Healthcare supply chains handle buying, storing, and delivering medical supplies, drugs, and equipment. If this area is not managed well, it can hurt a healthcare organization’s finances and the quality of care patients get. Financial metrics are numbers that help leaders see how well their supply chain works.
By looking at these metrics, healthcare groups can check their spending, how they use resources, supplier deals, and stock management. This helps them make better choices that cut costs without lowering service quality. It also helps leaders compare their results with other groups, find ways to improve, and plan budgets better.
Research and case studies show six main financial metrics used to track healthcare supply chains in the U.S.
Supply AP Days is the average number of days it takes for a healthcare group to pay suppliers for medical goods. This shows how well the payment process is handled. Lower AP Days mean quick payments but might hurt cash flow if done too fast without enough cash. Very high AP Days can cause problems with suppliers or late fees.
For example, Northwestern Medicine improved their payment process and raised yearly rebates by 133% by reducing AP Days and following payment terms better. This shows how AP Days affect money matters directly.
This metric compares supply costs to the number and difficulty of patients discharged. The Case Mix Index adjusts for how sick or complex patients are. It helps hospitals control supply costs while thinking about patient needs.
By comparing costs to patient complexity and number of discharges, managers can see if costs grow because of inefficiency or more difficult patients. This helps focus on cutting waste but keeping good care.
This metric shows what part of revenue is spent on supplies. It helps hospitals watch if supply costs are too high compared to money made from patient care. If this percent rises, it might mean supply spending is not efficient. If it stays the same or goes down, cost control is better.
Hospitals can compare this number to other similar groups and use it to plan their budgets and cut costs smartly.
SUM is the total amount spent on supplies that the group actively manages through contracts and buying strategies. Raising SUM means the group is better at using its buying power and supplier deals to lower costs.
Tracking SUM lets leaders see how much of the total buying is watched for savings and improvements. This is important because healthcare costs are generally going up.
Inventory Turns measure how often a hospital sells and restocks its supplies in a certain time. Good turnover cuts costs of holding supplies and lowers the risk of having old or missing stock. It also shows how well supply matches patient care needs.
Hospitals with higher inventory turns usually have better cash flow and waste less on expired or extra items. This metric helps balance having supplies ready without spending too much.
This metric tracks how much labor costs for supply chain jobs compared to patient complexity and number of discharges. It helps hospitals see if labor costs are reasonable and guides plans about staff or automation.
Finding the right balance between labor costs and supply work keeps operations efficient while making sure supplies are available when needed.
Healthcare leaders use these financial metrics to check their current work and compare it with others. This helps find weaknesses and improve over time.
For example, groups can compare their Supply Expense Per CMI Adjusted Discharge with similar sized hospitals or specialty clinics. Large systems like Northwestern Medicine improved payments and got bigger rebates. Corewell Health used smart methods to manage backorders during the COVID-19 pandemic. This kept supplies ready despite global challenges.
Focusing on a few key metrics instead of too many helps leaders make better decisions and avoid confusion.
New tech like AI helps track financial numbers, improve data, and speed up supply chain work.
AI can handle real-time data and give deep analysis. Predictive tools help leaders guess future trends, supply costs, and find ways to save money before problems occur. This stops crisis fixing and starts early action.
For instance, Simbo AI uses AI to automate phone work. While mainly focused on communication, the same ideas can help supply chain automation.
AI tools can also collect payment data, check supplier terms, and study spending patterns automatically. This cuts errors and speeds up reports, giving managers more time for bigger decisions.
Automation cuts manual work and makes tasks like invoice handling, ordering, and inventory control smoother. Automated payment systems catch errors, follow payment rules, and plan on-time payments. This lowers AP Days and improves relations with suppliers.
Inventory automation using barcode scanners and real-time stock checks helps keep Inventory Turn numbers accurate and restocking on track. This lowers mistakes and saves money by stopping overstocking or running out.
When automation tools link with electronic health records (EHRs) and other IT systems, data sharing works smoothly. This supports metrics like Supply Expense Per CMI Adjusted Discharge by matching supply use with patient info. This makes cost data more exact and useful.
Also, automatic data collection improves data quality, which is often a problem, especially in smaller clinics with fewer resources.
Even with these challenges, new tech in AI and automation offers ways to improve tracking and decision making.
By managing financial metrics carefully, medical leaders in the U.S. can make their supply chains work better, lower costs, and support steady patient care. New technologies like AI and automation help speed up these improvements in work and decisions. Paying attention to these financial numbers helps keep healthcare operations and finances strong in a tough environment.
The key objectives include operational excellence, financial health, process automation, digital integration, and making informed decisions using real-time data and advanced analytics to enhance supply chain efficiency.
The six critical metrics include Supply Accounts Payable Days, Supply Expense Per Case Mix Index Adjusted Discharge, Supply Expense as Percent of Net Patient Revenue, Spend Under Management, Inventory Turns, and Supply Chain Labor Expense Per CMI Adjusted Discharge.
Healthcare supply chain teams can benchmark their performance against similar organizations or industry standards using metrics to identify areas for improvement and opportunities for efficiency.
Technology enhances the tracking of supply chain metrics by providing advanced analytics, predictive tools, and automation, enabling supply chains to gain actionable insights and improve performance.
Setting achievable KPI goals helps to focus resources on few metrics, ensuring data accuracy and reliability, thus facilitating better decision-making and performance measurement.
Best practices include setting realistic KPI goals, leveraging technology for metric tracking, maintaining data quality, and implementing continuous improvement processes to adapt to changes.
Organizations can measure progress by comparing pre- and post-implementation metrics to assess the effectiveness of changes made to optimize supply chain performance.
Data quality is crucial for accurate analysis and tracking of supply chain metrics; poor data can lead to incorrect conclusions and hinder effective performance measurement.
Common challenges include lack of data integrity, limited access to analytics, and resource constraints, particularly in smaller organizations lacking dedicated analytics teams.
Successful examples include Owens & Minor achieving the ‘Perfect Order’ status, Corewell Health improving backorder management, and Northwestern Medicine optimizing accounts payable processes for increased rebates.
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