How Sourcing Excellence Can Lower Hospital Costs

Around the world, existing models of health care are becoming economically unsustainable. New ways must be found to control costs especially in hospitals, which account for almost half of all spending in most health systems

We outline an evolutionary approach to better procurement that can be used by both individual hospitals and large hospital systems. The approach, called sourcing excellence, has three phases; procurement groups move from one phase to the next as they develop their skills and capabilities. The groups do not need to reach the final phase of evolution to achieve strong results even those in the first phase are often able to lower supply costs by about 10 percent. But those groups that do reach the third phase frequently produce supply cost reductions in excess of 20 percent and “bend the trend” by lowering future cost escalations.