“Do more for less.”
This seems to be the catch phrase in healthcare today. In healthcare, every dollar counts and collaboration and trust are critical.
How AED is optimizing the supply chain
Since 1985, Advanced Endoscopy Devices (AED) has been focused on providing the highest quality endoscopy products and full service repair capabilities. We have also launched our comprehensive online shopping portal, Endoscopy Superstore, where you can purchase endoscopic instruments directly from the manufacturer.
Healthcare spending accounts for nearly 18% of the U.S. GDP and is expected to grow at an annual rate of 5.8% through 2020. Declining reimbursements and further implementation of the Affordable Care Act are leaving hospitals with few prospects for increasing revenue. Studies show that 30% of hospitals today are already unprofitable so cutting costs is crucial for survival.
Supply chain costs are the second largest and fastest growing operational expense for hospitals today, yet many administrators are not choosing to focus on how to properly take costs out of the supply chain. Instead they rely on GPO contracts. The Healthcare Supply Chain Association (HSCA) estimates that between 96-98% of hospitals belong to at least one GPO organization with 72% of all purchases going through GPO contracts.
Is your GPO contract good for your health or is it killing your bottom line?
Hospital purchasing administration has basically become complacent, turning over all supplier qualification and price negotiation over to GPOs.
But do GPOs really offer the best pricing?
According to a Government Accountability Office (GAO) report, GPOs collect administrative fees from vendors that range between 1-3% of negotiated contracts. This suggests that GPOs favor larger vendors with more market share and higher pricing because of the potential for higher administrative fees which GPOs use to cover operations costs. Some GPOs also redistribute a portion of these fees in the form of rebates in exchange for compliance.
Several GPOs are involved with lawsuits scrutinizing antitrust issues. In 2009, a congressional inquiry looked into the “opaque and unfair” buying processes of seven GPOs.
You should ask yourself: “Is my GPO really providing me with the best price?”
By enforcing strict compliance to GPO contracts, you might be inadvertently increasing your supply costs.
Shouldn’t you be providing your surgeons and patients with the best quality and best value alternative regardless of GPO contract? Does it make sense to pay 5% more for an item in exchange for a 3% rebate at the end of the year? This is what your GPO is asking you to do everyday.
Mintel’s Online Shopping US 2015 report reveals that 70% of U.S. adults shop online at least monthly with 33% shopping online weekly. Consumers are using the online marketplace to their advantage to search for the best deals on products and services and business to business.
Purchasing online has been increasing exponentially as well so why shouldn’t hospital purchasing agents be doing the same thing? AED’s online portal, Endoscopy Superstore, was specifically designed to streamline the ordering process and enable hospitals to compare the prices offered direct from the manufacturer to the GPO contracted price from the multinational instrument manufacturers.
“How can your prices be so low? Must be lower quality.”
AED has been designing and manufacturing endoscopic instruments, scopes, and sheaths since 1985.
As one of the most experienced OEM/ODM manufacturers of minimally invasive instruments, your surgeons have probably been using our instruments for years and didn’t know we were the manufacturer. By selling directly to hospitals and surgery centers online, we don’t pay middlemen or sales commissions so we pass the savings directly to you.
Sales people do play an important role in the value chain as they provide instruction for assembly, cleaning, and sterilization of instruments as well as facilitating repairs for scopes, instruments, sheaths, and power equipment. We know this knowledge base is important so we produce highly detailed video and PDF instructions on assembly, maintenance, and sterilization.
We also have all IFUs (Instruction For Use) posted online. They’re available 24/7 for your perioperative and instrument processing team to view anytime they have a question on assembly or processing. You can even start a repair work order online. You save costs by minimizing the number of touch points in your instrument acquisition process.
What are your thoughts?
What measures is your hospital taking to optimize the supply chain? Let us know in the comments below.