Optimising Healthcare Costs: Strategic Procurement for Enhanced Efficiency and Savings

UK/EU Healthcare at a Glance

Healthcare expenditure has surged, surpassing €1.7 trillion. Despite this growth, healthcare companies face mounting pressures on their bottom line from inflation, staff shortages, and regulatory changes. Years after the Covid-19 pandemic, these hurdles persist, impacting EBITDA and profitability, compelling procurement functions to rethink strategies. Even though inflationary pressures are settling in 2024, many organisations continue to grapple with the residual impact of price increases from the recent years.

The CPI figures for medical products, appliances, and equipment in 2023 reveal significant price hikes across the EU and UK. This worrisome trend shows no signs of slowing, with geopolitical uncertainties potentially exacerbating inflation. Moreover, the ongoing shortage of healthcare professionals further strains operational budgets.

Innovate to Excel Amid Cost Pressures

To succeed in this difficult landscape, healthcare organisations must adapt. It's crucial to optimise procurement processes, embrace digital transformation, and explore new market segments. Strategic cost management and procurement function improvement are paramount for success.

How Can H&Z Help?

Leveraging extensive expertise in healthcare value creation, H&Z is uniquely positioned to tackle these challenges head-on. As procurement specialists, we excel in indirect procurement, demand management, and procurement transformation. We guarantee supply cost reduction through our “Three-Pillar Approach to Healthcare Cost Optimisation."

From Chaos to Control

Pillar 1: Strategic Sourcing in Indirect Procurement

Targeting indirect spend in healthcare offers significant savings opportunities without affecting clinical outcomes.

Benefits:

• Increased flexibility in supplier selection and contract negotiations.

• Avoidance of the stringent requirements typical of direct spend categories, expediting procurement.

• Strategic sourcing effectively consolidates suppliers and reduces the supply cost base.

Impact: Effective management of indirect spend not only cuts costs but also enhances operational efficiency, allowing savings to be redirected towards improving patient care.

Case Study: H&Z successfully delivered €5m annualised savings (23% above target) across 35 indirect savings initiatives for a UK client.

From Insight to Action

Pillar 2: Analytics-Driven Demand Management

H&Z's refined framework maps KPIs to procurement categories, optimising spend and operational practices.

Benefits:

• Identifies cost-saving opportunities by standardizing bill of materials and practices, particularly in clinical spend.

• Enhances indirect spend management, such as waste, pinpointing inefficiencies for targeted improvements.

Impact: Focuses on process optimisation over supplier change, minimizing clinical disruptions and safeguarding care quality, aligning closely with healthcare missions.

Case Study: H&Z successfully delivered €1.7m annualised savings from an addressable spend of €26m across both direct and indirect spend, using our demand management framework for an EU client.

From Functional to Strategic

Pillar 3: Strategic Transformation

H&Z enhances healthcare procurement functions through a strategic, five-step transformation process to upskill healthcare procurement functions.

Five-Step Approach:

• Assessment and Benchmarking: Evaluates current functions and benchmarks against industry standards.

• Strategy Development: Develops tailored strategies aligned with organizational goals for cost reduction and quality enhancement.

• Process Optimisation: Streamlines workflows and standardizes procedures across the organization.

• Technology Integration: Implements advanced tools to improve transparency and decision-making.

• Training and Change Management: Provides comprehensive training and ongoing support to integrate new processes smoothly.

Impact:

• Drives significant cost reductions and builds a more agile and responsive procurement function. By adapting swiftly to the changing healthcare landscape, organisations can better meet current needs while preparing for future challenges.

• Such strategic enhancements significantly boost the operational capacity and financial health of healthcare providers, enabling them to deliver superior patient care while optimising their resource use.

Case Study: H&Z successfully transformed indirect procurement function of top-tier, EU manufacturer from transactional function to strategic business partner.

Conclusion

The path to innovative and efficient healthcare procurement is ongoing. H&Z remains committed to partnering with healthcare professionals who are ready to take the next step in their strategic evolution.