03/07/16

As hospitals are forced to get leaner in order to continue to survive, the spotlight shining on purchased services is getting brighter and hotter. The diverse nature of the product mix and the absence of centralized oversight and authority can create disorder that has both a financial and operational impact on an organization.

Value analysis within the hospital supply chain isn't a new concept. Member organizations that use this structured, evidence-based process for product selection generally experience supply cost reductions of 5 to 10 percent. Applying the same principles of value analysis to purchased services spend is one way to begin cleaning up the disorder and finding substantial savings opportunities.

Here is how to get started:

  • Categorize spend: Creating standardized descriptors and attributes for purchased services is an essential first step for the value analysis process. Working through your accounts payables files is the best place to capture expenditures classified as "purchased services."
  • Prioritize projects and create a dashboard for decision making: Start where the need is recognized—high dollar, high profile or direct request from the CFO. This is the best catalyst because it gives you the platform necessary to make change.
  • Benchmarking: Unlike the medical and surgical supply side of the house, benchmarks for purchased services can be more challenging to access. However, Vizient works with hospitals of all sizes across all different categories and can help organizations understand what a competitive purchased services contract looks like.
  • Set up a team to understand the criteria important to the decision: A general purpose value analysis team can support purchased services initiatives as long as they are non-clinical or aren’t connected to a service line. Develop scenarios that mix products and suppliers for optimal results with price and attributes included.
  • Create customized request for proposals using the standard descriptors and attributes. Develop evaluation criteria, a ranking, scoring and bid process to evaluate vendors. Use competition as a contract negotiating tool.
  • Track and measure the results. One of the greatest values coming from applying a value analysis process is the ability to track and measure. These data points will help sustain results over time and establish a process that helps prioritize projects in the future.

Taking the steps outlined above will position your organization to identify potential purchased services cost-savings opportunities. Using a third party to bring insights, process and benchmarking data could also be a cost-effective option. Sign up to attend our upcoming webinar, Learn Ways to Optimize Your Purchased Services Spend, on March 30 at 2 p.m. CT.