We often see healthcare organizations whose standardization could be better, but the question is, how much better should it be? For you see, there is a point where standardization will start costing these hospitals, systems, and IDNs money instead of saving money.
Standardization vs. Customization
Conventional thinkers would tell you that standardization is a good thing because it cuts down on variation and creates economy of scale thereby enabling a buyer to obtain a better price. However, what we have found in our software, training, and consulting practice is that standardization is a good thing up to a point but then it will cost your healthcare organization money – big time!
Let me use exam gloves as an example of how this concept works in the real world of value analysis. We have seen hundreds of hospitals standardize on hypoallergenic disposable examination gloves for each and every employee (e.g., nursing, dietary, housekeeping, etc.) who are required to wear disposable gloves.
However, we recommend that a hospital standardize 80% or more on a vinyl exam glove house-wide. Then provide departments or employees with special requirements (e.g. lab, nursing, housekeeping, dietary, facilities, etc.) with their own customized gloves to meet their exact functional requirements. This scenario would save a 250-bed community hospital tens of thousands of dollars annually on their examination glove purchases, especially since we utilized value analysis to recommend a vinyl glove vs. hypoallergenic glove to standardize on.
Standardization: 80/20 Rule
After almost three decades of working with healthcare organizations to optimize their standardization through customization, we have found that the 80/20 rule seems to be the ideal standardization vs. customization ratio for any healthcare organization.
The rule says that, on average, 80% of your customers will be okay with one standardized product, service or technology. However, 10% of your customers will need a higher cost specification and 10% can accept a lower cost specification of the same product, service or technology. Otherwise, you are throwing away money!
#1 Reason for Buying Off Contract
We have found that the #1 reason for your department heads and managers buying off contract isn’t to buck the system, but that the product, service or technology you standardized on doesn’t meet their exact requirements. We see this occurrence almost every day when we search a hospital, system or IDN’s purchase history database. So if you want your department heads and managers to conform to your GPO or local contracts, give them what works!
Test This Idea Yourself
Still don’t believe us when we tell you that standardization can cost you money? Then check with the customers of a standardized product to see if all customers are happy with the concept that says that “one size fits all.”
We are sure that you will find that some customers need a more sophisticated product, most can standardize on one product, and some others don’t need all of the bells and whistles you are providing them. Add this up, as we did above, and you will quickly see how you are spending more money than you need to with your standardization strategy.