All hospitals monitor their supply chain costs, but many only take into account the obvious costs. Tracking supply costs, analyzing use, and negotiating lower prices are fairly straightforward processes, mastered by hospital CFOs and their staffs. Unfortunately, product pricing represents only 50% of true supply chain costs. The other 50% comes primarily in the form of outside service contracts, known as purchased services. These costs can be more difficult to monitor, and there is less benchmarking information readily available.
The primary challenge in harnessing purchased service spend is the lack of visibility within hospitals. Finance and supply chain departments must work together to assess their current spend in purchased services. When executive leadership is able to visualize how large their purchased service spend is, they will become empowered to begin making significant reductions.
One of the simplest ways to uncover savings in purchased services is to match contracts to services delivered. Oftentimes there are big discrepancies and hospitals are paying large sums for services that are not used. Streamlining processes and services can also help to decrease reliance on outside contractors, and therefore reduce costs.
Hospitals and healthcare organizations have become experts in sourcing supply chain costs and lowering their spend on products. They must begin to do the same for purchased services, or risk huge opportunities for savings and financial stability.