My extensive research has shown that only a minority of supply chain managers are targeting their purchases service for cost reductions. The only answers that I can come up with on why this is happening is that supply chain managers either believe that this is someone else’s job – not theirs, or in some supply chain circles it is believed that these service contracts are too sensitive and politically charged to be tackled by supply chain professionals without getting their hands bloodied.
For instance, just the other day we identified, for one of our clients, thousands of dollars of savings in their transcription expenses. However, our client decided to make excuses why their transcription expenses were too high instead of aggressively investigating why their transcription expenses were off the chart compared to their peers. Would this be our client’s attitude if we were talking about their physician preference items? I don’t think so…
Since at many hospitals, systems and IDNs their purchase service spend is equal to or greater than their supply spend, this is a new untapped saving source that shouldn’t be ignored. In fact, we have documented that 11% to 18% (or $10,309 per occupied bed) in new supply chain cost reductions are being left on the table untouched by healthcare organizations nationwide. This is why purchase services should be on every supply chain manager’s radar screen.
To get started on the road to achieving these robust savings I just talked about, you will need to capture and then archive all of your healthcare organizations purchase service contracts into one relational database. Don’t ask for permission to do it — just do it!
Next you will need to develop comprehensive statements of work, find the right service providers and benchmark to contain cost, implement contract programs for traditional and nontraditional service and then measure supplier performance against pre-established criteria.
All of this might seem like a lot of work for your supply chain department, since you are already understaffed and overworked already, but if you want to become a supply chain hero in your management’s eyes, this is one sure way to do it.
In the new healthcare economy we now live and work in your cost management work is never done, it is just beginning. As one of our clients said to me the other day, “We are all going to need to learn new ways of doing business, since no matter what happens with ObamaCare, we in the supply chain will need to find new and better savings for our healthcare organizations. Purchase service contract management is one of those new ways that requires a unique blend of art and science to achieve peak performance. Though, I can assure you that it will also bring about big dollar savings and big results for your hospital, system or IDN and with very little risk to yourself and your supply chain department.
Robert T. Yokl
Chief Value Strategist
Strategic Value Analysis® in Healthcare