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Making the most of Medicare cuts – back to the basics (Part 1)

By Rusty Zosel on Thu, Dec 22, 2011 @ 08:00 AM

iStock_000016349390XSmall1-resized-600The impact of the 11.1% cut to Medicare reimbursement on long term care providers across the country has been substantial. With revenues down margins are tight, very tight. To discover ways to reduce waste and get the most from the dollar expended, providers are examining every facet of their operations, including procurement. While labor may represent the bulk of its expenses, a company also needs to review its procurement practices, contract terms, pricing points, and price protection regularly. In this day and age, every penny counts.

In the this first of a two-part blog, I'll share with you some salient savings opportunities that we recommend and which are concisely mentioned in an article I found recently online, Procurement Savings – Ways to Increase Your Profits. I’ve somewhat paraphrased the content.

1. Review supplier’s terms and discounts.
You should have a Master Agreement with all suppliers. As partners, you and your suppliers may achieve procurement savings by altering your purchasing patterns. By purchasing slightly more products less frequently, you may automatically receive a better discount.  If you are using outside contract management or GPOs (Group Purchasing Organizations), you may also want to review those resources and any agreement they have with you, along with their contracts and pricing with the vendors or product categories in which they are being utilized.  

2. Consolidate suppliers and deliveries.
Savings in delivery charges and the costs of accepting those deliveries can result when you consolidate deliveries. In some cases, it may make sense to consolidate what you purchase from which suppliers. It may be more convenient to purchase from a local vendor, however, like the neighborhood hardware store, “convenience” can become a black hole for your cash. Also, by consolidating suppliers, costs related to processing purchase orders and invoices can also decline.

3. Consolidate purchasing requests and intervals.
By consolidating your orders and reducing their frequency, you can reduce delivery and documentation processing costs.

4. Review purchasing requirements.
This ensures that only strictly necessary purchases are made. It will cut down on excess costs and storage costs.

5. Purchase from agreed catalogues.
Combined with #2 above, purchasing from catalogues specifically negotiated for your company containing specific brands or types of a product will result in savings. As mentioned above a greater volume of orders from one vendor can result in deeper discounts.

6. Review stock levels. 
With consolidation and the advice to buy in greater volume must be tempered by sound inventory control practices.

7. Review purchased products specifications. 
What may have been ideal a while ago may have been superseded by an item or class of items that function better at a cheaper price.

In Part 2, we'll conclude with the rest of these critical savings opportunities. In the meantime, I wish you and yours a very Merry Christmas!

Topics: Procurement Automation Medicare cuts consolidate purchase requests and intervals consolidate suppliers and deliveries purchase from agreed catalogues review purchasing requirements terms and discounts review purchased products specifications automated procurement process raise stock levels