Robert W. Yokl, Vice President, SVAH Solutions
A great way to focus your Purchased Services Cost Reduction and Sustainability Program is to utilize a value analysis team to review, analyze, and monitor your purchased services on an ongoing basis. Even though you may have some contract managers already given the responsibility to facilitate the contracting process, you can still gain high savings and overall functional value from your purchased services with a team approach. Following are some important lessons to consider when deploying a purchased services value analysis team that have been proven to work for me and my firm for the past 29 years in working with hospital purchased services.
1. Have a Plan for How Your Purchased Services VAT is Going to Operate: You need to have some forethought on how you want your new purchased services VA team to operate. The old notion of forming a team full of members from every segment of your health system in order to cover all of your bases is not a productive approach. Nor do you want to have a team that merely turns the value analysis contract project right over to the contract owner (department head/manager) every single time. They already have full control of that contract, so what makes you think they are going to do anything different for a VA team than they were before? A better option would be to organize your team with good stewards (department heads and managers still) who will act as project facilitators and work with those department heads and managers who may or may not be part of the team.
You want the reviews to work with the contract owners but not turn the project over to someone who is biased and will not be open to allowing anyone else to handle their contracts. This is tough, as everyone thinks that Medical Records should handle the records management contract and therefore vet the VA project. Those departments more than likely don’t want to change a thing. Yes, they do want to save money if they can, but they do not want to engage in a VAT process.
A best practice approach would be to have some other team member who does not have ownership of the contract and/or purchased service become the project lead to simply facilitate the project. In the example of Records Management, you can assign a member from Finance, Supply Chain, Lab, etc., and they will coordinate with Medical Records, Radiology, and Finance, as well as Supply Chain who have access to all the group purchasing contracts. An unbiased approach engaging customers and stakeholders will save big every time!
2. You Don’t Have to Wait Until a Contract Comes Due to Perform a VAT Review: When talking to CFOs and supply chain leaders about purchased services programs, they always want to start with all of the contracts that are upcoming for renewal or new for approval. That is great but they more than likely are not the top areas to go after to find big savings in your purchased services. This cyclical approach will go on for up to two to four years and organizations cannot wait that long for big savings in areas that may or may not be contractually based. Instead, you should be deploying some form of benchmarking or fiscal year-over-year reporting for your major purchased services categories so you can go after big savings that are popping up on these reports. Plus, in most cases if a purchased service is running high you don’t need to wait for the contract to run out; you can look into the who, what, why, where, and when, and reduce costs within the existing contract. We do this all the time with our clients, and you can too!
3. Expect Bigger Results, Then Train Your Teams to Bring You Those Results: Purchased services has been around for many years and most department heads and managers have been involved with their own purchased services contracts, but few if any of them have had any formal purchased service cost reduction/value analysis training. The thought of forming a purchased services value analysis team that is responsible for reviewing 35% to 45% of your total non-salary budget and telling them to just go save money is unwise. Yet, this happens quite often and with little or no knowledge to guide their work, the VAT members end up only scratching the surface of the savings that they could potentially achieve. A simple one-day training or webinar program for each of your members is all you need to give them a thorough understanding of how to address purchased services in a VAT environment. A little bit of money spent here will save you millions!
I could go on and on with important lessons for purchased services value analysis teams, but these are my top three that I feel are needed the most in health systems throughout the country. Even though group purchasing organizations are now offering savings opportunities on purchased services contracts, that is only a small percentage of the money that is on the table in big savings. The majority is going to be found by your purchased services value analysis teams, but they need to be set up to succeed. If you only form a team and tell them to go save money, you are going to get meager results, but if you follow these important steps, you will fuel the purchased services VAT now and every year for the long term.