reduces fees to 1% or less. For distributed non-contracted products, contracts can be secured reducing the distribution fees or the products can be ordered direct from the manufacturer. This reduces fees from between 8% to 12% down to 5% or less.

In addition, some medical-surgical products are eligible to move through the pharmaceutical distributor, where the fee structure is a “cost minus,” thus eliminating any distribution fees and reducing the product acquisition cost. Vendor negotiation to reduce product costs also benefits other product groups, such as Environmental Services and Food; optimizing Group Purchasing Organization agreements will further add to organization-wide savings.

Through partnering with vendors, distributors and customers, supply chain leaders can optimize the blend of distributed products, use distributor-branded products where clinically acceptable, maximize the Group Purchasing Organization contracts, and minimize non-contract products. The result: incremental fee reductions that lower overall supply costs while maintaining quality care.


DavisJ.jpg

Ms. Davis is a senior consultant with GE Healthcare Camden Group and brings more than 30 years of clinical experience, specializing in acute care surgical services, while supporting clients on their road to improving efficiency and optimizing their resources while delivering safe and cost-effective care. With a solid nursing foundation, Ms. Davis has developed an array of subject matter expertise that includes a strong focus in perioperative services and a wealth of knowledge in Truven Action OI. 

 

Topics: Non-Labor Expense Reduction, Janice Davis, Group Purchasing Organizations, Supply Chain

5 Tips To Cut Supply Chain Costs

Posted by Matthew Smith on Aug 29, 2017 11:27:57 AM

By Tom Fox, Vice President, GE Healthcare Camden Group

Has your hospital or health system struggled to reduce your Non-Labor expenses to meet budget demands? Is your organization finding it difficult to sustain previous expense reduction and find new opportunities? Here are 5 tips to help get your Non-Labor expenses and your supply chain back on budget – and keep it there.

1. Preparation Is Key To Engaging Physicians

If your hospital requires a value-analysis of products and medications used by physicians and other clinicians, it is essential that you engage with them to gain support for supply chain change initiatives. Before meeting with physicians, it is important to be prepared and do your homework. This includes performing a thorough review of relevant literature, researching product information and examining evidence about the impact of new supplies and treatments on the patient. Furthermore, it is essential to engage physicians in discussion to determine the quality of the clinical evidence with a focus on the clinical outcomes. By preparing for your physician meetings and having a plan for an open dialogue, you can make the most of your time with them and in turn, they will be more likely to consider and support initiatives to reduce supply chain inefficiencies and costs.

2. Effectively Communicate Supply Chain Changes

When considering supply chain changes, remember to include all stakeholders in the process. Consider all departments impacted by the potential change and include representation in meetings where changes are proposed. All communication should include information that describes the proposed or effective changes in sufficient detail to ensure clarity. It is also advisable that you include:

1. “before” and “after” scenarios for either product or process changes;

2. a reason for the change;

3. the expected implementation date; and

4. the contact person to call if there is a question.

Taking these steps will support a smooth transition to new products or processes.

Furthermore, it is critical to communicate to users when a product is on “back order” or “out of stock” for any reason. This communication should provide information about the plans to provide an interim substitute as well as expected date for re-stocking of the regular item. By doing so, you can ensure users will be able to accommodate the interim products during the time of a “stock out.”

3. Don’t Assume Supply Chain Parity

With respect to large integrated delivery networks (IDNs), there is a general expectation that standardized supply contract prices are loaded into materials management information systems and followed properly for all locations within a multi-hospital healthcare system. However, a review of these prices across the enterprise will very often identify fairly significant differences in pricing that contractually should not occur. This is particularly prevalent in large IDNs that have gone through recent mergers and acquisitions that required the consolidation of multiple items masters. Identifying these opportunities requires a review of not only prices for each item number at each location across an enterprise, but also conducting a review of the item master to identify duplicate item numbers for the same product. By identifying and resolving these price discrepancies, health systems can gain considerable savings.

4. Battling Extreme Drug Pricing Increases

Hospitals and health systems are experiencing an unprecedented escalation in the cost of older, commonplace drugs with new price increases. In these instances, drug manufacturers are not recouping the research and development cost of bringing a drug to market, but rather capitalizing on drugs that have entrenched use with little or no competition. Therefore, it is important to not accept these price-gouging practices without first exploring every effort to limit the use of these agents only to cases with no viable alternatives and to compound, dispense and administer in dosage forms designed to minimize waste.

Limiting the utilization of these old drugs with the new costly price tags will require the assistance and cooperation of the affected clinical departments. Often the clinicians ordering these agents have no idea that these commonplace drugs are now today’s pharmacy budget busters and educating them on this new reality will likely align them with the goal to seek alternatives when appropriate.

5. Monitor Medication Dosage Guidelines

Hospitals can limit the financial impact of drug price increases by closely monitoring and, when needed, adjusting medication dosage guidelines. In addition to limiting the utilization of medications when possible, the pharmacy department should review the actual dose utilized per case and determine if there is an opportunity to dispense in an amount that will minimize waste. This can be accomplished through internal pharmacy department compounding or through partnerships with custom IV compounding companies or 503B manufacturers.

Non-Labor Expense Reduction


TomFox_headshot.jpgMr. Fox is a Vice President with GE Healthcare Camden Group with more than twenty years of experience developing strategic vision with C-Suite executives, physicians, and department leaders to transform how healthcare organizations utilize their non-labor dollars. Mr. Fox works closely with clients across the country reduce non-labor costs and sustain those savings over the long-term. He works closely with clients to identify savings opportunities, obtain stakeholder support, and educate staff on utilization to maximize and sustain the savings. He may be reached at [email protected].

Topics: Non-Labor Expense Reduction, Supply Chain Management, Tom Fox

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