Profitability is More Important Than Any Other Buying Factor
I’m’ hearing that more and more supply chain professionals are evaluating their new product, services and technology requests with a new, yet a very old buying criteria – profitability! Or, if it isn’t PROFITABILE why should we buy it? This is a significant emerging best practice you need to know about and then employ at your own hospital, system or IDN.
Hospitals have always been the “kings” as loss leaders, when it comes to buying anything. Their justification or logic in making these decisions has always been that we will make up for these losses on volume or on some other procedure(s) that a particular physician will be performing at our hospital –so what’s the BIG problem!
The problem is that your hospital NEVER really ever makes up for these losses (big and small); hospitals just eat them on the promise of future profitability in some other area of their operations. As an illustration, the average pacemaker total procedure reimbursement from Medicare (supplies, pacemaker, labor and overhead) is about $10,000, so if you are buying pacemakers that cost you $9,000 (or 90% of your reimbursable fee), I can guarantee you that you just lost money on every pacemaker procedure you perform. You will never make it up with volume – your losses will just get worse.
So what progressive supply chain professionals are doing to eliminate this extreme misadventure is to add the criteria of profitability to each and every one of there value analysis studies that they perform. This way, if your executive management wants to buy a product, service or technology that NEVER is going to make or save them money at least they know these undisputable facts from the get go. This is the only hope we have for our healthcare organization to self-correct this flagrant practice.
Filed Under: Best Practices • savingsblog
