Cost benchmarking

To the editor,

There has been a great deal of interest in cost benchmarking in materials management. Two more commonly used benchmarks are Cost per Adjusted Patient Day and Cost per Adjusted Patient Discharge. But both are heavily dependent on utilization and in most cases utilization is controlled by clinical protocols. In most cases there is little the Director of Materials can do. This logic may make it easier to sell automated supply cabinets in an effort to limit clinician access but does little to further the cause of the Director of Materials Management. But rather than chasing benchmarks, I believe that the real issues for materials management are:

1. Can I reduce unit supply cost? (Made immensely more difficult by the typical CEO's Jekyll and Hyde approach to cost management. On one hand he covets the annual rebate check from the GPO. On the other hand he won't waste a minute telling the director to find a lower price.)

2. Can I reduce the chances that my AP department will pay invoices with prices that are wrong?

3. Can I provide high service levels in supply replenishment and equipment management so that my nurses spend their time caring for patients and not spend their time serving as temps for my distribution department?

It is troubling that because CEOs are so dependent on their GPO rebate checks, they want to focus not on cost, but on utilization, mistakenly assuming that materials can control utilization, perhaps because while CEOs are "brave" enough to make the GPO decision they are not brave enough to confront their physicians on product selection and utilization. Yet if the C-suite has such a low level of trust in their materials people how do they expect that the Director of Materials will have any better luck controlling the supply choices of physicians than the executives do? Don't they realize that in far too many cases the physicians have no more respect for the materials people than they do? And where do you suppose they learned that lack of respect? Until hospital CEOs step up and recognize the opportunity in the supply chain and sup port and empower their Directors of Materials Management to lower cost and improve service, their mixed message will guarantee supply chain underperformance and continued frustration for Directors of Materials Management.

Lynn James Everard, C.P.M., CBM

Co-founder,

Foundation for Healthcare Integrity

(www.healthcareintegrity.org)

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