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Total Cost of Ownership

By: Sherry MacDonald, Director of Marketing and Communications
Practice Greenhealth

As we delve more and more into the health care supply chain, Practice Greenhealth has announced a new Total Cost of Ownership (TCO) framework that is being developed by Practice Greenhealth and its members to evaluate the total cost of a medical device or product from purchase and use to disposal. This framework brings together hospitals, group purchasing organizations (GPOs) and businesses to develop this guidance offered to hospitals across the country.

Health care providers are always looking at ways to lower costs.  When it comes to purchasing, they may be paying more in the long-term for a product with a lower sales cost. These costs are a part of the total cost of ownership of a product or service. Purchasing decisions should include these costs to assess the full costs to an organization. However, there is not currently a methodology in place to assist hospitals in determining their total cost of ownership of health care products and services. Building this tool could have a significant impact on reducing the total cost of delivering quality health care.

Considering the total cost of ownership benefits health care organizations by:

  • Reducing the costs of providing quality health care.
  • Increasing product and service efficiencies to ensure products are not wasted (disposed).
  • Minimizing the environmental footprint of health care through purchasing efficiencies.
  • Reducing the use of resources, such as energy and water; reducing the amount of waste disposed and associated costs; and using safer chemicals to reduce potential impacts to patients and staff.

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