by R. Timothy Stack, president and CEO, Piedmont Healthcare
Unsustainable growth in healthcare costs, healthcare reform and the emergence of value-based purchasing are pushing hospitals and health systems to improve quality, access and outcomes, while reducing expenses.
With this increased pressure, many hospitals are looking very closely at all costs to ensure that care is being provided in the most efficient, cost-effective manner.
Supply costs represent approximately 20% of operating expenses for hospitals and are typically the second highest expense behind labor. In the past, vendors have controlled the relationships with the hospitals and physicians when it came to new devices and implants. The vendor would convince physicians that the implant or device is the newest and highest quality device on the market and physicians would then require hospitals to purchase the device.Hospitals can simply no longer afford to purchase the latest and greatest technology every time. In a new reality of decreasing reimbursements and bundled payments, it is imperative that the hospitals and physicians are better aligned to make the business decisions regarding all supply purchases.
Therefore, the burden and analytics must fall to the vendor to “sell” the hospital and physician on the reasons for selecting a higher cost item over the current device. The analytics must include a financial analysis, including return on investment, as well as the quality outcomes so that hospitals and physicians can make the best decision that results in the highest quality, greatest efficiency and best outcome for the patient.
R. Timothy Stack is president and CEO of Piedmont Healthcare and a member of the American Hospital Association (AHA) Board of Trustees. Prior to joining Piedmont Healthcare in 2001, Stack served as president and CEO of Borgess Health Alliance, and president and CEO of Borgess Medical Center in Kalamazoo, Mich.