September 9

Manage Your Multi-Million Dollar Purchased Services Spend by Focusing on Contract Utilization, Not Just Price


If you are a regular reader of this blog, you will know that I continue to preach that a price savings on your purchased services is a good thing, but to truly achieve big purchased services savings, by as much as a 10:1 ratio, you need to manage your contract’s utilization. By utilization I mean, the efficiency, effectiveness and compliance of the work being done under contract. For instance, your healthcare organization could be getting a competitive rate on your laundering cost per pound, but if your laundry/linen cost per patient day is 23% higher than your peers’, you have actually lost money on this contract. That’s where the truly big savings reside!

You Could be Leaving Up to 11% to 18% in New Savings on the Table

We have worked with hundreds of Purchased Services Value Analysis Teams over the years. Their first reaction, once SVAH identifies a purchased service saving for them, is to bid the contract or to jump on a GPO contract to reduce the contract’s price. However, because of our Certified Purchased Service Specialist Training given to these VA teams, they know better than to stop at the “First Best Idea” to save money.

Instead, their VA project managers follow our 6-step Value Analysis Funneling™ Model taught in this CPSS course to ensure that the purchased service’s contract is efficient, effective, and compliant with the contract’s statement of work. It should be no surprise to you that 80% of the time these VA project managers will find that the contractor’s utilization can be improved by as much as 11% to 18%, thereby, reducing their contract cost by thousands of dollars annually. Whereas a price savings alone would only save 6% to 9%, on average, on the same contract annually.

Opening Up a Whole New World of Savings for Your Healthcare Organization

If you want to continue to nibble around the edges of your purchased services with new price savings, then you are missing a whole new world of savings for your healthcare organization. As an illustration, we worked with a large university teaching hospital who thought they had wrung the towel dry on their purchased service contract savings by bidding and jumping on GPO contracts. We helped them implement another two million dollars in purchased service savings, beyond price and standardization, by focusing on the efficiency, effectiveness, and compliance of the work being done under their purchased services’ contracts. This is a new approach to purchased service contract management that will increase your hospital, system, or IDN’s bottom line savings by enhancing your cost optimization on these contracts.

P.S. (Limited Time Offer) If you would like to learn more about this important topic, just e-mail me at to obtain your FREE copy of my e-book, “How to Rein in Your Purchased Service Expenses Before They Damage Your Bottom Line.” The offer may be free, but the content is priceless!

Below are some similar articles that you may find interesting.

4 Big Purchased Service Missteps That Your Contract Team Should Avoid

Four Healthcare Supply Chain Challenges You Need to Heed for 2020 and Beyond



healthcare, healthcare organization, hospital, price savings, purchased service contract savings, purchased services, savings, utilization

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