Operational Profitability?

Short post today, these numbers speak for themselves.  I read the attached article from Ms. Pennic and couldn’t comprehend the shear amount of waste presented.

• ‘An estimated $5 billion is lost annually in the implantable device supply chain as a result to waste, inefficiency, and lack of visibility.’
• ‘The supply chain is the second largest and fastest growing expense for healthcare providers, with only labor costing most providers more.’
• ‘Supply chain represents 40 to 45 percent of hospital or healthcare system operating costs.’
• ‘…according to Gartner Research, many providers can reduce supply chain costs by 5 to 15 percent if they better analyze, plan and control the purchase and use of goods and services.  That can translate into a profit increase of 2 to 7 percent.’
• ‘…healthcare providers that make greater investments in back office automation and process improvement enjoy operating cost ratios that are 2 to 4 percent better than those of their peers.’

Staggering numbers when you look at the suggestion of $5B in lost implantable business alone!  If you can assume a savings of 5-15%, of that we are looking at a reduction of $250-750M a year!  As most health systems are operating with thin profit margins, many with less than 10% of revenues, an increase of 2-7% of profit could double a system’s annual profit!

This all leads back to a massive shift in healthcare away from clinical to operational optimization.  In the end, the patient will remain the focus of any and all efforts, but the focus of operational efficiencies has to be where the market invests as skyrocketing costs are making healthcare unavailable for millions of people in the US.  The suggestions that Mr. Johnson provides in this article are important for all health systems, as technology and efficient partner relationships should help drive down waste and excess product in the market.

Cohealo is focusing on driving this change in the market; we are introducing new solutions to make it even easier for our clients to realize savings from their supply chain teams.  Our existing clients and prospects understand the value in professionalizing several cottage industries under one roof, where Cohealo helps them cut the fat out of their courier and rental fees under one contract.

Let me know if you have any questions about our new services and how they may affect your health systems’ overall financial health.  I’ll be here working hard with the rest of the team at Cohealo trying to accelerate change, making sure we make the supply chain a revenue center and ensuring that healthcare systems optimize their purchase and consumption choices.