In Episode 17 of The Healthcare Leadership Experience, Lisa is joined by her producer Lisa Larter, from The Lisa Larter Group. Together they discuss how to maximize margin improvement opportunities for hospitals.
Lisa Miller explains, ‘’I’m very passionate about hospitals getting the best cost savings, getting the best advisory services and being able to have the freedom and flexibility to do that, because ultimately this is about patient care.’’.
This episode is sponsored by VIE Healthcare Consulting® which has proudly helped hospitals save $758 million since 1999.
In today’s episode you’ll hear:
Why competing priorities and unexpected urgent issues like Covid get in the way of margin improvement initiatives.
The danger of settling for things being good enough – and why good is the enemy of being great.
The importance of an unbiased performance review. Hint: validating success is equally as important as validating opportunities. ‘’…the unbiased review isn’t a gotcha game’ – it’s also about finding things people are doing right.’’
The need for a strategic team in every hospital dedicated to margin improvement opportunities.
Why non-labor spend is the largest cost savings opportunity.
The importance of engaging physicians (and the JAMA study that reveals the real cost of not providing physicians with cost data). ‘’You can’t be cost conscious if you don’t know what something costs.’’
Why data analytics is foundational in value based agreements – and why mapping your managed care agreements directly to cost is a huge margin improvement opportunity.
Why negotiation isn’t always just about money, it’s also about freedom and flexibility of choice. ‘’There should be no …. agreement that says you’re restricted from using a third party consultant.’’
The positive effect on margin improvement that happens when you provide your team with the resources, expertise and skills they need to maximize cost savings.
For more on high performing healthcare contracts, listen to Episode 6 of The Healthcare Leadership Experience, featuring Ray O’Kelley, CEO & Founder of Healthy Contracts and Business Data Applications (BDA), Inc.
Connect with Lisa:
CLICK HERE TO OPEN THE FULL TRANSCRIPT
Lisa Miller (00:00):
I want us to test our bias. I want a high-performing organization, and that may mean having my great leaders, have somebody come in and do a review — only because we want to be greater. The unbiased review while people may think it’s internal about their people, really could be about the vendor performance, the service performance, giving an unbiased review of what is expected in the marketplace. I can’t stress enough that there are quite a bit of contracts that need to be negotiated locally. I’m very passionate about hospitals getting the best cost savings, getting the best advisory services and being able to have the freedom and flexibility to do that because ultimately this is about patient care. This isn’t about driving more revenue for a GPO. This is about cost savings for hospitals and we’re all in the solution together.
Speaker 2 (00:57):
Welcome to the Healthcare Leadership Experience, a place where healthcare leaders will share proven strategies and innovative approaches to leading the clinical and business side of healthcare. This show is sponsored VIE Healthcare Consulting who’s proudly helped hospitals save over $700 million in non-labor costs since 1999. Here’s your host, Lisa Miller, founder and CEO of VIE Healthcare.
Lisa Miller (01:20):
Welcome to the Healthcare Leadership Experience. Today’s episode is maximizing margin improvement in healthcare. So margin and improvement is an objective that every hospital and health system has had on their strategic initiative for years. There are specific reviews, work streams, to not only improve, but to exceed industry norms. So today we’re going to discuss some of the challenges and opportunities. We’re going to begin with, Lisa, a discussion on what gets in the way. So for those of you who have joined us on this episode, we are fortunate to have Lisa Larter, who’s our producer joining us now on the show. So you’ll hear Lisa and Lisa discuss healthcare topics. So welcome, Lisa.
Lisa Larter (02:09):
Thanks for having me.
Lisa Miller (02:10):
Welcome, it’s great to have you. So, I want to begin with what are the challenges? What, what gets in the way? And I think there’s several reasons. One is just competing priorities, right? Unexpected, urgent issues like COVID, right? I mean, so certainly for the last almost I would say 18 plus months, we’ve had to have the challenges of COVID. So that’s going to get in the way of margin improvement initiatives. And completely, you know— legitimate — I think one of the pivots and one of the things is we debrief and look at those uncertainties and competing priorities and how we can handle those things as an organization is — they’re always going to happen. They’re always going to be there.
So should we have a dedicated that — whether it’s two to five people — and they are focused on strategic initiatives and they don’t get pulled into kind of those urgent issues. And we’re going to talk about that more in a moment, but I think that’s a way to handle competing and unexpected urgent issues like COVID because they do present a challenge as we’re trying to focus on margin improvement initiatives, right? And those margin improvement initiatives has to be a, a pillar for economic certainty for hospitals. So they have to always have those margin improvement initiatives going, regardless of those competing priorities.
Number two, things are good enough. And you know, the organization has 3, 4, or 5% of operating margin when things are okay. And, you know, unfortunately, their organization’s not enough pain. And usually, one of the big drivers to change is discomfort, pain. And so just being good enough sometimes is what gets in a way of being great. But why would you want to leave unnecessary costs or unnecessary spending, or margin improvement opportunities left untapped? I mean, what would be the reason? Why would you want to pay more? Why would you not want to go through and look at utilization? So, I think good enough gets in the way. Number three-
Lisa Larter (04:26):
Good enough is the enemy of great.
Lisa Miller (04:27):
Yeah. Good. Yeah. And I, and actually, I actually see that as the, probably one of the biggest things that gets in the way, you know what — we’ve always done it this way. We’re, we’re doing okay. Our GPO has benchmarked us and said that we’re one of the, they’re, they’re top contract utilizers and, you know, we’re, we’re doing good enough. So we’re okay. Number three, we did this review two years ago and we did this analysis two years ago and so we don’t need to do it.
And, and I agree, listen, you don’t want to be looking at these same margin improvement initiatives every month in the exact specific way. But I do think there needs to be an annual cadence to looking at clinical costs, looking at your contracting, looking at utilization. I do think that it does need to cycle because one of the biggest opportunities is putting something into place — whether that’s standardization, whether that’s clinical cost savings, a contract cost savings. And then in six or seven months, for some reason, things aren’t happening the way they started.
So I do think this annual review is also something that needs to be put in place, what gets in the way? And having an unbiased review and an unbiased review is uncomfortable. Who really want someone to come in and say, you could have done that better? And I know it’s uncomfortable, but I do think it’s a very powerful way, if you’re willing to put yourself in situation to say, listen, I may not know everything, I put my best foot forward. I tried, but I’m going to bring an expert in and I’m going to have an unbiased review.
Or I may have people who are doing a fantastic job, they could be best in class. And it’s not an indication of I’m thinking that they don’t do a good enough job. It’s because I want us to test our bias. I want a high performing organization and that may mean having my great leaders have somebody come in and do a review only because we want to be greater.
Lisa Larter (06:33):
Lisa, I agree with you that having an outside party look at what you’re doing can be incredibly uncomfortable. But I think that there’s two sides to it. Sometimes that outside party is able to identify opportunity for your team to do better. And sometimes that outside party is able to validate that you guys are doing everything you need to do. So I think true leadership is not afraid of the unbiased review because they want to know what they don’t know and they want to know how their team is performing.
Lisa Miller (07:08):
Yeah. I love that because when we work with hospitals, we do both, right? So we are putting together a list of things that their team has done an amazing job of. Like, there is no opportunity here, your team has done phenomenal work. And I think it does validate and I think it’s equally as important, validating successes and validating opportunities. And I think that, you know, that’s, that’s a great nuance.
Lisa Larter (07:33):
You can’t look at the unbiased review is a gotcha game.
Lisa Miller (07:36):
Lisa Larter (07:36):
It’s not about catching people doing things wrong. It’s about uncovering opportunity and finding the things that people are doing right. And I think it requires a really confident leader to do that.
Lisa Miller (07:47):
Yes. And the unbiased review could be about the vendors. And that’s key because for us having the ability to see across the country, across hospitals, different sizes, being able to see, you know, vendor terms or vendor behavior, you know, we’re able to say, wait a minute, this is something that needs to be put in check. This is a good idea to have a quarterly business review, or this is a low-performing vendor that, you know, needs more accountability.
And so the unbiased review — while people may think it’s internal about their people — really could be about the vendor performance, the service performance, giving an unbiased review of what is expected in the marketplace. So, you know, it’s a great point of view that there’s ways to, to look at it from different perspective, Lisa. And I think the other thing that gets in the way as we round this out is sometimes, you know, we don’t have the systems in place in the planning in place.
And we look at margin improvement initiatives as fixing a problem. There’s an increase in the budget or overall, we have to solve certain problems. And I really believe that this having this system, this discipline, this planning in place where these margin improvement initiatives come around every year or two, and they come around in very specific ways, they just, they’re not a reactionary margin improvement process. They are a systematic margin improvement process. One of our clients years ago, we started an initiative, and the CFO says, yeah, we do this every two years.
Lisa, every two years, we have someone come in and review our purchased services spend or review our clinical costs. It’s part of how we build in and report out to the board, it’s part of our process — no matter if we’ve had a fantastic year or a challenging year. And in fact, this hospital has one of the highest margins in the country and the CFO just has that part of their process. And, you know, they look at it also as giving their teams the ability to be successful, not just throwing them a goal that says, listen, here’s the goal, go do it.
They actually put in place the resources and the tools to make them successful. And in fact, we were just called in recently to come back in and go through this process with them. And I, I think it’s just a very visionary approach to be able to say, you know what, we require a lot from all of our people and we want to be able to support them. And the review is part of the process where we feel like we have an internal control, and we give our people the support because they have big goals that we give them.
Lisa Larter (10:32):
Monitoring your margins should be a key standard in any organization. Uh, I mean, as a small business owner, I look at my margins on a monthly basis when I get my PNL and I look at the outliers and I look at, you know, where things are costing too much money? So it doesn’t matter if you’re a hospital or a business, you have an obligation to monitor your margins in real time. Otherwise, you run the risk of running into some really serious issues. And as we both know, when something is running amuck or it is completely offside and it goes for too long, it’s that much harder to recoup the additional costs or to recover the wastes that a hospital has experienced. So, that makes complete sense.
Lisa Miller (11:24):
Well, it’s lost money. So if you catch something in month 8 versus catch it in 2, or you catch it on contract renegotiation month 36 or 48 or 47, those are all missed opportunities. Those are gone, you’ll never be able to recoup again, ever.
Lisa Larter (11:42):
Right. And even if you can get some of that money back, the time, effort, and energy to do so cost more money,
Right. Right. If it’s a mistake, then I have to go put it together, spend the time and the resources and the aggravation really, because, you know, just because there’s an error, I have to tell you, and you still don’t want to give back that money. And it requires a lot of effort and aggravation, and you want to catch things in real times. It’s a great point. So I get asked often, what are the biggest opportunities in margin improvements? And there’s many, right? But I’m going to talk about five of them, but before we start kind of having that conversation about those five biggest opportunities, I think it’s really important to talk about the strong foundation. As I mentioned earlier, really having a, you know, a strategic team, could be two to five people. They are not part of your process improvement department, but they are strategic margin improvement SWAT team.
They won’t get pulled into ops, they won’t get pulled into, you know, kind of these critical issues that come up. They stay focused on margin-improvement opportunities and they work with different departments. And every department, supply chain, finance, everyone has that contribution to support those margin improvement opportunities. But I will tell you separate from your process improvement department, having this really focused margin improvement team, we have seen, has been invaluable.
So, once you have this strong foundation in place, it really is the cost side. The non-labor cost side is still a bigger, the biggest opportunity. In fact, I think is still the largest opportunity. And unfortunately, I think there’s some kind of misinformation — whether that’s from GPOs saying you’re on all of our contracts. And so, you know, you’ve optimized your costs as best as you can. I know that hospitals are looking at regional co-ops, but I will tell you the strategy of utilizing a GPO is important. And it’s also important for a hospital to say, wait a minute, where are those areas that I can negotiate locally? I can have my own self-contracting.
And there’s just still so much opportunity as we talk about purchased services spend, GPOs are starting to write those contracts and in effect, they’re very, they tend to be very broader in nature. And the hospital still has to negotiate those pricing terms ’cause they’re so regionalized. Again, I can’t stress enough that there are quite a bit of contracts that need to be negotiated locally. And I say this not because I don’t have issues with GPOs. GPOs are an important part of our ecosystem, but anything utilized as the only source, as the only answer, that’s a problem. It speaks to the hospital being able to do what’s best for the hospital, not being told what to do.
So, this whole area of non-labor costs, contracting, there is still a huge opportunities, huge opportunities to review your contracts, to self-contract, to be bold, to be visionary. You know, whether it’s standardization, whether it’s looking at insourcing or outsourcing or a combination — but looking at the cost side of the equation is still number one, the biggest opportunity. And engaging your physicians on the costs, those clinical costs operations side of, of the equation. So physicians control quite a bit of costs, right?
So whether it’s, you know, implant costs or ordering, testing, you know, they control a big part of cost for hospital. And I think supporting those physicians with data is key. Giving them the data, they will make phenomenal decisions, they’re scientists. So if you show them an ordering pattern or you show them competitive data on their utilization, if you show them the different costs, they’re going to say, I didn’t know that. Well, okay, that makes sense. We’ll go ahead and use, you know, this product or this test. And if you need me, I’ll support your pricing. Well, you know, I don’t want you to spend more money. I’ll support your pricing negotiation.
I think we just have to give physicians more information about costs. There’s an interesting study done by JAMA. If you’re interested, you can email me, and I can send it to you. They had two groups, they had a group, the operating room. It was surgical case cost, I believe it was a neuro specialty. And they had two sets of groups. One set where they gave the physicians their real actual costs after their cases. So it’s real time, they’re giving them the implant cost after their cases. And that group, just by showing them their costs, reduced their case costs, it was like 7.2%.
The other group, the control group, where they didn’t get the cost information, were just performing their cases. They didn’t get the case cost after their surgery, actually had their costs increase by 6.4%. Now, that’s a, you know, 13 plus differential. So just by showing them the data, not telling them anything, not telling them what to do, just showing them there was a reduction. By not telling them anything, there was an increase. I think that’s the strongest case for our ability to be able to support doctors and physicians and giving them information.
I think the biggest thing we hear when we are presenting data to physicians, we never got this, Lisa, we’ve never seen anything like this. This makes sense. You put this in a way for us that is logical. You know, we know where the data comes from, you’re showing us the data, it’s our data. You’re giving us this great analysis, you know, in four or five slides and yeah, we’re on-board. And I think that’s the biggest surprise, is I don’t think enough physicians are getting the data they need.
Lisa Larter (17:52):
Well, if we go back to episode 16, where you talked about creating an engaged organization and having people be cost-conscious and cost-aware, you can’t be cost-conscious if you don’t know what something costs.
Lisa Miller (18:05):
Yeah. Good point.
Lisa Larter (18:05):
Can you imagine going to the grocery store and there’s no prices listed and you just pick up whatever you need? Now, some people could do that and find out what it costs once they get to the till. But most people make decisions around the products that they put in their cart based on the cost and the value and importance of the items. It just doesn’t make sense that physicians are not able to easily do the same thing.
Lisa Miller (18:32):
Yeah. And easily is key. And it has to be more than based on episodes. Like, okay, we have an issue, we’re going to run down here and show the physicians this, and we’re never going to show them again for another year. You know, it has to be consistent. So another area of opportunity is value-based agreements and the value-based agreements really allow hospitals to move from volume to value — but be incentivized by giving great outcomes. So value-based agreements, and I think the backstory on value based agreements is, it’s going to come back to data analytics.
And in fact, probably so much of, you know, what we do and what we see in the marketplace is this ability to perform comprehensive data analytics, being able to take 12 months of historical data, whatever that may be — whether it’s cost or whether it’s, you know, reimbursement data, utilization data, it could be patient, you know, data, but making sure it’s 12 months at least. And putting together a strong foundation, a strong baseline of data so that you can garner insights or see those little bits of insights. You know, some are gonna pop out, but some may be slight that you would catch, but as it relates to value-based agreements, really understanding what you’re trying to achieve, what your patient population is, how you need to intervene. You know, that intervention might be more virtual care, which is another big opportunity. But it, you know, might be on patient discharge. Are we giving those patients enough information? Is there a phone call after the patient gets discharged? You know, how are we supporting the patient through their process or healing process, recovery process?
So I think the value-based agreements, the opportunities to connect the managed care agreements with costs. A lot of times, you know, we have supply chain in one corner, and we have, you know, managed care, revenue, finance in another — but mapping, taking those managed care agreements and saying, wait a minute, we reimbursed implants at 10% plus cost, or we just get the cost, or we only get an implant reimbursed if it’s above a $1,000. I mean, it’s just all sorts of things, but sometimes they sit in silos, but really mapping our managed care agreements directly to cost is, is a huge opportunity.
I will tell you that we consistently still find gaps or opportunities where hospitals can improve their revenue or even improve their cost structure just by understanding where those managed care agreements, you know, what, what those terms and conditions are. But with value-based agreements, you have the ability to increase your revenue. And, you know, with you having, a hospital, having your own data, your own insights can go to a managed care provider and negotiate with strength, with knowledge and negotiate a great agreement. Um, so you’re getting reimbursed more money based on the value you’re providing
Lisa Larter (21:32):
Totally speaks to why people need to learn how to negotiate in all areas of life.
Lisa Miller (21:37):
Yeah. You know, and, uh, we have an episode coming up in the future, we’ll talk a little bit more about negotiations, but I definitely feel that people think they’re better negotiators than they are, there’s some people who don’t like it at all. But negotiation is a skill that directly ties to financial performance. And we’ll talk about it in a future episode, there’s actually a study performed on, uh, organizations that have a disciplined negotiation process in place and how they show their revenue actually was big. It’s like 14% more than those who don’t have a negotiation process in place. It’s so, it’s so fascinating, but negotiation is so important and there are some critical aspects, um, really knowing your data, having a strategy. And also just, you have to be comfortable. You have to have a team, there’s, it’s process in negotiations, but I think a lot of people just think they want to split the difference, or I’m good with just 10%, you know. And they just have these things that they feel like if they do, they win, but they live a lot of untapped opportunity. So it’s a great point about negotiation.
And I think just to, to sum it up, as I talked about a foundation earlier, I guess the other bookend to this strong foundation again, is analytics. And I, and just having a really, really strong analytics capability — whether, whether it’s internal, where, or utilize an outside company that does not tie to a platform, you know, we’re platform agnostic. We use Power BI to pull data in and analyze data, but just having a company that has a framework or internally a framework for having strong data analytics. Because that’ll be your support for costs, revenue, any other kind of outliers population management. It gives you the ability just to do a lot of work with a really comprehensive, strong data analytics capability.
Lisa Larter (23:33):
I think that’s probably one of the most important things, because if you can’t measure something, you can’t monitor it. And if you don’t know what the actual results are of what’s going on with your contracts and your agreements, then you can’t identify and assess where money is being spent unnecessarily. To me, the ability to access data analytics with ease is foundational for any of this to work.
Lisa Miller (24:04):
Absolutely. It really is. I would say a little bit of the holy grail in kind of all of our work, because it does take time. You know, you need a process, you need to be thoughtful, you need to be thinking, okay, where are the opportunities? Where are the opportunities? And you have to have a mindset of, okay, they’re here, we’ve got to find it. And there, and there’s methods you can look at your data and there’s methods that you could follow, but it really is, it’s, it’s just so important. I can’t tell you how many times where, you know, we’ve kind of looked at a contract and then, you know, maybe looked at a few invoices and then took a really comprehensive review and perform data analysis.
And the outcomes would have been completely different had we just looked at their agreement and only looked at one or two invoices versus taking 12 months, maybe 18 months and digging into the data and the outcomes were just, uh, night and day. And, and I think that’s really key in, in everyone’s work, whether it’s internal or you hire someone external to help you and support your data analytics.
Lisa Larter (25:03):
I would like to say, Lisa, that, you know, when we talk about what you were talking about, what gets in the way, I think one of the other things that gets in the way is not knowing what is possible. I know from, you know, the work that I’ve done with you over the last three years, that you have a patented technology that makes utilization of data analytics a heck of a lot easier for hospitals than most hospitals realize. And so I would just add that sometimes what gets in the way is not knowing what is really possible and accessible for your organization.
Lisa Miller (25:42):
Yeah, that’s a great point. Thank you, Lisa. You know, so I would say now it’s about seven years ago, we were, you know, continuing our work in purchased services, which we had been doing prior to that for 15 years. We had always looked at purchased services and we’re going on our 22nd year. But what I found was that it was very manual. So I literally had seven or eight employees and their whole job was just to take invoices and manually put them into spreadsheets.
So, you know, spreadsheet data analytics from the invoices and it took so much amount of time. And it just seemed to be such an enormous pain point. I mean, yes, for us, but for our clients too. And the one thing that we kept on hearing over and over again, when we would present our savings, cost savings and purchased services, they would say, wow, it’s just, I didn’t realize this was possible. Like you said, I didn’t realize, you know, that this was there. And, you know, it was because of the attention to detail, the deep analytics, but very resource-driven, very high manual.
So it just got me thinking a little differently, like what if we automated this? And so we went down this road of figuring out how to take that data at the invoices, but in a structured way. And so that led us to, you know, getting a patented technology. We’re at the second year of having that, and we’re able to take the data from the invoices and we’re not scraping it, we’re pulling it down in a structured way. And we pull it right into data, you know, analytics. And I agree with you, I was on a call last week with a really large health system. And, you know, they have a GPO who they’re working with on purchased services, but they’re not allowed to work with anybody else.
And that’s a whole other conversation, I, you know, I can’t imagine that a GPO can tell them who they can work with, but they’re not allowed to work with anybody else. But in the conversation, I asked them, how do you get to your invoice line-item details? And he’s like, uh, I, it’s manual. I, yeah, I guess that tool doesn’t, that yeah, they don’t do that. They, they don’t, they, they don’t have to manually put it in or it’s spot checking. And, and just all of a sudden, I could see his mind shifting, like over the call, like wait a minute, how do we get to the line items.
You know, you could have 15, 10, 7 hospitals. How do you get the line item details for your purchased services spend? And I could see his mind shifting like, wait a minute, you’re right. I’m just looking at a categorization tool or just the RFP tool, everything is manual. What am I missing? And so I think this idea of not knowing what’s available and it’s not, you know, for us, for our purchased services technology, but there’s so many things in the marketplace that I do feel like, you know, that allow hospitals to kind of say, wait a minute, no, we could do it that way. So it’s a great point, Lisa, thank you.
Lisa Larter (28:36):
Yeah, no problem. I think it’s a shame that any vendor would tell someone that they’re not allowed to work with somebody who can help them do better work.
Lisa Miller (28:44):
Yeah. I think that’s, I think that’s one of the most surprising things. I’m disappointed most because, you know, again, I think GPOs are an important part of our ecosystem, but I think that they have to — whether they like it or not — you know, they have to work in a world where other experts that they don’t own, they can’t buy all the experts. Right? They don’t own, are giving hospitals other sources of, to save money, to increase their revenue. They can’t be the only source.
Lisa Larter (29:14):
It doesn’t make sense though. Like, I mean, again, I am not…I am a marketing person. I run a small business and do strategy and advisement work. But in my mind, I’m trying to imagine you as my client. And I’m trying to imagine me saying to you that contractually, you are only allowed to use our marketing services and you’re not allowed to retain anyone else for any iota of marketing. You’d look at me and you would think I was crazy, you know, in the business world that would never fly.
Lisa Miller (29:48):
It doesn’t, there’s nowhere in business that it flies. There’s nowhere. I mean, it’s like telling Apple, Walmart, you know, you can’t buy any of your products only through the group purchasing-
Lisa Larter (30:00):
Lisa Miller (30:01):
They would look at you like, are you kidding me? It would never happen. It doesn’t happen. And there’s just no reason for it. And in fact, I think it’s the opposite. We live in a world where these costs are mapped to patients cost as well. So, if a hospital decides and wants to use a company to help them with their savings or their reimbursement or anything outside of a GPO, no GPO should be telling them they can’t do that, or making them feel pressure from using someone else. It really has come a long way from why the [inaudible 00:30:36] was created.
But, you know, with the admin fees that they get back and really wanting to control all of the hospital supply spend, you know, whether it’s for admin fee spend or we’re also really not to let those hospitals know there could be something else better for them in terms of pricing or contracts. And so, I do encourage hospitals to kind of rethink that strategy again, as GPOs is part of their strategy. No one should ever tell a hospital who they can use in any way, shape, or form. It, it wouldn’t work in the business world. It’s a shame that, you know, it’s kind of happening on the healthcare side.
Lisa Larter (31:15):
Right. And it just reinforces your message about negotiation and being able to negotiate the type of agreement with a GPO and or any service provider that you need. And that also, that negotiation isn’t always just about money, it’s about freedom and flexibility of choice.
Lisa Miller (31:33):
Yeah, absolutely. It’s going through your contracts and all your contracts. I mean, in fact, your GPO, you know, for all hospitals, probably their GPO is their largest agreement, and we don’t see it on the AP spend, but it’s because of this admin fee share situation where the GPS get the admin dollars from the vendors. But if you were to look at that spend and look at the admin fee dollars that come in, as well as the money that’s spent, it’s probably every hospital’s largest vendor. And that agreement should be for auditing reasons, for all kinds of reasons, just for, good healthy practices should be the one that’s reviewed closely. And in fact, I know that FTI Consulting has a great offering where they go in and they kind of review the GPO agreement in terms of conditions. And if the hospital wants to do an RFP, I believe, you know, FTI Consulting is offering those RFP services to, you know, for hospitals, but really to review the agreements, there are T’s and C’s in the agreements. And, and again, there should be no way, shape or form in an agreement that says you’re restricted from using a third-party consultant. I mean, they’re kind of a third-party consultant too. I mean, there’s, you know, and we probably could have this conversation for hours and hours.
I’m very passionate about hospitals getting the best cost savings, getting the best advisory services and being able to have the freedom and flexibility to do that because ultimately this is about patient care. This isn’t about driving more revenue for a GPO. This is about cost savings for hospitals and we’re all in the solution together. So we’ll have to have a conversation about that. And in fact, I do have an episode with John Reese, uh, from FTI Consulting, which is really interesting. One of our episodes from a few months ago, you can check out, it was, it was a great episode.
So as we wrap up maximizing margin improvements in healthcare, I want to talk about engaging your team. And, you know, since everyone has a budget, aligning their goals, you know, to margin improvement initiatives is commonplace, right? Usually, you know, that’s what happens.
However, I think when you’re giving all your departments or teams a goal, I think you have to add providing support and resources to help them achieve the outcome to that equation. And I go back to my example of, um, the hospital puts that into their process every two years to have reviews. But, you know, for instance, let’s say, uh, there are, uh, several teams that need to focus on a margin-improvement initiatives. So, it could be a cost side, a revenue side, value-based agreements, data, analytics, whatever those might be for your organization. Are you allowing your, are you giving your teams, let’s say negotiation training? Are you giving them project management training?
I mean, a lot of hospitals have one or two project managers and they’re overwhelmed. Like, would it be better to equip some of your teams to teach them project management or teach them about negotiations or even a basic course on data analytics? Or saying, listen, you have a budget, you can go out and bring in a company, you know, to help with benchmarking or to help achieve the goal. And here are the constraints, you know, here’s the budget, or if they’re performance-based, that’s great, you know, because they’ll help you and you’ll be aligned together and there’s no upfront money. They can help, you know, drive that goal and they’re financially invested. But I think it’s really important that you give your teams resources.
Sometimes teams, they’re all ha- they, they want to be able to accomplish these big goals, but for whatever reason, they don’t sometimes have the expertise, the insights or they, they need training or education. So I think that’s really important. And I think the most important first step you can make is even ask them what skills they need and what training they want, because they might tell you I’m uncomfortable with negotiations. I’m uncomfortable knowing what’s available in the marketplace, like I don’t know how to do that. Like you, asking them what they need and maybe, you know, having those options available to them.
So I think, again, as we’re wrapping up. I think what we’ve covered today on the show is really important. You know, there’s just a lot of ways to maximize margin improvement, but I think some of the key points are, you know, this has to be maybe a SWAT team you have that’s outside of process improvement because you’re always going to have issues coming up. You know, unfortunately, COVID is probably going to continue to be an obstacle or a challenge for us. I think it’s also really important that we continue to look at the cost side. And I think that’s a, a big opportunity along with data analytics
So I encourage you to listen to episode six with Ray O’Kelly on high-performing healthcare and hospital contract, and it’s a great episode. And our next week’s show is cost aware for patient care. And we’ve got seven skills we’re going to talk to everyone about. So Lisa, thank you for having this discussion with me and look forward to future discussions.
Lisa Larter (36:55):
Thanks for including me. I always enjoy hearing how passionate you are about helping hospitals. And I’m always blown away by how much you know about this industry.
Lisa Miller (37:06):
Thank you. Well, I’ve been around a little bit, but, um, it really does, you know, our, our team here at VIE, we love what we do and we’ve got great hospitals working very hard. And you know, we want to help them achieve their mission, so we’ll continue to do that.
Everyone, we’ll look forward to, uh, your comments, your feedback. If you’d like to have us talk about a specific topic, please let me know. Thank you.
Hi, this is Leah. You were listening to my mom’s podcast, the Healthcare Leadership Experience.
Hi, this is Fernando. If you would like to speak with my mom, just email her.