By Tony Verdone, Vice President of Technology at Aperek
In today’s ever-changing healthcare environment, hospitals, health systems and integrated delivery networks (IDNs) are striving to save money and recoup or avoid unnecessary expenditures to bolster financial performance. An area of opportunity is employing technology solutions to efficiently consolidate and analyze spend across the organization.
Though decades-old legacy tools and applications were designed to organize and maintain accurate item pricing as well as vendor and manufacturer data, they rely on people to manage information and they are not very effective at consolidating or performing analytics.
Overcoming Roadblocks to Consolidating Spend
In order to form and analyze a comprehensive view of spend, organizations must first collect and consolidate data—a process often impeded by roadblocks. For example, data redundancies can occur when an item is entered multiple times, perhaps due to a “special” or “nonfile” order, such as when the purchaser is unable to locate an item in the catalog. Hospitals, manufacturers and vendors each have their own item numbers for products, causing further duplication when more than one of these numbers is used in a system. Likewise, vendors and manufacturers (particularly those with multiple divisions or subsidiaries) may appear under several listings or vendor numbers.
A lack of standardization can also be a hurdle when quantifying spend. For instance, if an organization is trying to analyze the amount paid for implants from various manufacturers, and there are no classification codes assigned to the implants, it can be challenging and cumbersome to accurately capture complete information. In some cases, key information may be unknown in the system, further complicating the process.
When any of these barriers exist, it makes it extremely difficult to vet prices and maintain, track and consolidate items within an individual hospital—let alone across a health system or IDN with multiple, disparate supply chain structures containing thousands of vendors.
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By Tony Verdone, Vice President of Technology at Aperek
In today’s ever-changing healthcare environment, hospitals, health systems and integrated delivery networks (IDNs) are striving to save money and recoup or avoid unnecessary expenditures to bolster financial performance. An area of opportunity is employing technology solutions to efficiently consolidate and analyze spend across the organization.
Though decades-old legacy tools and applications were designed to organize and maintain accurate item pricing as well as vendor and manufacturer data, they rely on people to manage information and they are not very effective at consolidating or performing analytics.
Overcoming Roadblocks to Consolidating Spend
In order to form and analyze a comprehensive view of spend, organizations must first collect and consolidate data—a process often impeded by roadblocks. For example, data redundancies can occur when an item is entered multiple times, perhaps due to a “special” or “nonfile” order, such as when the purchaser is unable to locate an item in the catalog. Hospitals, manufacturers and vendors each have their own item numbers for products, causing further duplication when more than one of these numbers is used in a system. Likewise, vendors and manufacturers (particularly those with multiple divisions or subsidiaries) may appear under several listings or vendor numbers.
A lack of standardization can also be a hurdle when quantifying spend. For instance, if an organization is trying to analyze the amount paid for implants from various manufacturers, and there are no classification codes assigned to the implants, it can be challenging and cumbersome to accurately capture complete information. In some cases, key information may be unknown in the system, further complicating the process.
When any of these barriers exist, it makes it extremely difficult to vet prices and maintain, track and consolidate items within an individual hospital—let alone across a health system or IDN with multiple, disparate supply chain structures containing thousands of vendors.
Using Web-Based Solutions to Identify and Maintain Savings Opportunities
While getting a handle on spend is certainly challenging, there are tools that can simplify the process. For example, leveraging web-based analytical applications allows individual hospitals, health systems and IDNs to realize many benefits:
Consolidating Spend and Identifying Savings Opportunities. Consolidating spend is the critical first step to identifying and negotiating savings opportunities. However, with the aforementioned roadblocks, it is hard to know where to begin managing the morass of information. Organizations can start by engaging analytical software and services on an automated platform. This kind of tool is capable of pulling and mapping spend from across the enterprise and consolidating item, vendor or manufacturer information into a single entity while maintaining the granularity to drill down into individual departments. For example, if an IDN wants to analyze spend on implants across its six hospitals, it can use a web-based solution that has a real-time dashboard to quickly see what was spent throughout the hospitals, at each hospital and within individual departments.
Some web-based technology allows organizations to drill down even further, adding a product index layer when consolidating spend, which maps items, vendors and manufacturer information appropriately and assigns classification codes (such as the United Nations Standard Products and Services Code) in the product index layer, enabling organizations to assess spend based on item categories, in addition to item number, vendor or manufacturer.
Negotiating Better Pricing. Because hospitals have disparate supply chain systems with different identification numbers for vendors and manufacturers, a web-based service can help health systems and IDNs consolidate information, enabling them to determine market share and negotiate more favorable prices—as bigger “buying power” translates to significant savings for all members.
Typically, vendors track purchases from healthcare organizations but may not have health system or IDN members grouped together to accurately reflect the organization’s market share. To address this, organizations can use real-time reporting capabilities to demonstrate when criteria for moving to the next pricing tier are met, helping negotiate better agreements. In addition, the organization can program the solution to receive alerts as they approach the next tier.
Web-based analytical tools also ensure that data shared with benchmarking companies is accurate. These companies accumulate data and return reports that allow organizations to see how their pricing compares to others in the area. Organizations can then use this information to determine whether they are overpaying for any items and further negotiate with vendors.
Achieving Price Compliance and Recoverable Savings. When individual hospitals, health systems or IDNs negotiate contracts for items, web-based savings solutions enable them to manage and track purchases to ensure the organization is paying the contracted price and purchasing products from only the contracted source. Such tools allow organizations to look across invoices and assess them for price and contract compliance—and will alert leadership when discrepancies arise via monthly, weekly or even real-time reports.
Additionally, analytical tools can review consolidated spend to determine rebate eligibility or the possibility for moving to the next pricing tier, which are typically tracked by the vendor or manufacturer. Rebates or tier movement can save organizations thousands.
Tracking Overpayments. Savings solutions and web-based analytical tools can help organizations identify, track and recover overpayments. For example, using a web-based program with reporting capabilities, one health system serving the Midwest was able to identify and recover $300,000 in overpayments for its total hip and knee implants contract when the hospital produced spend data to the manufacturer. This significant amount of money may have gone unnoticed or may not have been recoverable without having supporting data provided by the web-based savings solution.
Actionable Analytics Translate to Savings
Verifying prices for thousands of products and vendors for one hospital—let alone several in a health system or IDN—can be cumbersome and time-consuming without the right tools in place. Moreover, discrepancies may go unnoticed or may be difficult to recover, costing organizations thousands—possibly millions—of dollars per year.
By engaging web-based analytics and savings solutions that effectively consolidate spend and provide actionable analytics, individual hospitals, health systems and IDNs not only can recoup unnecessary spend, they can negotiate more favorable pricing to further boost savings and enhance the organization’s financial performance.
