Navigant analysis suggests a 17.8 percent average supply expense
reduction opportunity for U.S. hospitals while maintaining quality;
equal opportunities exist across hospital size, types
CHICAGO--(BUSINESS WIRE)--Sep. 13, 2017--
Hospitals nationwide could reduce annual supply expenses by
approximately $23 billion in aggregate through improvements in supply
chain operations, processes, and product use, according to a Navigant
analysis of more than 2,300 hospitals. This represents a 17.8 percent
average total supply expense reduction opportunity or up to $9.9 million
a year per hospital – an amount equivalent to the annual salaries of 150
registered nurses, or the cost of 4,000 cardiac defibrillators or five
Da Vinci robots.
The analysis also shows lower supply spending does not have to reduce
quality, as hospital-acquired condition and value-based purchasing
scores are slightly better at top-performing supply chain facilities.
Moreover, the chance to realize savings may exist for all types of
hospitals, with opportunities relatively equal across such
characteristics as size, regional location, and whether the facility is
urban or rural, for-profit or not-for-profit, or system-based or
standalone. To view these results, visit www.navigant.com/SupplyChainAnalysis.
“The pressure on hospitals and health systems to reduce costs and
maintain quality will only intensify, no matter the outcome of
healthcare reform,” said Christine Torres, system VP of supply chain
management for Philadelphia-based Main Line Health. “The supply chain
represents close to a third of the average hospital’s overall operating
expense, and it’s predicted to surpass labor as a hospital’s
greatest expense by 2020. Opportunities exist for all
organizations, even top performers, to improve supply chain efficiencies
while continuing to offer the highest levels of care to the communities
Provider Best Practices
The study found that the top 24 percent* of 2,331 U.S. hospitals
analyzed spent $23 billion less a year than other facilities on supply
chain products and related operations, processes, and procedures.
Savings could be achieved if the remaining 76 percent of hospitals
perform at the level of top performers for supply chain budget efficiency.
Top performers consistently leverage evidence-based protocols and data
analytics to reduce variation in pricing, product use, and clinical
outcomes. This information better equips supply departments to:
Reduce the number of suppliers and contracts for like items,
particularly with products needed for routine procedures.
Optimize the type and frequency of products used based on specific
patient circumstances and cases.
Engage physicians to standardize use of implantable devices proven to
produce clinically equivalent outcomes at a lower cost.
Automate requisitions, purchase orders, invoices, and other manual
supply chain processes that can lead to documentation errors.
“It’s clear that some hospitals have the appropriate strategies and
processes in place to efficiently manage supply chain budgets while
maintaining high-quality outcomes,” said Rob Austin, associate director
at Navigant. “For example, we have found, somewhat counterintuitively,
that the highest-performing providers are simultaneously able to
decrease cost and improve quality, in part by reducing clinical
variation. Lower-performing supply chain departments need to leverage
these types of proven best practices to drive care delivery
Benchmarking data is also essential, but providers must look outside
their organization to obtain a true snapshot of performance.
“In-hospital benchmarks and year-over-year improvement goals are
valuable in monitoring internal supply chain performance, but these
measures don’t reveal an organization’s true improvement potential,”
said Paul Weintraub, director at Navigant. “To accurately uncover
efficiency opportunities, providers must look beyond their facility’s
four walls and leverage industry-wide benchmarking data that compares
their supply performance against that of their peers.”
To access Navigant’s supply chain benchmarking calculator, visit www.navigant.com/supplysavings.
Publicly available data from Definitive
Healthcare (2015-2017) was reviewed across four key performance
indicators (KPIs) for supply expense: per case mix index (CMI) adjusted
patient day; per CMI adjusted discharge; as a percent of total operating
expense; and, as a percent of net patient revenue. Hospitals were
divided into 12 peer groups based on CMI and adjusted occupied bed
count, and 560 of 2,331 (24 percent) with savings opportunities of less
than 5 percent of total supply expense across each KPI were designated
Healthcare practice is comprised of more than 500 consultants,
former provider administrators, clinicians, and other experts with
decades of strategy, operational/clinical consulting, managed services,
revenue cycle management, and outsourcing experience. Experts
collaborate with hospitals and health systems, physician enterprises,
payers, and government entities, providing enterprise-wide strategic
development and performance improvement solutions.
Navigant Consulting, Inc. (NYSE: NCI) is a specialized, global
professional services firm that helps clients take control of their
future. Navigant’s professionals apply deep industry knowledge,
substantive technical expertise, and an enterprising approach to help
clients build, manage, and/or protect their business interests. With a
focus on markets and clients facing transformational change and
significant regulatory or legal pressures, the firm serves clients in
the healthcare, energy, and financial services industries. Across a
range of advisory, consulting, outsourcing, and technology/analytics
services, Navigant’s practitioners bring sharp insight that pinpoints
opportunities and delivers powerful results. More information about
Navigant can be found at www.navigant.com.
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Source: Navigant Consulting, Inc.
Navigant Investor Relations
Kyle Bland, 312.573.5624
Alven Weil, 704.995.5607