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(File pix) Healthcare organisations throw away millions of ringgit in medicines and other consumables every year as they pass their expiry date. This wastage can be significantly reduced, with fewer different articles kept in storage against lower inventory levels.

THE government has been urged to regulate the cost of private healthcare as part of efforts to lessen the cost of living in Malaysia. The authorities will target healthcare spending of 6.0 per cent to 7.0 per cent of the gross domestic product (GDP), an increase from the current 4.4 per cent.

Recently it was reported that medical supplies in Malaysia is a multi-billion ringgit business.

What needs to be done to create a more affordable healthcare system in Malaysia? Professionalisation of the purchasing function of healthcare organisations is a good starting point.

Managing a world-class healthcare organisation does not only require medical but also business expertise. Within the healthcare organisation the purchasing function is increasingly important.

In fact, a significant part of healthcare costs can be directly linked to the effectiveness of the purchasing function.

There is a difference between buying and purchasing. Purchasing is the professional buying by an organisation. Purchasing is structured, based on facts, and shaped by corporate or public policy. Buying in the private domain has space for irrational considerations, whereas in the corporate or public domain this space is not present.

I have learnt that purchasing involves everything you receive an external invoice for. Therefore, the finance department is the starting point in the optimisation of purchasing. Modern purchasing is data oriented, involved in obtaining intelligence on the purchasing market as well as recurring analysis of own spending.

Purchasing is hereby more a science than an art.

Professionalisation of the purchasing function is essential for a more efficient organisation of hospitals, specialist centres, elderly homes, disability care, general practitioners, dentists, etc.

However, what I often discover with healthcare organisation in Malaysia is that there is a lot of untapped potential in saving purchasing costs and improving the purchasing organisation.

Purchasing in healthcare organisation are generally not well structured, category management and inventory management practices are not effective enough, synergy advantages not exploited, and supplier management lacks efficiency.

Although many healthcare staff are involved in purchasing, purchasing in healthcare organisations is often not well structured in terms of purchasing policy, purchasing process, purchasing methods and procedures, purchasing organisation, information systems and performance measurement.

Category management should be a critical focus area for healthcare organisations, which looks at standardisation of the goods purchased.

A rationalisation of a category in direct consultation with the respective healthcare specialists reduces the number of suppliers, inventory levels, and purchasing costs.

Today, healthcare organisations throw away millions of ringgit in medicines and other consumables every year as they pass their expiry date. This wastage can be significantly reduced, with fewer different articles kept in storage against lower inventory levels.

There is a lack of horizontal and vertical collaboration in purchasing with other healthcare organisations.

Horizontal collaboration, collaboration with similar organisations, can be achieved through a joint purchasing organisation, collaboration on project basis (e.g. in case ofanational epidemic or disaster), or selective collaborative purchasing in certain disciplines (e.g. certain expensive equipment and medicines). Synergies are achieved in terms of reduction of purchasing costs, but also better purchasing conditions, or consolidating pressure on suppliers to comply with important needs such as halal.

In case collaboration with competitors is too sensitive, a separate national healthcare purchasing organisation could play this role. Vertical collaboration, collaboration within your own healthcare chain, like collaboration between hospitals and nursing homes, allows for faster patient flow between hospital and nursing homes with fewer bed stays in hospitals.

Hospital stays are less cost effective than nursing home stays. These patients can easily add up to 10 per cent of the beds in hospitals. Collaboration can therefore reduce healthcare costs in a big way.

In short, purchasing in healthcare needs further professionalisation!

Massive cost reductions are possible without affecting the quality of healthcare in government and private healthcare organisations. Annual reporting and benchmarking on purchasing performance of government hospitals as well as private hospitals could be an effective instrument to enhance awareness of the importance of the purchasing performance of healthcare organisations.

With an aging population by 2035 and an increase in noncommunicable diseases, purchasing excellence in healthcare is not a luxury for Malaysia but a necessity.

Dr Marco Tieman is a professor at ELM Graduate School, HELP University

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