By Kim Allen, VP of Strategic Sourcing at HealthTrust
Sponsored HealthTrust– December 2024 – The Journal of Healthcare Contracting
Supply chain healthcare leaders must prepare for the unpredictable through a robust expense management strategy for indirect and purchased services. Kim Allen, VP of Strategic Sourcing, HealthTrust, shares best practices for how providers can strengthen their overall indirect and purchased services strategy to achieve cost savings and increase efficiencies.
Q: Why is it important to have an overall expense management strategy in indirect and purchased services?
Kim Allen: Purchased services can represent over 40% of a health system’s non-labor spend. While managing this portfolio may be challenging, strategically overseeing indirect and purchased services contracts can be the tipping point that determines a health system’s financial success. Health systems that take a holistic approach to expense management, including their indirect and purchased services portfolios, maximize their opportunities for financial stability and long-term success.
Q: What challenges can healthcare leaders face when implementing a strategy for indirect and purchased services?
Allen: Fragmented service contracts and decentralized spending make standardization and oversight complex. Similarly, resistance to change from departments accustomed to vendor preferences or long-standing contracts can delay processes and implementation. Limited internal expertise or data analytics resources to effectively monitor and optimize purchased service spend can create roadblocks – underscoring the importance of partnering with an expert with deep experience supporting healthcare providers in these areas.
Q: How should health systems be engaging their GPOs for support?
Allen: Health systems should rely on their GPOs to identify opportunities that maximize value creation while minimizing disruption. After identifying key focus areas, GPOs should collaborate with health systems on supplier selection, emphasizing negotiating and managing contracts tailored to the health system’s specific needs. GPOs provide data-driven insights and benchmarking to assess cost-effectiveness and drive informed decision-making. By leveraging their GPO partner’s expertise, health systems gain continuous education on market trends, regulatory changes and cost-saving innovations in non-clinical service areas.
Q: What are the indirect and purchased service categories that are typically overlooked but offer opportunities for immediate value?
Allen: These categories can include facilities management, such as contracted services like HVAC, janitorial and security – all of which can often be optimized for cost savings and service quality. Working with a GPO partner can streamline vendor contracts and consolidate IT services – reducing redundancy and lowering costs. Improving efficiency and sustainability in waste management and environmental services can drive immediate savings and long-term environmental benefits. Other commonly overlooked areas include Treasury and Accounts Payable agreements such as credit and ACH, Office Supplies, and Food Procurement. All of these can be effectively leveraged by a GPO, which translates into significant savings for health systems.
HealthTrust Performance Group is committed to strengthening provider performance and clinical excellence through total spend management solutions that leverage operator experience, scale and innovation.