Forecasting with Analytics

Picture this scenario … The monthly financial reports don’t look good. You’re over budget on supplies. This will elicit the inevitable email from the CFO asking, “What’s going on?”

The problem, says Bill Kellar, Supply Chain CEO of HCA Healthcare’s TriStar Division, “is that summary financial reports often tell us the ‘what,’ but not the ‘why.’ ”

For instance, are surgical volumes up? Is one physician using a more expensive non-contract device? Did procurement strategically order a quarter’s worth of devices in one month? “The value indications in terms of spend can be indicative of an operational issue that needs to be resolved,” Kellar says.

That was the message he and Dan Cleeton, CPA, AVP of Financial Operations for HealthTrust Supply Chain, delivered during their HealthTrust University Conference presentation: Forecasting Future Performance With Supply Analytics & Reporting.

Yet few hospital systems fully integrate these attributes into their supply expense reporting, Cleeton says.

“We chose this topic because it continues to be a discussion point with members,” he says. “Strategic supply chain leaders must understand the drivers behind their supply expense performance to connect with their hospital executives.”

It all starts with a detailed list of accounts, as granular as possible. “Many of our members budget for overall spend at the aggregate, not category level,” Kellar says. For instance, one category might be cardiovascular medical devices, but best practice indicates spend should be further delineated to enable comparison to reported case volumes (for example, heart valves, rhythm management, stents, etc.). Additionally, both spend and case volumes can then be compared to previous year and budgeted totals, to further explain spend variances. Clinical data provides additional insight, enabling supply chain leaders to plan savings initiatives that may affect future supply expense performance.

“The bottom line is that you have to be close to the business and understand what’s influencing supply spend,” Kellar says. That entails developing relationships with key individuals throughout the facility, such as the operating room director, who can help explain why surgical spend has increased.

And turn to your HealthTrust account manager, he advises. “HealthTrust has the operational expertise to help you get there.”