In the world of overused catch phrases and key topics in the Acute Care industry, I’d say standardizing and/or bundling is going to be right up there with Healthcare Reform, primarily because the two are interrelated. Overused or not, I want to dive into this topic because I think the great majority of medical facilities are still trying to figure out the best way to keep revenues up and costs down, and that means “standardization and bundling!” … Or does it?
Let’s start with the simplified end-goal. I think everyone can agree that hospital systems need to reduce costs without hurting productivity or safety. The standardizing trend promises that if you place all of your eggs into one basket, they will deliver the least expensive omelets to your door. But, here’s the problem… While the eggs are “fine” and they might be cheap, how much are they charging for the bacon and cheese in that omelet, or the chef who put it together?
The question I’m getting at is this: Is standardizing and bundling the best option in all circumstances? Somehow I have made this conversation about food, but bear with me on my next point and I promise I’ll turn this back around to hospital supply, and hopefully I’m not making you think about lunch yet.
Restaurants are notorious for having a lot of overhead and high failure rates, so they must watch pennies daily to keep the doors open. For those of you who are food television junkies you know about the show with failing restaurants and the chef hero who walks in, solves problems, and saves the day. Two of the common problems on every episode is 1) The menu is too big (need to standardize), and 2) The food supply is either pre-frozen or prepared in some way, which offers hidden costs and reduced product quality (bundling isn’t always good). So what can we learn?
First, it’s ok to shorten the menu. Reducing the number of SKUs in a facility is a great way to reduce costs and increase efficiencies on all ends. Since Sempermed USA exclusively manufactures disposable hand protection, I’ll use examination gloves as an example. While every department may not be able to use the same type of examination glove, the great majority of staff can move away from their preferences and standardize. But keep in mind that non-clinical departments (food service, housekeeping, etc.) can find huge savings by using non-clinical gloves instead of high-cost examination gloves.
Second, purchasing fresh raw products might take extra effort, but the savings and taste is so much sweeter. Does a bag of pre-frozen French fries cost more or less than fresh potatoes and some oil? Here are an insider’s two-cents in regard to commodities: the margins are incredibly thin, so most suppliers will be competing for lowest cost whether they are on a bundling contract or not. And, the company asking you to standardize or bundle will make up for any low or lost profits within the mess of bundle agreements and custom packs.
What if we pushed for another standard? What would happen if only packs, kits, and specialty items were bundled, and commodity items like examination gloves, gowns, masks, and shoe covers were bid out separately? I would challenge you to look at savings apart from the catch-all supplier and see how quality and long-term savings might increase as well, because we all know that up-front costs aren’t telling the whole story. Bundling creates a more difficult environment to clearly analyze overall savings, and the catch-all supplier created this program for a reason.
So, as you begin to explore your options of standardization and bundling I would encourage you to standardize as much as possible in regard to SKUs, buy high-volume items separately so that you can identify your cost savings, and leave the bundling for your cable provider.