We often talk about a healthcare organization’s purchased services savings opportunities being “equal to or greater than” supply expense savings, but too often this statement is interpreted to mean the price you are paying for your purchased services only. In fact, we have found that there is more than one way to shave your purchased services costs if you know where to look. Here are three ways to discover savings opportunities, beyond price and standardization:
1. Utilization Misalignments: Just because you have the best price for your purchased services contracts doesn’t mean you have wrung the towel dry in savings. You also need to eliminate all waste and inefficiencies in their value streams. For example, one of our clients found when they looked at their telecommunication invoices that they were being slammed with thousands of dollars of phone charges annually they hadn’t authorized. So don’t stop searching for additional purchased services savings because you think you have the best price, when there are literally hundreds of thousands of dollars of new and better in-use savings that are just waiting for you to harvest.
2. Over-Specification: When we read a purchased service contract that hasn’t had its specifications revised, improved, or amended for a number of years, we can always find savings opportunities because your customers don’t need everything that is included in the contract to perform the service that is described. For example, how many times does your healthcare organization’s windows need to be cleaned in any given year? How many times a year does your high and low-tech equipment really need to have preventative maintenance? How many rent-a-guards do you need on each shift? Do you get the idea?
3. In-Sourcing Opportunities: It becomes such an ingrained habit to outsource a particular service for many years that we overlook the possibility of in-sourcing these services again when the timing and conditions are right to do so. Food service or environmental service outsourcing are good examples of this happening. It’s been our experience that these departments generally aren’t outsourced for lower cost alone. It’s usually quality issues, too, that drive the decision to outsource these departments in the first place. Therefore, it’s our suggestion that when any purchased service contract comes up for renewal it should always be considered a make or buy decision, not just a contract renewal decision. This way you never leave any purchased services savings dollars on the table untouched!
As more and more healthcare supply chain professionals take on the responsibility of sourcing, bidding, and negotiating their healthcare organizations’ purchased services contracts, just remember that your purchased service contract price is just the tip of the iceberg! Your greatest purchased service savings are actually to be found below the waterline. This can represent as much as 26% in aggregated purchased service savings annually for your healthcare organization in the first round of value justifying your purchased services contracts. Don’t you think this is a much better way to shave your purchased services cost, rather than just attacking price alone?
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