February 22

How To Get More Done With Purchased Services On A Tight Budget


It’s our opinion that too many supply chain professionals have limited their involvement in purchased services contract (PSC) management at their healthcare organization because of their tight labor budgets. While this is a fact of business life, it shouldn’t keep supply chain professionals from doing more to control these multimillion-dollar annual expenditures as follows:

How to Manage Purchased Services on a Tight Budget

Assign A Purchase Order Number To Each Contract. To track all PSCs make sure to assign a purchase order number for all new and renewal PSCs. Otherwise, it would be almost impossible to trace a PSC through its lifecycle.

Perform a Value Analysis Justification Study. Yes, you can perform value analysis studies on the majority of service contracts at healthcare organizations. Remember, each of these contracts should have functional requirements that should be set out by their respective departmental customers. Make sure you are meeting each functional requirement exactly and not getting caught up in the “we like this” or “we really would like to have this” thought process. Contracts should not be considered if they don’t meet your customers’ requirements. You are wasting your time with vendors who are not in the ball game specification- and feature-wise.

Make Sure You Have A Copy of PSC On File In Purchasing. At minimum, keep an original copy of all PSCs in your purchasing department’s master file. This will enable you to make these PSCs available when questions arise, legal issues occur, or an audit is conducted.

Require Three Bids Before Approval Of Contract Documents. If your department heads or managers are managing their own PSCs make sure they provide three bids for their new or renewal contracts when requesting approval. This way you will know that the recommended PSC has been tested for competitiveness. One more thing; your department heads or managers must also justify not selecting the lowest qualified bidder.

Have A Senior Management Representative Co-Sign All Contracts. To ensure that your PSCs are vetted properly, make sure that all PSCs over $25,000 are co-signed by a senior management representative (Vice President or above). Note, your department heads and managers should never sign a PSC since they aren’t an agent or officer of your corporation. It’s illegal to do so!

Have A Third-Party Service Benchmark Your PSCs For Competitiveness. On an annual basis you need to have a third-party benchmark the competitiveness of your PSCs to identify areas of cost and quality improvement.

ROI for Better Contract Management

Yes, these new protocols will add a few hours a month to your current supply chain workload, but the return on investment by doing so could be 10-fold. Just as important, by tightening, strengthening, and further proceduralzing your purchased services management you will avoid many pitfalls that can be embarrassing. Worse yet, decisions made could cost your healthcare organization thousands in legal fees due to one misstep by your staff or your department heads and managers. Don’t let this happen to you.

P.S. If you would like more ideas like these, consider subscribing to our Healthcare Purchased Services Magazine. The magazine is FREE, but the information is valuable.

Below are some similar articles that you may find interesting. 

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5 Best Ways To Sell Hospital Value Analysis Training

Podcast 64 – Is It Time To Get Back To Saving Money Again?

Request Demo of SVAH’s Value Analysis and Utilization Tools


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