By P.J. O’Connor, Manager, Business Development, OC Reilly

(Sept. 10, 2018)–If it can be measured, it can be managed. That solid principle of business remains true because it can be applied in multiple ways across multiple scenarios. Supply chain management certainly is part of that mix.

It can be helpful to start from a wider perspective, then drill down into specifics, when looking for opportunities to improve supply chain practices and results. In the May/June 2018 edition of Supply Chain Strategies & Solutions, an article illustrates one tool in particular to carry out this idea.

The story, titled “How Cost Per Case Can be Used to Measure Clinical Variation,” offers this guidance: “The best cost reduction or process improvement strategy starts with clinical strategy, and clinical strategy should start with an analytics-first approach. Cost per case (CPC) – a familiar key performance indicator – is one of the best ways of comparing clinical variation between physicians, procedures, and cases.”

CPC measures variable costs, or those costs that vary by case (supplies, tests, etc.) and fixed and overhead costs, which do not vary by case (electricity, wages, administrative costs). It makes sense to focus on variable costs, since fixed costs are generally spread out over all cases and typically have no bearing on clinical variation.

The article concludes by stating: “Ultimately taking a broad view is essential to identifying these issues. CPC is a valuable measure because it captures multiple data points. As reports are developed and used, CPC can prove a powerful tool for finding cost reduction and process improvement opportunities – and that can impact your hospital’s bottom line.”

Individual areas for improvement can be more readily spotted and addressed by surveying the entire field in play. The professionals at OC Reilly can help you take the broader view as you work to improve your health care supply chain efforts.

© OC Reilly Inc. 2018