The Standardization Revolution: Tackling Healthcare Waste, Costs, and Complexity with Granular Solutions

As a former healthcare procurement leader and now a software solution engineer, I can say in every hospital I worked at and visited. Standardization is not just a buzzword; it’s a critical, yet underutilized, strategy that can deliver transformative results across financial performance, operational efficiency, and patient care. Despite its importance, no single org has outlined a prescriptive best practice approach to item standardization. It’s time to change that. Long term we should all be using the same standard with a tiny twist of geography.

What is Standardization in Healthcare?

Standardization involves streamlining the products, services, and processes used across an org to ensure consistency, efficiency, and cost-effectiveness. For hospitals, this means reducing the sheer variety of similar products and suppliers that arise from diverse end-user preferences. When implemented effectively, standardization offers:

• Financial benefits: Savings of 15–30% depending on the category.
• Leveraged purchasing power: Strengthening negotiating positions with suppliers.
• Consistency: Improved service levels across the org.
• Better patient care: Enhanced access and reduced variability.

How do I know if I need standardization?

1. Supplier Fragmentation Multiple suppliers offering similar products or services often indicate opportunities for consolidation. This not only improves pricing but also ensures consistent quality.
2. Product Fragmentation End-user preferences often lead to a wide variety of products fulfilling the same need, resulting in inconsistent pricing and inefficiencies. This is the one place where we need to make it hard on the requestor.
3. Incomplete Category Definition A narrow view of product or service categories can limit leverage in supplier negotiations. Comprehensive category analysis is essential for identifying opportunities. Think about category definition as not singular but a hierarchy with at least 6 levels that intersect. This is your item calculation.
4. Varying Service Levels Disparate service-level agreements (SLAs) across departments can lead to inefficiencies and inconsistent outcomes. Make the SLA match your planning item profiles.

Now before you start the x-lookups. It’s time for another meeting. Yay! Maybe? One that’s needed to lay the groundwork and Northstar this restructure.

1. What specific issue are we addressing with this standard?
2. Have we involved front-line clinicians in creating the standard?
3. Have we anticipated any potential unintended consequences?
4. Do we have the necessary resources to design, implement, and assess the effectiveness of this standard?

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Looking through my old notes I came across this table that can help be the basis of that meeting because there are two models and a significant shift recently to one.

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What are the keys to success?

1. Utilize a Data-Driven Process Data is the cornerstone of effective standardization. An objective, data-driven approach helps identify opportunities and evaluate solutions. Relying on anecdotal information often leads to suboptimal outcomes.
2. Increase Knowledge of Complex Categories Deep understanding of supplier capabilities, product functionality, and market dynamics is essential.
3. Engage Key Stakeholders Early Stakeholder buy-in is non-negotiable. Early engagement ensures alignment and accountability, driving adoption and sustained improvements.

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Actionable Takeaways for Healthcare Leaders

Step 1: Conduct a Comprehensive Audit of the Item Master

Action Plan:

1. Identify duplicates and inconsistencies: Use data cleaning tools or manual processes to locate duplicate entries, inconsistent naming conventions, and outdated information.
2. Analyze data completeness: Check that every item has complete, accurate, and up-to-date attributes (e.g., item description, unit of measure, supplier, manufacturer, pricing, alternative).
3. Evaluate usage patterns: Determine which items are actively used and which are obsolete, leveraging purchase order histories and utilization reports.

Step 2: Develop and Enforce Standard Naming Conventions

Action Plan:

1. Create a naming schema: Use a consistent format for item names, incorporating key attributes such as category, size, and purpose (e.g., “Syringe – 10mL – Luer Lock”). Double check special characteristics and EDI transmissions with suppliers you use. It breaks some.
2. Collaborate with stakeholders: Include clinical and supply chain staff in defining conventions that are intuitive and relevant. This is a sub description not main.
3. Document guidelines: Publish a reference manual detailing naming rules and provide examples for common item types. Every modern ERP should have this built right on the page.

Step 3: Classify and Categorize Items Effectively

Action Plan:

1. Adopt a standardized taxonomy: Use industry-recognized frameworks such as UNSPSC (United Nations Standard Products and Services Code) or GS1 classifications to group items logically.
2. Define at least 3 layers of categories: Organize items into broad categories (e.g., surgical supplies) with subcategories for specificity (e.g., sutures, scalpels).
3. Automate classification: Use AI-driven tools or enterprise resource planning (ERP) systems with built-in categorization features to streamline this process.

Step 4: Rationalize the Item Master

Action Plan:

1. Reduce item proliferation: Eliminate unnecessary variations by consolidating items with overlapping functions.
2. Engage clinicians in selection: Work with clinical teams to identify and standardize best-in-class items based on evidence-based outcomes and user preferences.
3. Implement a "Justify and Standardize" policy: Require justification for adding new items and prioritize standardization across facilities.

Step 5: Implement Data Governance and Maintenance Protocols

Action Plan:

1. Establish ownership: Designate a team or individual responsible for ongoing item master updates and accuracy.
2. Schedule regular reviews: Conduct periodic audits to ensure data remains clean and current.
3. Integrate with procurement workflows: Align item master updates with purchasing and contracting processes to ensure seamless data flow.

Step 6: Leverage Technology for Continuous Improvement

Action Plan:

1. Deploy data validation tools: Use software that automatically flags anomalies, such as missing fields or mismatched pricing.
2. Integrate with ERP systems: Ensure the item master integrates with your hospital’s ERP platform to improve visibility and accessibility.
3. Use analytics to drive decisions: Regularly analyze item master data to uncover trends, track compliance with standardization efforts, and identify new opportunities.

Some interesting data that I found researching this:

Supply chain costs account for 40-45% of a healthcare system’s operating expenses, making them a critical area for cost management. Effective supply chain strategies can lead to a 5-15% cost reduction, according to Gartner Research.

Healthcare supply chain management involves optimizing medical supply processes to deliver quality patient care while ensuring cost efficiency across operations.

Standardization is a powerful tool to reduce costs by minimizing variation in product selection, driving evidence-based clinical practices, and ensuring patient safety without compromising quality.

Typically managed by a value analysis team, standardization prioritizes products and services that meet both clinical and financial goals through evidence-based decision-making.

Benefits of standardization include reduced variation, lower patient risk, optimized clinical outcomes, and significant cost savings.

Unnecessary spending on supply chain products and related operations amounts to $25.7 billion annually, as reported by Navigant

For individual hospitals, an analysis by Navigant revealed an average potential savings of $12.1 million annually. This figure is equivalent to the salaries of 165 registered nurses, 50 primary care physicians, or the cost of 3,100 knee implants.

Seattle Children's Hospital achieved a 20% reduction in supply costs per case by implementing standardized preference cards for laparoscopic appendectomy procedures.

Intermountain Healthcare identified significant opportunities for standardization after discovering that 24,000 of the 100,000 items in their item master were unique, often used by only one facility or a single clinician. By adopting a "Justify and Standardize" approach, alongside other initiatives, Intermountain optimized purchase order lines, streamlined invoicing, right-sized inventory, and reduced costs through increased utilization. These efforts resulted in $1.5 million in savings, driven largely by standardization efforts.

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And now, standardization in healthcare to the physician

Physicians often see it as a control tactic, fearing it means treating every patient the same. But here’s the reality: personalization doesn’t require endless product SKUs. It’s about giving patients the right care without drowning in redundancy. I remember a physician at a Central Florida hospital who fought standardization at first but later admitted it saved time and improved care. Funny how that works.

Some worry it means lower-quality products, but the key is partnering with clinicians to select the best options while keeping costs in check. Nurses, on the other hand, love it because it saves them time and improves efficiency, leaving more moments to focus on patients.

Patients? They just care about how they’re treated—not what’s in your toolkit. Standardization isn’t the enemy; it’s an opportunity for better care and cost savings to the patient making affordable access to healthcare.

This is another source of duplication and excessive inventory. PPI products should be carefully evaluated to determine what items are “preference” driven vs. procedural requirement driven. Ask them to justify what unique SKUs need to be kept and standardize as much as possible. By partnering with physicians and clinicians you can work to offer education and training to gain acceptance and reduce inventory.

The Path Forward and we have the monitor post.

Evaluate Physician Preference Items (PPI) Physician Preference Items (PPIs) are often a significant source of duplication and excess inventory. To optimize these, a systematic evaluation should be conducted to distinguish between preference-driven items and those that are required for procedural success. Use Six Sigma’s?Define, Measure, Analyze, Improve, and Control (DMAIC)?methodology to assess which unique SKUs are necessary and where standardization can be applied. Collaborating with physicians and clinicians through education and training sessions can increase buy-in, reducing unnecessary inventory and fostering alignment on product usage.

Reduce Waste A critical part of continuous improvement is reducing waste across the supply chain. By applying?Lean?principles, ensure that the right products and quantities are being used for each procedure. Prevent wasteful practices like using sterile products in non-sterile settings or opening prepackaged kits and only utilizing one item. Conduct regular?Kaizen?events—focused on incremental improvements—across departments to identify and eliminate these inefficiencies.

Standardize Across Systems For larger healthcare systems, standardizing product usage across all units can yield significant savings. By leveraging your org’s buying power, you can negotiate volume discounts and reduce overall supply chain costs. This can be supported by?Project Management Professional (PMP)?practices, specifically by creating detailed work breakdown structures and timelines to ensure consistency across all departments.

Set Policies Around Supply Chain Management Establish comprehensive policies and procedures for the entire supply chain process, from product selection to ordering, distribution, and disposal. This will ensure that there is a structured approach to inventory management and that all stakeholders adhere to the same protocols. Use PMP tools like?risk management planning?to ensure these policies are not only efficient but also flexible to address future needs.

Limit Vendors Reducing the number of vendors simplifies the supply chain by lowering the number of SKUs and creating opportunities for volume-based discounts. A targeted vendor management strategy can be developed using?Six Sigma’s?Control?phase, continuously monitoring vendor performance to ensure quality, reliability, and cost-effectiveness.

Clinical Standardization Implementing and enforcing clinical protocols across your system is essential for consistency and cost control. By standardizing clinical practices, you can reduce variability in outcomes, enhance patient care, and ensure optimal use of supplies. Leverage?Six Sigma?tools like?Process Mapping?to define and streamline clinical workflows, ensuring they align with supply usage and patient care standards.

Monitor Utilization Monitoring how supplies are being used, in the right quantities and under the correct circumstances, is a key aspect of a continuous improvement plan. If discrepancies are identified—such as replacing dressings more frequently than necessary—work with the value analysis team to either adjust clinical protocols or select more cost-effective alternatives. This step ensures that products are utilized to their full potential, aligning with both quality patient outcomes and cost containment goals.

Now I applied this using PMP and Six Sigma methodologies and leans more on the back-end follow up, but nevertheless ?healthcare orgs can effectively drive continuous improvement, creating a more efficient, cost-effective, and patient-centered supply chain.

You can check my sources, and you should.

Articles and Journals:

1. "The Role of Standardization in Healthcare Supply Chain Management"?-?Journal of Healthcare Management Discusses the importance of standardization in reducing supply chain costs and improving operational efficiency in healthcare organizations.
2. "Standardization of Healthcare Supply Chains: Challenges and Opportunities"?–?Healthcare Management Review Explores the barriers to standardization in healthcare supply chains and offers insights into overcoming these challenges to improve performance.
3. "Vendor Consolidation and Standardization in Healthcare Supply Chains"?–?American Journal of Healthcare Supply Chain Management Examines the process of consolidating vendors and standardizing products to drive cost savings and enhance supply chain performance in hospitals.
4. "Using Lean to Drive Standardization in Healthcare"?–?International Journal of Lean Six Sigma Focuses on how Lean principles can be applied in healthcare supply chains to standardize processes, reduce waste, and improve quality.
5. "The Economics of Standardization in Healthcare: A Case Study Approach"?–?Health Economics Review Analyzes the economic impact of standardization in healthcare, using case studies to demonstrate cost savings and operational improvements.
6. "Inventory Management and Standardization: Improving Supply Chain Efficiency in Healthcare"?–?Journal of Supply Chain Management in Healthcare Offers strategies for inventory standardization, addressing how effective management practices can reduce excess inventory and waste in healthcare supply chains.
7. "Improving Patient Care and Cost Reduction Through Item Standardization"?–?The Journal of Healthcare Financial Management This article explores the financial benefits of item standardization in healthcare and its role in improving patient care while reducing operational costs.
8. "The Challenges of Physician Preference Items and Standardization"?–?Journal of Healthcare Purchasing and Procurement Focuses specifically on the challenges of standardizing physician preference items (PPIs), with a focus on strategies for successful implementation.
9. "Implementing Value Analysis to Drive Standardization in Healthcare"?–?Healthcare Purchasing News Discusses how value analysis can be used to drive product standardization and reduce costs in healthcare procurement and supply chain management.
10. "Supply Chain Standardization and Its Impact on Healthcare Costs"?–?International Journal of Healthcare Management Investigates how standardizing supply chains in healthcare systems can lead to long-term cost reductions and improved service delivery.

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The views expressed on this LinkedIn post are my own and do not necessarily reflect the views of Oracle.

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