VHA's Non-Salary Cost Reduction program helps hospitals save supply costs

Supply costs represent a hospital's second largest expense, behind staffing, so many hospitals are intensifying efforts to reduce supply costs in response to economic stress. The supply arena is the best area to reduce costs without jeopardizing patient care. Floyd Memorial Hospital and Health Services in New Albany, Ind., turned to VHA Inc., the national health care network, to help it reduce supply expenses, and saved $3 million annually.

"VHA has developed a tried-and-true methodology to help hospitals save money on supply costs," said David Markoski, senior vice president of VHA. "Our Non-Salary Cost Reduction program improves financial performance so that hospitals can continue to do what they do best -- provide quality care for their patients."

VHA's Non-Salary Cost Reduction solution includes a wide range of cost-reduction strategies, incorporating extensive use of supply chain analytics, product standardization and engagement of the clinical staff to improve product utilization.

Savings at Floyd Memorial included:

-- $487,000 in the cath lab -- $302,000 in pharmaceuticals -- $280,000 in medical/surgical supplies

Another component to the initiative's success was VHA's Clinical Quality Value Analysis™ (CQVA) process. CQVA uses objective methods to help hospitals make decisions about medical products, technologies, and patient care services within the context of safe, quality, cost-effective care.

"We wanted to verify that the hospital was using the most appropriate, highest quality supplies, while confirming that we were paying the lowest price including all the applicable rebates," said Ted Miller, chief financial officer at Floyd Memorial. "The VHA assessments helped our team leaders know where to focus their efforts."

Floyd Memorial is one of hundreds of hospitals nationwide turning to VHA to find savings in their supply chain. Earlier this year, VHA pledged to help member hospitals save millions without compromising patient care, quality and safety, if the hospitals applied VHA's proven supply chain management methodologies.