March 7

Purchased Services Secrets Your GPOs Avoid Telling You


Although we are champions of GPOs for reducing, containing, and controlling your purchased services prices, and as a byproduct promoting standardization, we don’t believe that GPOs have all the answers to your cost, quality, and outcome challenges. That is why you need to obtain your competitive intelligence from many sources to keep on top of your game. To this end, here are three purchased services contract secrets your GPOs have avoided telling you:

3 Purchased Services Contract Secrets

1. Write Work Specifications: The most important secret I can give you is to write your own work specifications for any new or renewal purchased service contract that comes across your desk. If you accept the vendor’s contract as is, you are probably buying services that you don’t need or want. For example, one of our clients discovered they had been paying for years for concierge services in their food service contract that they didn’t know existed, thereby costing them $100,000 a year. This oversight has now been corrected since this client now writes their own specs for their purchased services contracts without fail.

2. Include Performance Standards: Just because you have a signed service contract doesn’t mean your contractor will make their best efforts to improve your situation, since most contracts read that the contractor will meet or exceed national standards. This statement isn’t enough to ensure the highest service quality for your hospital, system, or IDN. To have failsafe agreements you must include your own performance standards, such as, turnover will not exceed three percent annually or the contractor will assume all costs of recruiting and retaining new employees. That’s why standards and oversight are the only way to prevent your contractors from giving you below average service quality.

3. Bid, Then Negotiate Contracts: There is a tendency to negotiate purchased services contracts with a preferred vendor or accept a GPO contract as is without bidding. Let me caution you against this questionable practice, since bidding is the only way we know of to keep your vendors honest, to gain the necessary competitive intelligence, and to obtain the lowest possible cost. Naturally, it makes good sense to negotiate after the bid to ensure all of the details of your contract are in your favor, but not beforehand.

Get Your Purchased Services Contracts Right The First Time

If you are not responsible for your hospital, system, or IDN’s purchased services contracts at the present time, it is most likely that you will be in the very near future. Therefore, you might want to save these ideas in your intelligence files. However, if you are responsible for your purchased services contracts today, these three secrets will go a long way to guarantee that you won’t make a misstep in getting your new and renewal purchased services contracts right the first time.

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GPO, healthcare supply chain, Healthcare Value Analysis, hospital supply chain, Hospital Value Analysis, IDN, purchased service contract, purchased services, purchased services contracts, standardization, supply chain

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