minding the store: hospital supply chain...

Health Care Industry White Paper AUXILIO Solutions Team

October 2012

MINDING THE STORE: Hospital Supply Chain

Executives Should ‘Think Print’ to Drive Down Costs and Inefficiencies

AUXILIO Managed Print Services

Hospital Supply Chain Leadership and Strategies Drive Savings

Today, supply chain leaders are facing unprecedented challenges to reduce costs and improve quality in

business processes, product purchases and service contracts. Business is no longer ‘usual’ in the health

care industry. Supply chain leaders are at the strategy table with CEOs, CFOs and CIOs, collaborating on

ways to drive out waste and inefficiencies. Increased competition, reduced reimbursements from

Medicare and Medicaid and a tepid economy have created and sustained this challenging environment

for all health care providers. According to a recent report issued by Standard and Poor, analysts said the

health care sector’s performance is expected to decline in 2013 and 2014 as the industry continues to

face weak demand and pressure on revenue from public and private payers.i As a result, hospitals will be

tasked to reduce 15 ‐25% of their operating costs in response to

declining reimbursements.

To succeed in the new world order of health care, hospital

executives must aggressively pursue strategies that minimize

costs and streamline operations. Given that the cost of supplies

and services is second only to the cost of labor for hospitals and

represents around 42% percent of its operating budgetii,

reducing supply costs, whether low‐cost commodity items such

as paper or high‐cost physician preference devices, is a high priority for hospitals and health systems.

The average hospital is procuring 20,000 to 30,000 products. Compound that by multiple hospitals in a

health system and supply management quickly adds up to a mammoth and costly procurement,

workflow and logistical exercise. Hospitals that are focused on driving costs out of the supply chain ‐

and keeping them out for sustained savings ‐ are shifting their view of supply chain management from

transactional to strategic. Supply Chain leaders are clearly “raising the bar” around overall supply chain

performance. However, the reality today is that supply chain/purchasing departments lack the time and

resources to analyze and evaluate the entire supply chain. Historically, the responsibility of buying

equipment and supplies and dealing with maintenance contracts, including print related devices, service


and supplies, was left up to individual hospital department personnel who were not likely cognoscente

of a hospital’s business reduction strategies. Fortunately, supply chain leaders are beginning to redesign

these fragmented practices while facing these challenges head on and turning them into significant

opportunities to improve performance while reducing costs. One significant target that serves to

optimize a hospital’s supply chain initiatives and capture savings is reducing all print‐related expenses.

PAPER PREVALENCE IN HOSPITALS

Industry analysts concur that unnecessary printing is responsible for millions of dollars in health care

waste each and every year. Based on the research of 35 U.S. hospitals of varying in size (between 500

beds and 3,300 beds), the total volume over one year will add up to approximately 916 million images

either copied, printed, faxed or scanned.iii If all the spending on every document t made is rolled up, the

total annual expense is likely to be in the seven‐digit range. As a result, “Print Management” is more

frequently identified as the ‘low‐hanging fruit’ to reduce paper volume and therefore costs, and is a

growing source of opportunity for supply chain leaders to investigate.

THOUGHT LEADING HOSPITALS TURN TO MANAGED PRINT SERVICES

Take a moment to reflect upon your own hospital’s print

environment, which includes the production of all document

images either by printing, copying, scanning or faxing. If you

answer ‘yes’ to any of the following five simple questions,

there is a significant savings opportunity waiting to be

realized:

1. My hospital has outdated and malfunctioning

print equipment occupying valuable space

2. My hospital has highly‐paid IT staff performing

print device break/fix

3. My hospital has no centralized print infrastructure cost center

4. My hospital deals with multiple print equipment vendors

5. My hospital’s cost of document production is unknown

6. My hospital does not have a strategy in place for reducing overall volume


Due to the fragmented approach to this spend category, many hospitals have trouble documenting the

total number of print devices in their entire fleet, their location, maintenance schedules, contracts,

operating costs, or volume of paper produced. Moreover, the majority of hospitals cannot and do not

effectively track the periodic costs of their document output. In this day and age, forward‐thinking

hospitals are adopting Managed Print Services (MPS) programs, which is a proven effective strategy to

streamline a hospital’s print environment in order to control costs, maximize efficiencies, reduce volume

and integrate technology and devices to ensure maximum interoperability.

MANUFACTURER NEUTRAL MPS HAS ALL THE BENEFITS…AND THENSOME

The growing trend of MPS as an important strategy for supply chain leaders comes as no surprise as its

fundamental priority is to maintain control of all equipment, supplies, services and costs of the process

of producing a document. A MPS provider that is manufacturer – independent provides all this value and

goes a step beyond as it has the power to negotiate contracts based on the precise needs of the

hospital, without any equipment or vendor bias. Moreover, the burden of buying or leasing the

equipment for a hospital falls into the hands of the MPS provider, not the care organization. In addition,

the experienced MPS provider will utilize its

purchasing power to negotiate the contracts

that are in the best interest of the hospital.

Finally, through customized, streamlined and

seamless integration of services at predictable

fixed rates, a pure‐play MPS company will

assume all expenses related to the production of

a document including services, supplies,

equipment, finance charges and labor, meaning

one invoice as opposed to hundreds. This, in

turn, saves hospitals and hospital systems millions of dollars over the term of its contract.


As purchasing practices at hospitals and health systems continue to evolve, the supply chain continues

to be a target for large non‐labor cost savings. Try as they might, healthcare organizations are awash in

printed documents such as clinical forms, training materials, educational pamphlets, procedural

guidelines, dietary instructions, physician directories, regulatory and legal output, patient discharge

documents, etc. Actively managing this printed volume of documents through a vendor‐independent

MPS program can reduce spending by upwards of 30%, improve operational efficiencies and lead to

overall improved business health for your health care organization.

______________________________________________

i Evans, Melanie (August 17, 2012). Not‐for‐profits 'stable' despite tough times, S&P says. Modern Healthcare. ii Guerin‐Calvert, Margaret E and Israilevich, Guillermo (March 2011). Assessment of Cost Trends and Price Differences for U.S. Hospitals. Compass Lexecon.

iii Persistent Paper: The Myth of “Going Paperless”. ©2009. AMIA – All rights reserved.

Simon Vermooten, MBA Six Sigma Business Process Professional Executive Vice President of Solutions [email protected] 949-929-5054 Mr. Vermooten has over 25 years of experience in key positions with global copy and print manufacturers and service companies. He has an MBA in Global Management.

AUXILIO, Inc. Corporate Headquarters 26300 La Alameda Suite 100 Mission Viejo, CA 92691 Phone: 949-614-0709 Fax: 949-614-0701

www.auxilioinc.com

minding the store: hospital supply chain...

Documents