Five simple ways to contain costs
In today's challenging business environment where providers are expected to do more with less, it's the ideal time to evaluate all of your major cost centers. In the non-payroll category, two of the biggest areas of opportunity are in food and medical supplies. To that end, there are a number of things to be considered when looking for ways to save money for your organization.
Building partnerships for success that include positive “coaching” to ensure maximum value for the end user
Simply put, long-term care purchasing professionals no longer have the luxury of spending extra hours dissecting their order guides and distributor catalogs for the most cost-effective product selections. At Link-age, for example, members have an added resource in this regard as our staff has the ability to run historical usage data via distributor software. We then assist the member by researching this data and looking for those “best value” opportunities and educate or “coach” them on the suggestions to consider.
It is also important to not mandate or force feed specific line items, but to instead display the best value and seek commitment from the ultimate purchaser. At Link-age, our distribution partner can assist with sampling or, even better, the manufacturer or broker rep can visit with samples and additional menu or other formulary items. Our members' successes have been attributed to information sharing and spreading best practices as a source for cost control while holding or enhancing quality.
Use of a Managed Order Guide format that steers compliance for ultimate value, while not restricting purchasing creativity
The vast majority of our long-term care professionals depend on distributor websites for online ordering capabilities. The issue with this practice is that it often does not do enough to ensure the best value. Yes, it often points out the items with contracts or “deals” attached, but these selections are often overlooked as the buyer is struggling to meet the order cutoff or countless other distractions that face our decision makers.
A Managed Order Guide (MOG) is designed to limit the confusion and reduce the endless catalog down to those previously approved. Again, this tool is designed for convenience and consistent purchasing habits, but we always support the member's choice of variety and creativity. Product searches through the master catalog of items remains available and our Solutions team can make revisions to the MOG to suit buyer choices.
One great benefit of the MOG format is that its creation is the result of a team of professionals that focuses on both end-user choices AND the experts behind the scenes that manage distributor cost and any potential rebates that combine for the best bottom line. As with all purchasing tools, a MOG requires a commitment from the member to support its development, organization and use in ordering.
It takes more work, but look for value beyond your distribution partner
You have probably heard it said that distribution is a “pennies business.” The fact is, it's true. In today's economic climate, your distribution partner also has to do more with less, so you will have to go further up the supply chain to find additional savings.
This can add a significant amount of work for your purchasing people, but in the long run you will find more potential savings through negotiations with manufacturers than with your distributor alone. If you are utilizing the services of a group purchasing organization (GPO), then this is exactly the type of service they should be providing to you.
But what about rebates … how do you really know?
Whenever possible, focus on obtaining your savings at the time of purchase (also known as off-invoice price deviations). In some cases, however, a purchasing program may include additional incentives such as volume, prompt pay, and, of course, rebates.
Part of the challenge with any rebate program is verifying that you are actually receiving all of the dollars for which you are eligible. This is another area where a good purchasing partner can come alongside and provide you with transparent reporting that shows what percentage of the rebate (if any) that they are keeping and which portion is being sent back to you the customer.
It is important to note that using a MOG and having a trusted partner review your purchases is the best way to ensure that you are buying the products that will deliver the best value in terms of price and rebate.
The ever elusive “buy-in” from staff
Any successful purchasing program depends on people, and as we all know, sometimes people can be averse to making changes. One way to overcome this challenge is to engage a variety of participants in the buying process, ranging from experts on your dietary and clinical teams to the residents who will ultimately be consuming the products you are purchasing.
Many times, having a more inclusive approach will help alleviate some of the greatest concerns about making changes in what you are buying. This approach won't alleviate all the concerns, but at the minimum, your people will appreciate that you are giving them a forum for their opinions to be heard.
Any of the suggestions above will make a positive impact on your procurement costs. However, combining all of these into one cohesive and strategic purchasing plan, will give your organization the best return on your investment of time and resources.Scott Collins is the president and CEO of Link-age, a member-owned corporation focused solely on helping organizations succeed in the aging population marketplace. Link-age is made up of more than 500 senior living communities in 16 states that serve approximately 350,000 adults, providing their members and customers increased purchasing power and research a