Working Smarter, Not Harder: Using Data-Driven Strategies to Generate Front-End Cost Savings through Price Negotiation and Supply Chain Optimization

Background: Supply chain optimization is an effective method of generating front-end cost savings and increasing hospital profits. Through the negotiation and renegotiation of supply chain contracts, plastic surgeons can dramatically change the price at which they purchase surgical supplies and implants. This study characterizes the potential impact of supply chain optimization and puts forth a generalizable, systematic approach for successful sourcing. Methods: From October of 2017 to September of 2018, the authors examined all patients taken to the operating room for either a facial fracture or a hand fracture. Cost data were collected, Supply Chain Information Management numbers were used to determine whether each item used during the study period was under contract, and cost savings based on contract negotiation were calculated. Potential cost savings were calculated using the BillOnly calculator. Results: For the 77 facial trauma cases and 63 hand trauma cases performed, a total of 330 items (70 distinct items) were used, 47 percent of which were under contract (47 percent contract use), with an average negotiated discount of 49 percent. Based on BillOnly material cost estimates, the authors' institution would need to increase its contract use to 70 percent to achieve a net savings of 19 percent, and to 90 percent to achieve a net savings of 39 percent. The authors also estimated that if contract use increased to 90 percent, net savings would increase commensurately with increases in the average discount negotiated. Conclusion: Supply chain optimization offers plastic surgeons the potential to significantly decrease surgical costs while maintaining surgical quality.