You know what the second biggest cost line item is on most health systems’ profit and loss report: supplies—buying things like artificial knees, stents, service contracts. It’s estimated that an average hospital can save more than $12 million a year if they manage their supply chain better. And interestingly, oftentimes care actually improves as a result.
For context, that wasted $12 million could pay for 165 more nurses or 50 more PCPs. It’s the cost of 3100 knee replacements. (All this, by the way, is according to Navigant.) Does it bother you that so many people in this country can’t afford care and nurses and PCPs aren’t getting raises and some of it is because leadership at many hospitals is not adequately managing their costs of goods? Maybe I’m an idealist, but the human consequences of this inadequacy certainly bother me.
In this health care podcast, I am talking with Rob Austin. Rob is director of health systems at Guidehouse. He works a ton on supply chains at hospitals, health systems, and physician practices. Quick industry news flash: Guidehouse is a new entity comprised of legacy PWC (PricewaterhouseCoopers) government business which has combined with Navigant.
You can learn more at guidehouse.com. You can also connect with Rob on LinkedIn.
Rob Austin is director of health systems at Guidehouse. He works closely with health systems to help reduce the cost and improve the quality of health care in the United States.
As part of Guidehouse’s Healthcare Performance Excellence practice, Rob assists hospitals and systems to achieve rapid financial, clinical, and operational improvement, simultaneously reducing cost and improving quality. He previously worked at Allegheny Health Network, a seven-hospital system based in Pittsburgh, serving as director of supply chain and business development. Rob helped grow Provider Supply Chain Partners, a regionally focused group purchasing organization, from 12 hospital members to 74 and $1.3 billion in spend over three years. He also held various delivery, sales, and leadership roles at SAP Ariba.
Rob writes and speaks frequently on topics relating to health system operating margin improvement, particularly around optimizing the supply chain and enhancing shared services functions within systems.
02:04 Why the pandemic is actually a good time to get a handle on hospital supply chains.
03:21 “Supply costs, nonlabor costs, are the second largest costs any health system has.”
04:08 The $24 billion opportunity for hospital systems.
04:35 How efficient supply chains help patients at large.
06:18 The hospitals that would benefit the most from streamlining supply chains.
07:05 The case of the haves and have nots in the supply chain.
07:36 EP279 with Peter Hayes.
09:46 “The most efficient supply chains … are also more clinically effective.”
11:45 Standardizing supplies vs nonstandardization.
14:15 The biggest problems with a mismanaged supply chain.
15:50 Purchase services.
15:58 Areas of opportunity with supply chains.
19:27 The structural issues that add to the supply chain problem.
20:20 “To make an impact on your nonlabor costs … it needs to be driven initially from the C-suite.”
22:10 The steps to focus on to improve your supply chain.
29:32 Value-based care in the supply chain.
31:16 How smaller organizations can get a handle on their supply chains.
31:47 “Focus on people, process, and data.”
32:59 Amazon’s role in the health care supply chain.