Cost saving requires Leadership!

Dutch hospitals could save 200 million Euros by good procurement

The headline of my newspaper (de Volkskrant, 2nd February 2010) surprised me. After the take-over of a hospital (formerly known as the Ijsselmeerziekenhuizen) by a private owned company, it made profit over its first year. Anybody familiar with the healthcare in the Netherlands would not have believed you. I wonder what kind of bet you could make at the bookmakers three years ago. Is this a miracle or the result of a normal business approach by an entrepreneur?

A closer look into the article tells us that 300 employees have voluntarily left the hospital. Based upon the annual report 2008, this is a reduction of more than 25%. Moreover 55 managers and 10 doctors were fired. An interesting remark made by Loek Winter (CEO MC Lelystad, as the hospital is called today) is the savings realized by good procurement. Although savings on personnel are significant, the MC Lelystad must have shown similar results on procurement to make profit again. I consider this to be easily achievable. Probably strong leadership is shown by Loek Winter as it involves switching from a supplier to a new cheaper one. In hospitals these kind of changes are not made easily.

What are the opportunities for hospitals if leadership is shown? Based upon the last 25 spend-analyses of Dutch hospitals carried out by Coppa, a cost saving of 10% on average was considered to be achievable. Coppa always looks at the risks which may influence the probability of achieving savings. Strong leadership is one of these factors which influences the possible saving. I made new analyses of the savings, but I made the calculation taking into account that all hospitals were lead by strong leaders. In my dreamed landscape more aggressive strategies including standardization, outsourcing, e-auction, and single sourcing are common practice. Each hospital could realize a cost reduction ranging from 20% to 25% within one year.

I woke up and realized that most hospitals are not in the ‘luxurious’ position like the MC Lelystad to be in the middle of a crisis which makes it easier to make bold decisions. What a shame that hospitals do not realize all possible cost savings on procurement. Is there another way to realize these savings without making bold decisions? Another survey carried out by Coppa in 2009 reveals price differences between the Netherlands and Germany ranging from 30-60% on identical medical devices and supplies. As of the 1st of February 2010 is able to import these products from Germany. has calculated that all Dutch hospitals could save 200 million Euros by sourcing via claims to deliver the same products from the same suppliers. No difficult changes or decisions have to be made. Savings can be realized within three months. Are you stuck in the middle of a dream or are you going to discover your potential savings?