Finding Capital Savings: Wringing Water from a Stone?

If your boss asked you to wring more savings out of an already squeezed capital budget, would you be able to do it?

Faced with an unexpected budget shortfall, a community health system did just that by finding $3 million of untapped savings for a multi-year facility remodel. With construction cost overruns that left insufficient funds for the required capital equipment purchase and installation, the hospital’s supply chain leaders were tasked with finding a way to cut an additional $3 million, or 13 percent, from the more than $23 million approved budget. The team had already worked hard to trim unnecessary costs so this seemed like an almost impossible task.

The supply chain team began to work with clinical staff to rethink the problem and develop new options for addressing the budget challenge.

Here are three strategies that helped this hospital shave $3 million from its capital budget:

 

  1. Reshape the asset list

This team got buy-in on a revised capital budget by convincing stakeholders that they couldn’t fit “10 pounds in a 5 pound bag.” As simple as this may seem, this basic principle was extremely critical to getting their options off the ground. And while easy to say, it was very difficult to do. The supply chain team was armed with information about how the various departments could get their clinical needs met without compromising patient care, and worked with vendors to agree to greater savings on the equipment purchases. For example, one vendor reduced its pricing because the department agreed that it would reconsider the decision to purchase additional modalities from the vendor.

  1. Get over new versus pre-owned

The supply chain team helped the other departments across the hospital recognize the significant savings that selectively purchasing pre-owned refurbished equipment could bring. They reassured department physicians of the quality of pre-owned equipment and importantly, the faster implementation. When the team presented objective quality and cost information to the physicians, they supported the pre-owned options and allowed the group to re-prioritize what would be purchased new.

  1. Supplement the in-house team with external resources

The very tight time frame and many other competing priorities had already stretched the supply chain staff.  Fortunately, the CFO recognized that the hospital could accelerate negotiations with suppliers by bringing in a third-party expert with knowledge of specific vendors’ negotiation strategies and tactics. These supplemental negotiating services added bandwidth at a critical time and allowed the team to stay on schedule.

 

Using these strategies, this hospital was able to do what initially seemed impossible. By finding more than $3 million in hidden savings, the supply chain team addressed an unanticipated budget shortfall and kept this critical expansion project on track.

To learn more about find hidden savings in your capital equipment budget, visit the Miga website.

About the Author

ari-beilin

Ari leads Miga’s Client Experience team and oversees all day-to-day client service activities as well as Miga’s marketing initiatives. His responsibilities include account management, customer support and training, all focused on helping Miga hospital clients maximize their savings and success in their roles.