They also are beginning to organize more purchased and outsourced service contracts at the hospital-system level to receive better pricing and evaluate the cost-effectiveness of outsourcing certain services to possibly bring some services back inside the organization.
Declining reimbursement and lower patient volumes have forced hospitals to evaluate how much they spend on medical supplies and devices. The same financial pressures are driving healthcare providers to also reduce spending on many other types of products and services that they use.
“People are increasingly not leaving any stone unturned,” says Drew Ungerman, a director in the Dallas office of McKinsey & Co. “That's why you're seeing services become in sharper focus, given the value at stake and the relative challenge of going after clinical supply chain utilization.”
About 44% of hospital executives who participated in Modern Healthcare's 2013 Survey of Executive Opinions on Purchasing said they expected total spending on outside procurement to increase slightly this year, while nearly 26% of respondents said they expected it to decrease slightly. Another 5% expect spending to fall substantially and nearly 3% say it will rise substantially. Nearly a quarter of participants say it's likely to stay the same.
The savings from nonclinical spending categories are not as significant as standardizing hip implants and other costly physician-preference items. However, because the process is less time-consuming and does not require the involvement of physicians wedded to particular products and manufacturers, more hospitals have identified nontraditional supply chain categories as new opportunities for saving money.
The hospital supply chain has long focused on purchasing medical supplies. Hospital executives say that for years many of the “nontraditional” supply chain categories, which often include nonclinical purchased or outsourced services, were managed at a hospital level or even a department level with little oversight of spending.
“In most of the hospitals it's a wild-card cost center,” says Steve Kehrberg, senior vice president of supply chain for Catholic Health Initiatives. “If they didn't know where else to put it, they put it in purchased services.”
CHI, one of the largest not-for-profit health systems in the U.S., about two years ago started to include nontraditional supply-chain spending categories such as food and nutrition services, warehouse distribution, clinical engineering, fleet management and linen use under the supply chain function. The system spends about $633 million on purchased services annually, which includes any purchased, contracted or outsourced services. The system started to handle more of the management of purchased services and more of the purchasing itself several years ago.