Pinching Pennies: Healthcare Supply Chain Lessons From The U.S. Mint

by | Jan 26, 2015

Wednesday, January 16, 2013
By Michael Greenfield, CEO, Prime Source

It seems that even if you have a license to, literally, print money, it might not be enough in today’s world.

As reported recently, the cost of manufacturing both a penny and a nickel is now more than the 1-cent and 5-cent values of the coins themselves. As a result, the government has been looking for ways to shave millions in annual spending on producing bills and coins.

Perhaps the Mint should take a lesson from the healthcare world and look for ways to save.

For owners and administrators of healthcare facilities, and specifically those in the long-term care (LTC) field, making the monthly budget and hitting revenue targets are top concerns.  Controlling expenses is crucial to running a profitable LTC facility.

One of the quickest ways for a company to cut supply chain costs is by joining a GPO.  By leveraging the collective purchasing power of members, GPOs obtain preferred pricing on many different types of products.  Members can expect to see savings of 15-20 percent.

Below are some tips for LTC and other healthcare companies – from single facilities to larger organizations – to get the most out of their GPO:

No strings attached
Look for a GPO that does not charge membership fees for signing up.  Many GPOs will provide a review of your entire supply chain and provide specific recommendations on ways to save with little or no commitment. At Prime Source, members can switch to lower-priced vendors through our GPO or keep the existing contracts they want.  The final decision is always up to the member and a decision can be made at any time to withdraw or change an affiliation.

Depth and breadth of products and services
Your GPO should be able to offer regional and national vendors that help you save across all departments, from dietary to janitorial.  In addition, members can save by taking advantage of relationships with software companies, disaster recovery, temporary commissary services and many other service providers.

Ongoing reviews
Administrators and purchasing directors should review standard vendor contracts on a regular basis throughout the year to gain the most out of their membership. In addition to the initial review at sign up, there should be a proactive review of your account at regular intervals throughout the year to identify additional savings and introduce new contracts.

Large Scale Opportunities (LSO)
Many large vendors are open and willing to provide individual facilities and groups with special pricing, above and beyond contracted GPO pricing for major purchases.  Some examples of Large Scale Opportunities include renovations and large orders of the same big ticket item.

Additional services
The greater the level of involvement and collaboration with your GPO, the greater the savings.  Sure, you can lower your supply chain costs just by leveraging vendor contracts to find the lowest priced nursing equipment and cleaning supplies.  However, when you take advantage of their analytics and purchasing tools, you can expect to see additional major savings.

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