Achieving Success in Purchased Services

You know the numbers. You’ve squeezed the savings and efficiencies out of your supplies. But you still need to reduce expenses, while maintaining a high standard of care.

Provider consolidation, and the subsequent rapid horizontal growth of many health systems, has created a decentralized purchasing nightmare. While there is no denying cleaning up the purchased services space can be a daunting and seemingly impossible task, the potential savings are well worth the effort.

Purchased services represents an annual accounts payable (AP) spend of more than $50 billion. A typical integrated delivery network (IDN) allocates between 20 to 25 percent of its total operating expense to purchased services. No matter where you are on your journey to reducing purchased services spend, the savings achieved can be huge for both the health system and the nation’s healthcare industry as a whole.

In the past, many supply chain departments have been responsible for overseeing medical devices, services and in some cases, pharmaceuticals. But with health systems becoming increasingly more responsible for total cost of care, supply chain departments are now responsible for managing all of the organization’s non-labor spend, as well. On top of that, they are also now tasked with adjusting and scaling supply chain resources to meet the organizations needs, including additional services found outside of a non-acute care setting. Achieving success in these areas requires both an enterprise-wide cultural and operational shift.

Before you begin your journey to reduce your purchased services spend, there are a few things to keep in mind:

  • Dig into the Data – Collect and analyze your data. Start by researching current vendors and the services they provide. Work with your GPO to get your data cleansed so that you can understand vendor overlaps and spend in the numerous categories that comprise purchased services.
  • Gain Executive Buy-in – Get C-suite and executive sponsors engaged with the purchased services process from the start.
  • Identify Limitations – Once all the data has been analyzed, work with the C-suite to determine which areas are and are not off-limits.
  • Prepare for Road Blocks – Anticipate that some large opportunities for potential savings may be deemed “hands-off”.
  • Be Mindful of the Human Element – Internal and local politics play a big factor in whom an organization contracts with.