Centralized Purchase

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USHMS Inc., has the level of performance of these operational tasks can have as great an impact on the bottom line as any of those higher profile activities. Supply cost typically consume around 16 percent to 20 percent of an organization’s operating expense budget. Unlike new service revenue, every dollar of savings on acquisition cost, or the operational cost of placing orders and processing payments, goes directly to the bottom line of a hospital’s income statement.

In recent times, USHMS Inc., purchasing and materials management processes have improved. Most facilities have implemented Electronic Data Interchange (EDI) for purchase orders and invoices or are using Web-based solutions and third-party networks to help automate business transactions.

Benefits achieved

The benefits we have seen are many and are included here in bullet-point form. The impact on the bottom line that we have documented so far is $2 million, but that is only what has been documented. Many prices are fixed daily and contract pricing implemented but without documentation. But the true benefits of centralization go far beyond this, as the list below demonstrates:

  • Better pricing integrity with regard to GPO and other negotiated contracts
  • Improved capture of payment incentives
  • A modest reduction in the number of FTEs needed to carry out these transactions
  • Improved product standardization across the health system
  • Increased contract compliance to our GPO and SSFHS purchasing contracts
  • Consolidation of vendors leading to fewer POs and invoices placed, and shipments received
  • Improved data capture of capital project purchases for budget tracking The keys to success:
  • Hiring good, high-functioning, dedicated staff for central purchasing-A/P
  • Having good IT department support