Healthcare Cost Solutions, LLC

Hospitals and health systems frequently see year-over-year budgets for supplies increasing.  At the same time, supply chain managers, GPOs and sometimes vendors tout their successes in cost reduction through leveraging, re-negotiating, competitive bidding and reduced utilization.  From a financial perspective, the question asked is "If we are saving all this money, why are we spending more?"  And it is a reasonable question.  Almost intuitively, we know that many variables are changing: prices are going up from some items, down for others; your organization is using more of some items and less of others; there are new services and programs being added; physicians and surgeons are added to staff, while others leave; and there is constant change in the technologies available and those being used.

Given all these variables, how can we know which items are having the greatest impact and why, and which items should be highest priority for review and consideration for a more strategic management approach.  In order to answer these questions, HCS created its Cost Drivers Analysis process.  We take snapshots of expense data for two or more periods, and have developed an automated process to compare the data on a line-by-line level, isolating items: with significant change in usage and/or price along with items purchased in one period and not the other to analyze changes in product mix.

The analysis invariably offers new insights, and frequently surprises, about the products, categories, departments, and vendors where dollars of spend are increasing.  This leads to pinpoint the right interventions to implement to moderate, if not offset, the increases. The process nearly always substantiates that price increases are seldom the root cause for increased expenditures – rather, the increases are due to buying new products and/or using more of the same products. As a result, hospitals can re-balance their relative efforts on contracting, value analysis for utilization and controls on introduction of new products.  For more information, click here Cost Drivers Analysis.pdf