Hospital Purchased Services Contracts: Price Is A Moving Target

Hospital Purchased Services Contracts: Price Is A Moving Target

Robert T. Yokl, President, SVAH Solutions

Everyone would like to obtain the best prices on their purchased services contracts, but price is a moving target. That’s because there are too many moving parts on any purchased services contract. Therefore, I’m willing to bet that very few purchased services contracts are exactly alike, thus, making it almost impossible to benchmark by traditional methods. For example, a food service contract to manage your food service department could include the following under its scope of services: Hiring your current workers, buying food, running your cafeteria, and running your coffee shop. So, how can you have an apples-to-apples comparison?

You will need to treat your purchased services contract benchmarking like a home appraiser would, since no house is exactly alike. A home appraiser will compare features of a client’s house to features of a comparable house, starting with square footage. Then, they will add and subtract features (e.g., pool, two-car garage, deck, etc.) comparing to similar houses that sold recently within a few mile radius. That’s what you would need to do with your own food service contract to accurately benchmark it. Here is a partial comparison we might use for a typical food service contract to benchmark it:

Food Service Contract Characteristics Metrics Comparable Hospitals
Patient Meals Served Annually 45,263 43,298
Cafeteria Meals Served Annually 26,921 27,892
Food Purchased by Contractor Yes Yes
Contractor Owns Employees Payroll Yes Yes
Contractor Manages Coffee Shop Yes Yes
Contractor Provides Consignee Service Yes Yes
Contractor Shares in the Cafeteria Profits Yes Yes

This comparable list would then form the basis for benchmarking this food service contract, hence ensuring that we are comparing the contract’s characteristics as closely as possible. By the way, it is almost impossible to find one hospital that will meet all comparables, so you might need to use more than one hospital for each of your contract characteristics comparables as we did.