I think that just about everyone in healthcare supply chain/value analysis management realizes that there are savings in the range of 7% to 15% in their healthcare organization’s purchase services with their price and standardization tactics. However, most hospitals, systems and IDNs are just skimming the surface of their purchase service savings with these tactics, because the real robust savings (23% – 47%) in your purchase services is below the waterline. Here are five stratagems that will transform* your purchase service cost management efforts in this direction:
- Focus on outcome, not transactions: Both parties agree to align their interest around more efficient, higher quality and low-cost solutions than is presently being provided for multiple years.
- Concentration on what, not the how: Less emphasis on things and processes and more weight given to performance expectations. In short, let the experts do their job without dictating how they should do their job. All they need to know is their scope, not boundaries.
- Agree on clearly defined and measurable outcomes: Outcomes are to be expressed in terms of a limited set of (ideally five) high level metrics.
- Optimize pricing model incentives: Structure pricing that incentivizes best price/service trade-offs. Under these arrangements your suppliers are rewarded for solving your problems and then not penalized for costs that they don’t control (e.g., fuel, transportation, postage, chemical increases, etc.)
- Build a governance structure that creates insight, not just oversight: Employ a panel of internal experts (i.e. purchase service value analysis team) to help you manage individual contracts that improves performance – over time.
Purchase services are a hot topic in healthcare supply chain circles today, but just concentrating on price and standardization savings is only the tip of the iceberg. If you really want to ratchet down your cost in this commodity group, you need new approaches to contracting to wring the towel dry on your purchase service savings. I hope these five stratagems are a good starting point to facilitate this happening at your healthcare organization.
(*) Source: Vested Outsourcing by Kite Vitasek
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