Global

Details

  • Service: Advisory, Management Consulting
  • Industry: Healthcare, Government & Public Sector
  • Type: Business and industry issue, White paper
  • Date: 1/22/2014

Supplies, logistics and services 

Keeping the costs of supplies under control is important in delivering low-cost care.

Standardization

For disposables, implants and other equipment, standardization reduces inventory and enables more effective negotiation on price. Controlling access to and ordering of high-cost items is also important. More controversial is the approach to single-use items, with some low-cost systems reusing certain types of single-use equipment.


Some large hospital groups that focus on a specific set of procedures have designed and manufactured their own equipment. For example, CARE in India has a manufacturing subsidiary making cardiac catheters and stents. Aravind Eye Centers, also in India, has developed its own lens for cataract surgery priced comparatively lower than commercial alternatives.

Purchasing and logistics

Centralized or group purchasing, when done well and associated with standardization and rationalization of the number of items in the catalogue, can reduce costs by double digit percentages. Lean redesign of logistics and the supply chain is also important.


Some hospitals in the US and Europe have been experimenting with systems that supply theater and ward equipment and disposables on a just-in-time basis using bar codes, Radio Frequency Identification (RFID) and other systems. There are lessons to be adapted from the grocery sector which segments their supply chains based on common logistical factors including frozen items, produce, dry goods, and seasonal items instead of suppliers, programs or stores.


Stocking and replenishment procedures may be different for these segments, but resources are shared where possible.

Pharmaceuticals

After workforce, the largest cost item in many systems is pharmaceuticals. Enforcing the use of generics and strictly controlled formularies are well-known techniques found in many low-cost systems. Offering patients the opportunity to pay extra for branded medicines above and beyond generic pharmaceuticals reduces system costs and neutralizes potentially unpopular aspects of this policy. Centralized dispensing can also reduce costs and errors.

Outsourcing

Outsourcing has become more popular, beginning with non-clinical services, hotel services, a variety of back office functions, IT, supply chain, maintenance and transport. Care must be taken to ensure resource changes do not disrupt the flow of work though the organization.


A number of western European countries have extended outsourcing to some clinical services including imaging, laboratories, home chemotherapy, dialysis and specialist mental health. When managed well, outsourcing can offer the advantage of introducing providers with specialist knowledge and improved models of delivery.

 

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