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Pareto’s principle: Apply the 80/20 rule to both your vendors and items purchased through each vendor. 80% of your cost reduction comes from the top 20% of your spend.

• First, run an Accounts Payable report and sort your vendors by annual spending and focus on the top 20%. This prioritization will narrow your focus from say, 100 vendors down to 20 vendors.
• Next, run usage reports for each of the top 20% of vendors. Sort the usage reports by each line item’s annual spending and focus on the top 20%.
• Run the top 20% of the line items from each vendor through your Group Purchasing Organization (GPO) to
  make sure that you are connecting to every possible contract and that
  you are on the correct tier level. I have been helping surgery centers
  identify savings for over 20 years, and I have NEVER found an ASC that is
  taking advantage of all of the savings available through their GPO. Keep in
  mind that some medical supply distributors allow you to access the
  contracts of more than one GPO.
• If you haven’t already, label your shelves with the cost of each item. It’s
  incredible how mindful staff become when they know how much each
  item costs.

Identify the Starting Point for Cost Reduction

• Run accounts payable reports and sort your vendors by annual spending
  and focus on the top 20%. This prioritization will narrow your focus from
  say, 100 vendors down to 20 vendors.
• Next, run annual usage reports for each of the top 20% of vendors. Sort the usage reports by each line item’s annual spending and focus on the top 20%.
• Run the top 20% of the line items from each vendor through your GPO to make sure that you are connecting to every possible contract and that you are on the correct tier level.

7 Questions You Must Answer

1. Is there a GPO contract available?
2. Are you on the most aggressive GPO tier price? Tier price based on
   purchased volume
3. Is there a generic equivalent (drugs) & medical/surgical supplies is
   there a distributor private label. Examples: Exam gloves, gauze,
   bandages, tape, etc.
4. Is there another manufacturer that makes the exact same drug or
   supply at a better price
5. Are there any early payment discounts available
6. Are you being charged the correct distributor markup
7. Can you negotiate a bulk purchase price for high volume items

For more information about Ambulatory Surgery Centers Cost Containment, visit our resource hub.