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Changing the supply system paradigm.

Since revenues are fixed for a growing majority of patients, healthcare providers need to develop creative mechanisms for fixing and reducing costs in all aspects of their operations. Froedtert Memorial Lutheran Hospital in Milwaukee, WI, wanted to find a supply distributor, or distributors, interested in becoming our partner to accomplish five main objectives: 1) stabilize current supply costs at or below current line item pricing, 2) reduce supply costs per unit of patient service, 3) consolidate a broad range of supply sources to achieve economies of scale and more cost-efficient systems, 4) reduce supplier line item profit margins in exchange for broader market share within the hospital, and 5) establish a mutual commitment to supply cost measurement and control that evolves from the current focus on line item pricing to a system of procedure or unit of service pricing and cost control. Froedtert selected one prime vendor after an RFP process. Material Management will manage and monitor the program, with primary supply recommendations to come from the medical staff, nursing services and the Product/Service Analysis Committee.

Cost Allocation↗

Hospital plant and equipment replacement decisions: a survey of hospital financial managers.

Surveys of capital investment decisions have often neglected issues related to replacement of existing plant and equipment. As acute care hospitals experience declining inpatient utilization, appropriate hospital capital replacement becomes critical to efficiency and survival. Financial managers of 116 large, acute care hospitals were asked to rank factors that typically affect decisions to replace plant and equipment in their facilities. Factors influencing plant were expected to differ from those affecting equipment. The study found that replacements, particularly of equipment, are largely dictated by physicians, accreditors, and regulators. Rising operating costs and utilization were ranked as less important in replacement decisions. In light of impending health reform, these findings suggest that hospital executives need to reorder their replacement priorities to emphasize cost and efficiency.

Capital Expenditures↗

How EDI will redefine materials management.

Supply expenses and the related administrative costs are a big-ticket item for America's hospitals. As a result, more materials managers are investigating the use of EDI to cut overhead costs and minimize the need to keep huge stockpiles of supplies. In fact, some envision a day when the routine ordering of supplies will no longer be necessary. But getting there won't be easy. First, hospitals must make small, incremental steps toward automation. And these steps may be the hardest because they involve creating a new way of doing business.

Computer Communication Networks↗

Adding, defining and measuring value.

Suppliers to the health care industry are changing relationships with their customers by forging partnerships that blur the boundaries between them. Here, representatives from several suppliers discuss what programs and services the market has driven them to offer.

Consultants↗

Materiel executives and the managed cost continuum in a capitated environment.

Strategies that involve supplier partnerships and pose high risk for both hospitals and suppliers are an increasing trend. The materiel management professional who is proactive and able to assess risks in a managed care contractual environment will be the winner as materiel management becomes a network function rather than individual hospital function.

Capitation Fee↗

Cut supplier lead times by 50 percent--no mirrors, no kidding.

Every buying organization wants shorter supplier lead times--a lot shorter. In the past, we have expedited, negotiated supplier-held and consigned inventories, made deals with distributors to stock original equipment manufacturers (OEM) items, and pushed for supplier partnerships. In the end, the ebb and flow of the economy has had, perhaps, the greatest impact on supplier lead times--lower backlogs mean quicker deliveries.

Commerce↗