“A hospital bed is a parked taxi with the meter running.” – Groucho Marx
Americans have always been fascinated by what happens in hospitals. From Marcus Welby, MD to E.R., the inner workings of hospitals keep TV viewers enthralled. St. Elsewhere and Grey’s Anatomy shifted the theme from saving lives at all costs to saving lives while keeping the doors open.
Historically, hospitals have had noble intentions: to save lives and maximize positive clinical outcomes. However the fiscal reality is that hospitals have been forced to balance providing quality care while trying to maintain profitability. Not many are successful. In fact, 61% of US hospitals are operating unprofitably. For many hospitals operating costs continue to rise while reimbursement rates fall.
So what are hospitals facing that is causing this effect? Three main things:
- A rapidly aging U.S. population. Currently, 40 million people (13% of our population) are over 65 and eligible for Medicare. Between now and 2030, the Baby Boomers will steadily increase that percentage to 20% – over 72 million Americans over the age of 65.
- A swell of new patients eligible for healthcare coverage under the Affordable Care Act. As the new law goes into effect, an additional 30 million previously uninsured patients become eligible for healthcare coverage.
- Reductions in reimbursement rates. The Affordable Care Act, the American Taxpayer Relief Act and the sequestration each have provisions that reduce Medicare and Medicaid reimbursement rates.
Hospitals are now beginning to follow the supply chain optimization strategies that other business segments have profited from. They have begun to bring in expert logisticians to streamline their supply chains while addressing the unique needs of the healthcare industry.
Where are they finding efficiencies and cost savings? In a few key places:
- They are cutting down on physician preference items – No longer the norm, hospitals have created formularies to reduce inventory resulting in lower carrying costs.
- Hospitals are beginning to proactively manage the inbound flow of the thousands of products and supplies used to provide patient care. Coupled with tighter enforcement of vendor compliance policies, hospitals are realizing significant reductions in shipping and handling expenses.
- They are using information — tracking and visibility data for inbound shipments — to improve staffing planning and track delivery of materials throughout the hospital. This cuts down on re-orders and time-consuming “where’s my shipment” inquires to the dock and central supply staff.
With 34% of all products moving through the healthcare supply chain ultimately destined for a hospital, logistics optimization programs can be hugely impactful. Reducing operating costs in this manner even a few percentages points can be the difference between profitability and fiscal illness for a hospital.
What is your perspective on the mounting challenges hospitals face? I’d love to hear what you think!
|Tags:||health care, healthcare logistics, inbound logistics, supply chain management|