Few, if any, people still deny that US healthcare costs put the nation at a competitive disadvantage, reek of inefficiency and must be confronted soon. And as Washington begins to debate the direction the nation will move, PBS Frontline’s Sick Around America program last night showed us the magnitude of the challenges ahead:

And while many single out insurance and drug companies as part of the problem, a strong case can be made for the importance of private sector R&D driving innovation…which could be negatively impacted by healthcare reforms. But no matter what side of the debate(s) you come down on, there’s widespread agreement that greater efficiency and cost reductions in the system are essential.

So, how do we get there?

My colleagues recently looked at opportunities for cost savings in the healthcare industry and provided their recommendations in a whitepaper titled Spend Management: The Antidote to the Healthcare Crisis (download here). They dug into “the spending and procurement practices of over 300 global companies and found that the U.S. healthcare sector could collectively reduce supply chain costs by $40 billion through improved spend management practices, policies, and automation.” The projected increase in profits created by those savings come in at $26.7 billion.

Perhaps the most appealing aspect of this cost-savings approach is…it won’t impact patient care or access. Chris Merchant, who led the project said:

“Efforts to control costs in the healthcare sector have largely been either labor related, such as cutting staff, or care related, such as avoiding certain treatments. But such moves can adversely impact quality standards and are only temporary salvos. Many healthcare organizations are beginning to realize that their greatest opportunity to drive sustained cost reductions and improve care comes from doing a better job of purchasing and supplier management.”

The whitepaper outlines actions that healthcare organizations - from service providers to insurers to pharmaceutical companies - can take to find these savings and drive them to the bottom line. The major recommendations are:

1. Standardize processes: Consistent processes reduce risk, improve efficiency and productivity.
2. Adopt new technologies: Process efficiency through automation can provide greater visibility into spend and supplier performance.
3. Leverage external expertise and services: If the company lacks in-house expertise, supplier relationships or process efficiency, seek outside help.

The savings are out there. So whether they are passed on to patients, share holders or R&D, they are certainly worth pursuing.

Justin Fogarty is Managing Editor of Supply Excellence. For any questions or feedback on the blog or its contributors, Justin can be reached at jfogarty[at]ariba.com.