You might not realize it, but your purchased services’ annual expenditures are equal to or greater than your supply expenses. Therefore, purchased services should be top of your mind when you are searching for non-salary savings opportunities. With this in mind, here are three tips to reinvent your purchased services contract (PSC) process for even greater savings yields:
Reinvent Your Purchased Services Contract Process
1. Employ Analytics To Measure Success. We like to say that you don’t know what you don’t know until you measure your success with analytics. This is exactly what one of our clients did when evaluating the success of his current laundry/linen contract only to discover a $500,000 savings opportunity that he wasn’t aware of until now. Otherwise, how would he know that there were big laundry/linen contract savings left on the table on his prior laundry/linen contract? He now has a savings goal for his new contract!
2. Bid, then Negotiate Your Contracts. There is a tendency in our industry to jump on a GPO purchased service contract for convenience as opposed to bidding and then negotiating all purchased service contracts over $25,000 annually. The reason for recommending this policy is that your GPO purchased service contracts are designed to fit all sizes and types of healthcare organizations vs. customizing your PSC based on your facility’s uniqueness. Naturally, your GPO’s contractors would be considered in your bid process, but your specifications will be built around your own unique requirements, not theirs.
3. Include Performance Measurement, Goals, and Incentives. The missing elements in most purchased service contracts are measurable goals and incentives that are agreed to by your contractor to produce better outcomes. Using our laundry/linen contract example, your performance goal here could be to reduce your pounds per patient day by five percent, with an incentive for your contractor to do so by sharing in 30% of these savings. The key here is to clearly define your goals and then measure your outcomes to ensure success.
Too often, we tend to treat our purchased services contracts like any other commodity purchase. Yet, they are quite distinct from the products you purchase and should be treated as such. These three tips can help you take a great leap forward in measuring, managing, and monitoring your purchased services contracts for even greater success. It all comes down to thinking differently about them!
P.S. If you like this article, then you will want to consider signing up for our Healthcare Purchased Services Magazine for more ideas like these.
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