Today I’d like to thank Dave Stephens of Coupa for letting me re-post his thoughts on efficiency vs. cost in health-care providers.

Coupa has been working with a number of healthcare organizations lately, and so we thought we’d share some of the e-procurement challenges that we see as unique to that industry.

We’ll start with a simple question that has a surprisingly un-simple answer: Should healthcare providers prioritize quality over efficiency when in comes to patient care? Yes, you say, of course! But what does that really mean? Let’s take this question past the typical sound bite by using a specific example –

Discussion Point: Orthopedic casts

There are two different “technologies” used in the casting process. The casts are most frequently made from plaster, but fiberglass bandages are viewed as an increasingly popular and more modern alternative.

So what if you take a fresh batch of physicians, straight out of medical school, and plug them into a system where plaster is mandated (let’s say due to the presumption of lower cost due to “part” and “procedure” standardization)? Let’s say these newer physicians are inexperienced in plaster because they’ve always used the “newer” fiberglass bandage method in their residency programs. What you’ll most likely find is both quality and efficiency of casting by these new physicians is very low. Compound that with a low frequency of performing the casting procedures, and you’ll realize it will take a long time for proficiency to rise to adequate levels. The original goals of standardizing will have failed – costs will be higher, procedures will take too long, and quality of care won’t be high enough.

The obvious answer, to use fiberglass for casts, has a hidden problem. The hidden problem is the more senior physicians. They have used plaster for years and are very proficient at it. These physicians can give a higher quality of care at a lower cost using plaster – without a doubt. Not only that, they may have a perspective that fiberglass is not as good as plaster and may be fairly unwilling to move to what they view as a lower quality method of casting.

At this point some hospitals and clinics just give up and carry both fiberglass and plaster. And maybe that’s the right decision. Perhaps over time fiberglass may displace plaster altogether. What is the real cost / benefit for pushing one method over the other, especially once the true costs of switching for your professionals are factored in?

Conclusion for Healthcare organizations adopting e-procurement initiatives

An efficient e-procurement program recognizes the need for a high quality of care and supplies the necessary goods to practitioners even if it means sacrificing on the admirable goals of part standardization. We’d assert that being flexible with physicians results in lower total cost by reducing rework and increasing the operational efficiency of a healthcare organization’s high value assets (its professionals).

The same story can be told across a wide variety of supplies and procedure kits. From sutures to bandages, from scalpels to IV needles, the best supplies are those that your physicians and nurses are most comfortable using.

So consider your e-procurement goals before embarking on your programs in healthcare organizations. Focus first on convenience. With e-procurement your cycle times for receiving materials should be cut by weeks. Focus next on inventory management. With e-procurement you should have a much better handle on min/max reorder points and on your inventory levels and carrying costs.

And then where you can do so without impacting quality, reduce costs further by standardizing – with care.