Are You Working With the Right Firm?

Would it surprise you to know that most consulting firms offering purchased services expense reduction have only been providing this offering within the past few years?

If you’re considering bringing on a consulting firm to help you with your purchased services expense reduction, there are some questions you should ask.

The first question is, how many of these types of contracts have they analyzed? The second is, will they give you a sample of your choice to perform at no charge so that you can see an example of their work? The third, who are the analysts that will be working on your project and will you get a complete bio, which includes their experience and the results that they have achieved? And finally, I realize this is a sensitive one, are the consultants receiving any kind of compensation for the recommendations they’re making from the vendors? And that could be commissions or admin fees if they’re a GPO. It’s important to get clear on these elements.

Let’s segue quickly to some of the powerful results our firm has been able to achieve in purchased services.

Outsourced rehab: 14%-18% reduction.

Outsourced dialysis: 16%-23% reduction.

Patient satisfaction surveys: 6%-12% reduction.

Speciality lab testing: 7%-14% reduction.

Software maintenance contracts/software license renewals: 10%-15% reduction.

Pharmacy Compounding: 5%-8% reduction.

Document storage solutions: 14%-19% reduction.

And, there’s nothing better to substantiate the percentage examples above for what our clients achieve than a mini case study in two areas. One is sleep care. For some additional context to this, we had an IDN client with 1,032 beds that asked us to look at their outsourced sleep management agreement. We reviewed this pending renewal proposal from a regional sleep lab vendor. We were able to benchmark and provide best in class pricing, but we also performed an extensive retrospective review of the invoices versus the contract, which revealed enormous opportunities and some mistakes that we were able to identify. Ultimately, we reduced our client’s costs by 14.2% and we secured a credit of over $90,000.

A second case example is merchant cards. We have a current client with 450+ beds. We were asked to look at their merchant card rates. They had a $24 million annual spend, and we assisted them in reducing this cost by 32%, and also securing a one-time credit of $30,000 from errors that we picked up performing a retrospective analysis.

The key distinction is that there are differences between consulting firms.

The critical point for you is that you get the most out of your purchased services expense reduction by partnering with the right consulting firm. Click To Tweet

So, make the right choice!

What is one area that you’d like to review to reduce costs and spending?

Unique Cost Reduction Areas

You don’t have to rely on the traditional and often-used methods to reduce costs in your hospital’s purchased services.

There are a few non-traditional areas that you may want to explore and could prove to be extremely beneficial for your savings.

The first is organic transplant costs. This may come as a surprise at first, but it makes total sense when you really take time to think about it. It’s not uncommon to look at blood, bone and other biological costs, so why should we omit organic transplant costs as something to take a deeper look into?

Another great area to look at is legal. Yes, I know, nobody wants to upset their attorneys or legal partners. But, this shouldn’t be looked at as a “witch hunt” or anything else of the kind. It’s simply gaining clarity around legal costs. What kind of fees are being added in? Are you being charged hourly? Are you paying for a legal element you may not need?

In our experience, many legal invoices contain errors, elements that are not aligned to the agreement, double work, and other discrepancies. Click To Tweet

So, hospitals shouldn’t be afraid to look at their legal invoices. Many, if not all of the Fortune 500 companies, have audits of these invoices, to ensure accuracy, why shouldn’t you?

Another great area to consider is air transport. It’s not an uncommon industry, in fact, it’s a rather competitive space. Why not take a look to see if you can get a better rate elsewhere? If you feel like you may be paying too much with your current arrangement, there are plenty of available options.

Finally, take a look at advertising. Whether it’s through billboards, print media, or other advertising channels, understanding how your advertising contracts are put into place is another big opportunity. Similar to legal contracts discussed above, there are often many moving parts to advertising contracts and you need to ensure that you’re keeping a pulse on yours to ensure you’re not overpaying.

There you have it, a few different avenues to consider looking at in order to cut your costs. Explore each of these options, if you haven’t already, and you may be surprised by just how much you can reduce your spending.

Let me know in the comments, what’s another non-traditional area to consider in order to reduce costs?

Overcoming Financial Challenges

You may be intrigued by this recent study by The American College of Healthcare Executives.

Their study was on the top issues confronting hospitals and the number one issue that came up was financial challenges.

Given that this is, not-so-surprisingly, a common issue that hospitals face, I wanted to share with you three innovative ideas on overcoming these challenges.

First, consider a zero-based budgeting approach to your department costs, where you need to justify each supplier and each cost.

You can then begin a 12-month accounts payable spend and break it down by department and analyze every supplier and every spend to see if there’s an actual need or if there’s a different approach to that expense that may end up reducing costs.

The second idea is to incorporate an ongoing cost containment scorecard.

This isn’t just for a one-time use or when you have a great need to take out costs. This is about creating a disciplined approach to cost reduction and cost management that actually measures every initiative and is able to prove that the reductions are actually being achieved. This scorecard should also have c-suite and board visibility.

Finally, ask your employees, suppliers and patients for their ideas.

All three of these untapped resources will often come with a wealth of knowledge. They’re privy to seeing things on the front line that you don’t necessarily see and can offer perspectives that you may not currently be considering.

In talking to hundreds of executives, financial challenges are on the forefront of their minds. Click To Tweet

This doesn’t have to be a concern that plagues you. Start implementing these three innovative ideas and see your financial challenges reduced and even eliminated.

What’s another idea you’ve implemented to overcome financial challenges?

The audio version of this entry is at the bottom of this post.

Innovation Through Employee Ideas

Let me ask you a question.

How are you going to meet the new challenges we are facing now with healthcare reform?

One powerful strategy that’s often not considered is innovation through employee ideas.

That is, creating an open and creative environment where ideas are listened to and implemented.

Let me share a story with you.

It was 1992. Martin Edelston, CEO of Boardroom, Inc, invited Peter Drucker, the management guru for Day of Consulting into his company. He had no specific goals in mind for the day. He simply thought Drucker might be able to give him some interesting insights and indeed he did.

Drucker found that most of the people he met were frustrated by the amount of time they were wasting in unproductive meetings. Drucker provided a simple suggestion. “Anyone who comes to a meeting should be prepared to give an idea for making his or her work more productive or enhancing the company as a whole in some way.”

Edelston liked the idea and decided to try it. The success of the strategy was enormous. Boardroom went from a high turnover rate, very high absenteeism and not a lot of business to personal turnover plummeting to zero and absenteeism dropping very sharply too, all in just a few short years. Boardroom’s revenue soared by a multiple of five within three years with a substantial increase in their profit margin.

So, what does this all mean?

Every person in your hospital has an endless supply of ideas, especially ones to improve their workplace. Click To Tweet

Every week, every employee should answer two questions.

What can I do to improve my work area?

What could others do that would cause my work area to improve?

It’s simple, brilliant and easy to do.

Here’s another strategy. Have everyone at a department come up with three ideas that will, one, generate revenue, two, save money and three, improve productivity.

At least 70% of corporate assets are inside the heads of people who work there. And, often, they want to share these ideas and be a part of the solution. We just need to ask them and be willing to set up a system that encourages employee suggestions which are then carefully considered and examined for implementation.

VIE Healthcare has created an interactive workshop and process we call EXCITE, which stands for Executional Excellence in Cost Improvements for Teams and Employees. Click here to learn more.

What are you doing to promote employee engagement for cost savings and performance improvements in your workplace? Let me know in the comment section below.

Are You Clear on Your GPO Strategy?

GPO stands for “group purchasing organization” and can be an important part of your supply chain strategy, however it shouldn’t be the only element to it.

It is critical for a hospital (or health system) to have their own independent spend strategy for all areas of their hospitals spend and that may include disrupting current marketplace norms.

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