Why outsourcing non-clinical products and services can be a good thing.
Ever stop to think whether the grasses or coneflowers in front of your day surgery center are attractive, vibrant and well-kept-up? Have you ever considered whether your outsourced document-management vendor is adequately protecting your patients against identity theft? To what extent does your department manage the steady flow of temp labor that’s marching in and out of your facilities?
Most IDN contracting departments are well-oiled machines when it comes to signing contracts for med/surg supplies, even physician-preference items. But others are discovering that they can transfer their contracting skills and experience to non-traditional, non-clinical products and services — things like landscaping, IT, document management, purchase labor and leasing.
Making the leap isn’t effortless. It demands that contracting professionals work with departments they haven’t worked with before. It calls for them to adopt a broader vision of the value they can bring to their IDNs. And it almost always requires backing from administration, particularly as the contracting team starts poking into areas that may be hallowed turf to other departments.
But the payoff can be great, not only in terms of reduced prices for products and services that previously had been off contract, but in terms of bringing order to what had been wildly uneven — or even non-existent — processes.
Purchase labor has caught the attention of Columbus, Ohio-based OhioHealth. There, the contracting staff has worked out an agreement with an outsourced temporary labor firm to manage the majority of the IDN’s temporary labor needs.
In years past, OhioHealth was not only spending millions of dollars on temporary help, but it had only a loose grasp of how those laborers were brought into the IDN’s facilities. Some were brought in by HR, others through the departments themselves. Some would scan themselves in, others would not. Some were independent contractors, others were considered part-time employees. “There was a plethora of ways that workers were coming into our system,” recalls Bob Boswell, corporate director of contracts, purchasing and accounts payable. What’s more, OhioHealth had no easy way of identifying how many of these workers represented minority-owned companies. (Diversity is a top priority for OhioHealth.) And, due to his role with accounts payable, Boswell saw first-hand the cost associated with receiving multiple invoices a month from different purchase-labor sources.
It was OhioHealth Vice President of Human Resources Jon Joffe who took the initiative to try to bring some controls into the temporary labor process. He enlisted the support of the supply chain professionals, which suited Boswell just fine. “I’m a process-minded person,” says Boswell. They enlisted a temp agency with whom they had a contract — Triga Managed Vendor Services, a subsidiary of Columbus-based Dawson Resources — to help out. Specifically, they asked Triga to serve as sort of a clearinghouse for most or all of the other temp agencies with which OhioHealth worked, including its traveling nurse provider, explains Boswell. Specifically, OhioHealth asked Triga to:
Consolidate the invoices from other temp-agency firms and electronically transmit one invoice a month to OhioHealth.
Coordinate the credentialing of all the workers coming into the IDN’s facilities, in terms of background checks, immunizations, proof of training, etc.
Bring some order to the status of temporary workers by defining which should be paid as independent contractors, which should be classified as part-time employees, etc.
“We also had cost reduction targets, where Triga was expected to work with us to reduce our overall cost for temporary workers,” says Boswell. The company has not only helped OhioHealth reduce its hourly rates for temporary workers, but it also helped the IDN reduce its utilization of such workers. In addition, it has helped improve the process by which temps are used. For example, today, expenses for temporary labor are allocated directly to the cost center where they work. Triga also reports to OhioHealth its usage of minority-owned companies. Triga has an employee onsite at OhioHealth to help administer the program. “The program has been hugely successful,” reports Boswell.
Leasing is another area in which the OhioHealth contracting team has made inroads. “It’s an area in which few supply chain [executives] get involved, even though they probably should,” says Boswell. The key is separating the purchase price of a piece of equipment with the financing cost, he says. “There are lots of opportunities to save money if you look at financing through a third party instead of assuming that the manufacturer or distributor is the best source,” he says. OhioHealth has an agreement with West Bloomfield, Mich.-based Minority Alliance Capital to provide equipment leases for much of its equipment.
Boswell may have a leg up on other contracting professionals, given his background in accounting. But because of the dollars involved, every contracting professional should make an effort to learn the ins and outs of equipment financing, he believes. “You need to get with the finance people in your organization to start learning,” he says. “We are in a good position to work collaboratively on the front end to get the best value [for financing].”
When the Health Industry Portability and Accountability Act of 1996 (HIPAA) was enacted, contracting professionals might have greeted it with no more than a passing interest. However, Methodist Healthcare in Memphis, Tenn., has demonstrated that contracting professionals can play a role in helping their IDN comply with the law and protect their patients from disaster, such as identity theft.
“As a healthcare provider, we have to have a way of managing the privacy of our patients,” says Glenda Moore, corporate director of materials management. But as anyone who works in a hospital knows, that can be quite a challenge. With every patient comes a sheaf of medical records and notes, all of which must be stored in a secure place for a period of time, even after discharge.
At Methodist, the contracting staff was charged with contracting with a vendor that could provide the kind of safeguards that HIPAA demanded. “The security of these documents must be maintained, and you need the vendor’s assurance that they will be stored in a locked or contained area, or shredded until they are no longer recognizable,” says Moore.
Working with the health information, patient financial services and accounts payable departments, Moore enumerated Methodist’s needs and expectations of a vendor, then issued a request for proposal. The IDN expects to sign a new contract in the first quarter of 2008.
Although it was a new role for the contracting staff, it’s one that made a lot of sense, believes Moore. “In order to have a consistent, standardized way of managing documents throughout the system, you need to be standardized. That’s where materials management comes in.”
Contracting also played a role in a new landscaping agreement which Methodist just signed with a local vendor. Working with the facilities services department, Moore’s department helped identify vendors with proven track records. Together, they drew up performance indicators by which the new vendor could be judged, including such things as the maintenance of seasonal colors and the continued viability of plants. “This was an interesting process,” she says. “When we began to look at it and material management’s involvement, it didn’t seem like we would be involved. But the contracting process was the same as for the document management piece.”
And although it’s not exactly life-or-death, the fact is, landscaping is important to Methodist. “We are a top healthcare facility, and we’re the second largest private employer in the city,” explains Moore. “Our campus appearance is very important to us.”