How to Reduce Purchased Services Spend in Hospitals and Health Systems

Healthcare costs are an ever-present challenge in hospitals and health systems, but reducing purchased services spend can be key to reducing these expenses. In this blog post, we’ll explore the benefits of reducing purchased services spend in hospitals and health systems; the challenges faced when trying to control these costs; strategies for controlling them; and how to evaluate and adjust those strategies. By implementing cost-saving measures such as automated spend tracking, negotiating contract pricing, and creating standardized processes, healthcare organizations can make significant progress towards cutting their purchased services costs while still providing quality care for their patients.

Benefits of Reducing Purchased Services Spend in Hospitals and Health Systems

Reducing purchased services spend in hospitals and health systems can yield significant cost savings for organizations. By carefully evaluating current contracts and negotiating new contracts, organizations may be able to reduce the amount of money spent on purchased services such as laundry, janitorial services, outside laboratory services, and other non-medical supplies. Additionally, by optimizing purchasing cycles and streamlining processes for ordering supplies or equipment, hospitals and health systems can save costs associated with storage space, inventory management, and shipping fees.

Improved Patient Care and Quality

In addition to reducing costs associated with purchasing services or products from external vendors, reducing purchased services spend in hospitals and health systems also has the potential to improve patient care quality through increased access to resources. For example, if a hospital can negotiate more favorable contract pricing for medical supplies or equipment needed for patient care delivery (e.g., orthopedic implants), then they will have greater financial flexibility when it comes to providing needed materials to patients in need of specialty care that may not otherwise be available due to cost constraints. Furthermore, by optimizing supply chains through better tracking of orders and shipments as well as standardizing processes across departments within the hospital system (e.g., centralizing lab orders), healthcare professionals are able to focus more on delivering quality care rather than worrying about administrative tasks related to procurement of supplies or equipment needed for patient treatments or procedures.

Challenges in Controlling Purchased Services Costs

Hospitals and health systems often struggle with accurately tracking their purchased services spend. Without an efficient system in place for monitoring and analyzing purchase orders, it can be difficult to identify cost-saving opportunities or discrepancies in pricing. Additionally, because much of the spending associated with purchased services may not be tracked through traditional accounting processes, it can be challenging to get a complete picture of how much is being spent on these services.

Uncontrolled Contract Pricing

Another challenge faced by hospitals and health systems when attempting to reduce purchased services spending is uncontrolled contract pricing. Many contracts are entered into without considering the potential savings that could come from negotiations or other measures such as sourcing multiple vendors for the same service. As a result, organizations often end up paying more than they need to for certain services due to lack of oversight or understanding of the full market price range for those goods or services.

Lack of Standardization

Finally, many hospitals and health systems lack standardization when it comes to their approach towards purchasing goods and services from external vendors. This can lead to unnecessary duplication of resources as well as higher costs overall due to inefficient processes that don’t take advantage of economies of scale or bulk discounts offered by suppliers for large orders over time. Without standardized procedures across departments and divisions within an organization, it can be difficult to identify where changes should be made to achieve significant savings from purchased services spend reduction initiatives.

Strategies to Reduce Purchased Services Spend

To properly monitor and reduce purchased services spend, hospitals and health systems must first identify all of the available spend tracking systems. The Accounts Payable invoice management system, and the ERP Purchase Order, and Vendor Master files, and General Ledger transactions, Income Statement reports, as well as the Contract Management system will all be systems of record for harvesting purchase service spend. This will enable efficient analysis of historical trends, allowing for accurate forecasting of future costs. Automated spends tracking can also help identify cost-saving opportunities by providing visibility into which services are being overused or underused. Tracking through these systems of record also provides a better understanding of total expenditure on each service, enabling hospitals to identify and eliminate unnecessary spending patterns.

Negotiating Contract Pricing

Negotiation with vendors is another powerful tool in reducing purchased services spend in hospitals and health systems. By leveraging its buying power, a hospital can often negotiate discounted pricing for services that it regularly uses, leading to significant savings over time. Additionally, contracts should be reviewed periodically to ensure they remain competitive in the market and take advantage of any new technologies or innovations that could potentially reduce costs without sacrificing quality or patient care outcomes.

Standardized Processes

Creating standardized processes can also help reduce purchased services costs in hospitals and health systems by ensuring uniformity across departments while promoting efficiency through fewer errors or miscommunications between departments and vendors alike. Standardizing processes helps cut down on administrative overhead associated with manual processes such as entering data multiple times into different systems or platforms, eliminating redundant tasks thus freeing up resources that can be put towards value-added activities instead. Additionally, standardizing processes allows administrators to better track performance measures across all facilities within the organization, so they have more accurate knowledge about what works best from a cost perspective when it comes to purchasing services from external vendors.

Evaluating and Adjusting Strategies

Once strategies have been implemented to reduce purchased services spend in hospitals and health systems, it is important to evaluate their effectiveness. This can be done by measuring the impact of each strategy on cost savings as well as other metrics such as patient care and quality. Examples of metrics that can be used to assess impact include:

• total spending on purchased services,

• percentage of budget allocated to purchased services,

• overall hospital operating costs, and

• patient satisfaction scores.

By regularly reviewing these metrics before and after implementing new strategies, healthcare organizations can better understand the effectiveness of their efforts.

Refining Processes

In addition to assessing the impact of strategies for reducing purchased services spend in hospitals and health systems, it is also important to refine processes based on feedback from stakeholders including clinicians, administrators, vendors, patients and families. This feedback should be used to identify areas where adjustments can be made in order to further optimize operations and increase cost savings. For example, if a particular vendor is providing substandard service or not meeting contractual obligations then changes should be made accordingly in order ensure better performance going forward. Furthermore, any processes that are found to be inefficient or ineffective should also be adjusted or eliminated altogether so they do not continue wasting resources unnecessarily over time.

Conclusion

Reducing Purchased Services Spend in Hospitals and Health Systems can have a big impact on cost savings, quality of care and patient outcomes. By implementing an automated spend tracking system, negotiating contract pricing and creating standardized processes, hospitals and health systems can significantly reduce their purchased services costs. However, it is important to regularly evaluate the impact of these strategies to ensure they are having the desired effect. Refining processes as needed will help keep costs under control while still providing high-quality care.

In conclusion, reducing purchased services spend in hospitals and health systems requires a commitment to ongoing monitoring and adjusting of strategies based on results. Taking proactive steps now to control costs can lead to long-term benefits for both patients and providers alike. Now is the time to take action: start with an evaluation of your current practices, then implement effective strategies that will yield real cost savings without sacrificing quality care.

As always, until next we meet, I appreciate all you do.

TH

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