Preparing the enterprise for sustainable cost control is now the number-one concern for hospital executives, according to a recent Advisory Board nationwide Health Care CEO Survey.1 This fact is not surprising when you consider that providers are dealing with uncertainty over regulatory changes from Washington, declining patient admissions, waning reimbursements, and higher operating expenses.2 That is why health systems are placing greater emphasis on reducing the price of care, now more than ever. Laboratory and medical supply distributors and manufacturers know that their provider customers are becoming even more proactive at finding ways to deliver high-quality care with better outcomes at reduced costs by taking a closer look at their internal operations. A key tenet to achieving these efficiencies is the ability for healthcare institutions to broaden how they evaluate and choose the strategic vendor partners who help them develop and deliver those very solutions.
How is this relevant to the lab?
The focus on sustainable cost control is spreading into clinical labs, which play a critical role to providers, as they guide 70 percent of medical decisions within the acute care setting.3 Labs are striving to generate more revenue and reduce overall costs. However, labs are experiencing market-wide challenges that make this difficult to accomplish. They are experiencing an increased demand for testing, both in volume and speed, and yet are simultaneously facing a myriad of challenges in meeting those demands, including (but not limited to) staff shortages, tightening budgets, and declining reimbursement rates.
In the midst of this pressure, lab directors must decide on a best path forward with limited options and the proverbial one hand tied behind their back. Do we combat labor shortages with automation and technology? Are there creative options within our logistics or supply chain to cut out waste, cost, or both? Do we have the right partners to bring us flexibility and nimbleness in an ever-changing healthcare landscape? These are the types of questions clinical lab directors are asking themselves every day—and it is the answers to these questions that will allow providers to not only maintain but persevere and progress.
Four impactful changes labs can make
To achieve sustainable cost control, many lab directors are viewing their labs as stand-alone businesses that need solid financial foundations. Rather than attempting to identify one-off cost savings through individual items, they instead identify supply chain strategies that can drive a larger savings impact across the entire department. Here are some options to consider for your lab.
Build partnerships with your supply chain colleagues. By breaking down silos and partnering with supply chain colleagues, lab directors may benefit from understanding cost-control initiatives that supply chain has already implemented across the rest of the healthcare system. Healthcare supply chain executives are partnering with clinicians to learn brand preferences before streamlining clinicians’ ordering options within each product category. Since supply chain experts may have more experience with these cost-control initiatives, they may be able to share best practices with you before you make similar changes in the lab.
Demand high service levels and price transparency from your distribution partner. Don’t settle for poor customer service from your lab distributor. Find a distributor with a sales specialist interested in working alongside you and your team. Make sure your distributor offers you visibility into your lab spending across manufacturers and facilities so you can make data-driven decisions and actively monitor contract compliance, price parity, and distribution fees.
Consider product choice. Which brand-name commodity items can you switch to in order to minimize costs? If your lab has had full product choice available to it, you may be overpaying on the commodity products just for the brand name. You also may be missing out on standardization opportunities that drive savings by enabling you to purchase in higher volumes. Your distributor can help you re-evaluate how to validate items and systematize ordering options within each product category, and whether to switch to lower-cost, clinically equivalent products where applicable and acceptable.
Ask your distribution partner how you can save costs from a logistical standpoint. If tight storage areas prevent your team from working efficiently, your distributor may be able to help. Ask your distributor to bring its logistics directors on-site to perform an assessment and identify opportunities for optimized inventory levels, delivery type, and frequency, and supply room layouts. Perhaps increasing your delivery frequency will allow you to keep less on-hand while avoiding stock-outs. Or switching to low unit-of-measure delivery may mean less time for your team breaking down corrugate and more time on the bench.
Is your distributor a strategic partner?
Comparison-shop as your distributor’s contract expiration nears. Who your distribution partner should be is one decision you can make that will have a huge impact on your lab’s profitability for years to come. The best laboratory distributors are able to customize services to support you as your needs evolve with a broad lab product portfolio, a strong focus on customer service, logistical expertise, and transparent pricing, giving you access to real-time data to manage your business. With all the challenges lab leaders face, it is imperative that they have a distribution partner that will go above-and-beyond to meet their needs.
Ultimately, making one or two changes in your lab can have a huge impact on cost savings. Whether that means building partnerships with your supply chain colleagues, or asking your distribution partner how to save costs logistically, taking these steps can have a significant and lasting effect on your bottom line. Whatever decisions you make, your distribution partner plays a key role in ensuring these cost-control measures come to fruition.
- United Health Group. Annual health care CEO survey: cost control is top priority for hospital executives. July 11, 2018.
- Byers J. Why hospitals will face greater cost containment efforts in 2018. Healthcare Dive. December 11, 2017.
- Importance of clinical lab testing highlighted During Medical Lab Professionals Week. ACLA News. April 17, 2014.