Four proven strategies to launch cost savings for your hospital.
These strategies cover 4 major areas for cost savings. Each is unique and doesn’t get looked at often or skimmed through. While some are not looked at all. But, if you launch even one of these hospital cost saving initiatives, you’ll quickly open the door to saving your organization, not just thousands or hundreds of thousands, but potentially millions of dollars.
When looking at these areas, it’s crucial that you set out a strategic plan that will garner the most success for your time invested. As you begin to tackle these cost saving initiatives, you’ll see a lot of reporting, benchmarking, and digging deep to find the analytics that will help you achieve the most significant savings. Remember, the dollars are in the details.
Subscription Services Are Hiding Valuable Savings
When you look at subscription services and all of the accounts that your hospital has invested in, you may see things that you don’t use or didn’t know you had. This happens over time, as some of these subscriptions may have had one year free or were initially at a lower rate, but you’re no longer grandfathered into the package, or something as simple as it’s no longer being used and someone forgot to stop the subscription.
Taking this one step further to our own lives, there’s an app called TrueBill, and their claim to fame is, “Get control over your subscriptions. Don’t pay for unwanted subscriptions.” How often do you have subscriptions that you pay for every month but perhaps don’t use? TrueBill solves that problem because they go through your subscriptions and help you manage your subscriptions. TrueBill has canceled over million subscriptions and easily saved its customers millions of dollars.
What if you acted as the TrueBill for your hospital? Once you reviewed your subscriptions, you could likely find ones you no longer use. In my experience with hospitals, I have seen upwards of $500,000 in cost savings.
But how do you get this done? Start with your GPO agreements. Often you’ll find annual subscriptions that could be for annual analytics, annual benchmarking, or clinical documentation. These subscriptions that often go unused are embedded in the agreements.
While you’re going through your subscriptions, ask yourself these questions:
- How long has this subscription been in place?
- Who uses this subscription?
- Does anyone use this subscription? If the answer is yes, do they need this subscription?
- What’s the outcome you’re trying to achieve with this subscription?
- Do you have the right package for the number of users?
- Are you getting the best price, or is it the right price?
Hospital Cost Savings Are Found in Professional Services
Professional services often fly under the radar for most hospitals. Usually, you’ll see these fees when you implement new technology or an infusion of needed services. However, because professional services are attached to a project you need help with, there’s a wide range of pricing.
You’ll want to start by taking a step back and looking at how you approach the fees. Do you have a framework in place for price standardization? If you don’t, you can start by putting services into different buckets and setting the standardization for each bucket.
You can create many buckets, but to start, we can look at four specific buckets.
Let’s look at legal as an example. With your legal bucket, you likely have specific hourly fees, and there could be six or seven legal fees that you work with. You may have general counsel that looks at contracting, a merger and acquisition attorney, and a defense attorney. And each lawyer has a different set of fees.
You’ll want to gather all of the fees you are paying for and understand historically what you’ve spent in the last 12 to 24 months. Once you’ve done that, you’ll start to see extensive ranges and a lot of additional fees you may not have seen otherwise or double charges.
Reach out to your legal teams and explain that you are happy with the legal services they provide but that you need organization and management around costs. Negotiate with them and say, “Here’s where our standardization of fees lies, and this is what we look to pay our attorneys.”
Across all buckets, I have seen bundled hours. This is where your service providers provide you with a bank of 400+ hours per year for a set cost. But, when we investigate further, we often see that hospitals are paying $40,000 or more on bundled hours that aren’t being used. These hours aren’t rolled over at the end of the year but instead lost.
Your hospital may have 12 or 15 professional service buckets, but when you compound that across your organization over time, you can find a massive area of spend.
The Four-Part Framework for Equipment Services Agreements
Typically, this area of spend is not top of mind for hospitals when they think about cost savings. However, it’s always surprising how large this area of spend is. You have service agreements for the equipment, the Biomed department, a third party, agrees to manage the services agreements, and individual agreements with the OEM, which can be a lot to manage with so many moving parts.
To gather all the data, you’ll want to start with a four-part framework.
- Validating the location of the equipment
This is vital because you’ll want to know what department your equipment is in. Once you’ve identified the department, you’ll want to ask a few questions. Is this being used, and if so, is it being used as a primary piece of equipment? Is it being used as a backup piece of equipment? If it’s a primary piece of equipment, you’ll want to ensure you have the correct service level as a part of your agreement.
- What level of service does the equipment have
There are levels of service agreements. For example, you could have platinum, gold, silver, etc. But if it’s a primary piece of equipment vital to a department, you’ll want to have the highest level of service, but if it’s a backup, you may not need the highest level of service attached to the equipment service agreement.
- Double charges for equipment repair
Your hospital has paid the OEM for the service agreement, but the OEM uses a third-party repair company. But when the repair company provides you service on the equipment, they may send you the bill instead. So, now you’ve paid the OEM, and now you’ve paid the repair company.
Finally, the last part of the framework looks at the price. How much are you spending, and where can we find the hospital cost savings. Let’s use printers and copiers as an example since you likely won’t have a service agreement on fax machines or lower-end printers. But there is value in having a service agreement because you won’t want to pay top dollar for repairs on the fax or printer.
So, you’ll want to have a service agreement you can rely on and all the benefits that come from it. Every year, you want to review and look at your equipment and how the service agreements are attached. Then you’ll want to evaluate the usage, the standard of service, and where the double charges may come in.
Your Med Surg Report is Massive But Has The Most Significant ROI
Your Med Surg distributor is a massive area of spend because it’s comprised of thousands of supply items. Many people manage the ordering and the price accuracy, which can cause the details to get lost or missed. And because it’s so complex, it takes a team to evaluate where the pricing discrepancies are and complexities.
In my experience, I see an average of around a 5% error rate. If you have a $10,000,000 Med Surg spend with your distributor, think about what something as small as a 2%-3% error rate could mean for your hospital.
Then you want to look at what contract each supply item is tied to. For example, you’ll see that some items are a part of a GPO agreement, others are in the wrong tier, or some have no contract. So, you’ll want to get the data and the right report for you to review.
It isn’t easy sometimes to see these details monthly, but if you take time on an annual basis to run through and perform an audit, you will reap some great opportunities.
Each of these areas of spend is diverse and complex and has specific nuances that need careful attention. I can almost guarantee that if you look at these four areas of spend in your organization, you can pull out multi-million-dollar cost savings for your hospital within a year, and that will transcend into every year following.
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