Practice Greenhealth Announces Development of Total Cost of Ownership Tool for Health Care Products and Services
First-of-its-kind effort will evaluate total costs from use to disposal of health care products
February 4, 2014 (Reston, Virginia)– As part of Practice Greenhealth’s Greening the Supply Chain® Initiative, Practice Greenhealth is pleased to announce the development of a Total Cost of Ownership (TCO) Framework to be used by health care providers to evaluate the total cost across the lifecycle of a medical device or product from purchase and use, to end-of-life. Practice Greenhealth is bringing together hospitals, group purchasing organizations (GPOs), and businesses to develop this guidance, which will be offered to hospitals nationwide.
With tremendous pressures to reduce costs within the U.S. health care system, health care providers must look at ways to lower their purchasing costs. When it comes to purchasing medical devices, products and services, there are submerged costs, such as storage, maintenance, and disposal costs, that are not considered during procurement decisions. Therefore, 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. Providing a tool that brings these submerged costs to the surface during the procurement process could have a significant impact on reducing the total cost of delivering quality health care. Creating that tool requires a standardized method to measure or calculate these submerged environmental costs that is universally recognized. Elements of cost that address a reduction in environmental and human health impacts are also a priority to reduce health care’s environmental footprint.
Health care organizations that consider the total cost of ownership in their supply chain purchasing considerations will benefit 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.
Participants in the TCO Project
TCO project member companies who are leading this effort represent a growing list of participants. In addition, the TCO steering committee includes not only representation from suppliers but also from health care systems, hospitals, and GPOs. If your company would like to participate, email Bob Jarboe at firstname.lastname@example.org.
For more information about the Total Cost of Ownership Project , please contact Sherry MacDonald, Director of Marketing and Communications, at (703) 870-7494.
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About Practice Greenhealth:
Practice Greenhealth is the nation’s leading membership and networking organization for institutions in health care that have made a commitment to sustainable, environmentally friendly practices. To learn more about Practice Greenhealth, visit www.practicegreenhealth.org.