At up to 25% of total expense, purchased services are one of the highest potential cost savings opportunities in any hospital. But many organizations focus optimization only on five to 10 highly visible categories like food, IT and freight – ignoring potential cost savings in myriad other areas. Often, oversight of business, clinical and operational categories is decentralized, resulting in redundancy, coverage gaps, variance in contract terms and lack of budget visibility; and inconsistent data and organizational challenges can hinder the contracting process.
To achieve meaningful cost reduction and improve overall margin, hospitals must evaluate and streamline spend comprehensively across all purchased services categories. A first step could be to partner with a third party that has expertise in data aggregation and analysis, needs assessment and performance improvement for these challenging categories.
External consultants can also help an organization address short- and long-term planning, centralize vendor management, establish governance protocols, implement performance metrics, conduct procurement and contract negotiation, and leverage benchmarks.
These initiatives can result in value beyond significant cost reduction by improving operational efficiency, goal alignment, standardized contract terms and more. Some categories are associated with revenue, and others can directly influence patient satisfaction (HCAHPS) scores.