Take Control Of Your Purchased Services Spend: Best Practice Success .
Take Control of Your Purchased Services Spend: Best Practice Success Stories January 16, 2014
Presenters Laurie Clayton Cris O’Neal-Gavin Regional Director of Contracting and Purchased Services St. Joseph Health Northern California System Contract Manager, Purchased Services SSM Health Care Background 33 years of healthcare experience in Supply Chain Management, Corporate Compliance Officer and Purchased Services and Contracting Director Served in Support Services Management, AHRMM, CAHPMM, Hospital Council of Northern California, CPI boards and MedAssets committees Background Manager of SSM systemwide Purchased Services Appointed member, Premier National Purchased Services Strategic Planning Committee Active Member of CCG Purchased Services Committee Active Member of AHRMM Education Committee Beverly Schierer, R.T. (R)(T) Vice President, Research & Analysis MD Buyline Background In 1992, Schierer joined MD Buyline 30 years in the Radiation, Therapy and Imaging Field Previously served as Equipment Planning Manager, Help International Member of ASRT and AHVAP
Agenda The Purchased Services Opportunity Factors Causing Growth in Purchased Services Challenges with Purchased Services St. Joseph Health’s Innovative Model SSM’s Innovative Model MD Buyline’s Value Analysis Approach to Purchased Services Case Study Conclusion
The Purchased Services Opportunity savings 25% 10% to 30% average savings in a purchased services category before after 18%-22% experience the direct impact 20% purchased services savings falls straight to the bottom line 15%-19% 15% Hospitals implementing Buyline Purchased Services Program’s best practices spend 25% less on purchased services. Hospitals with Buyline Purchased Services Program have quickly realized a 3% sustainable improvement in their operating margins. before after 10% 7% 4% 5% 0% PURCHASED SERVICES OPERATING MARGIN
The Purchased Services Opportunity Healthcare Providers’ Operating Budget Purchased services account for 3% 18% 100 billion in annual spend DEPRECIATION across the healthcare industry. SUPPLIES AND PRESCRIPTIONS OPERATING BUDGET 24% PURCHASED SERVICES 55% SALARIES Purchased services lack vendor standardization, volume consolidation and price benchmarking seen in capital and consumable spending.
Factors Causing Growth in Purchased Services 1 2 SPECIALIZATION Critical services, such as viral ICU, offer immediate access to highly skilled experts at a time when there is a national shortage of intensivists and skilled critical care nurses. INNOVATION New services, like human genome sequencing, are offering the provider access to cutting edge technology without requiring an up-front capital investment. 3 REDUCED COSTS 4 CORE COMPETENCY 5 Infrastructure costs for information technology can be time consuming and costly, which makes outsourcing an attractive choice. Outsourcing a clinical service, such as cataract, to a third party gives hospitals the opportunity to focus on achieving their strategic initiatives, such as cancer care, surgical towers, a bariatric center or an ambulatory surgery center. PATIENT SATISFACTION Improving patient satisfaction is often a motivator for outsourcing services, such as translation, because communication is improved and streamlined between patients, staff and physicians.
Challenges with Purchased Services Optimization is difficult with inadequate processes, tools, data and knowledge increase in spend services decentralized decision making and purchasing lack of visibility & executive sponsorship lack of infrastructure to control and manage contracts lack of broad category expertise no benchmarking data available regional variations
St. Joseph Health’s Innovative Model What was the state of purchased services contracting before the team and process was put in place? CHALLENGES Decentralized process Unskilled execution of contracts or no official contracts signed Lack of protections at all for paid service Duplication of services Time and money wasted
St. Joseph Health’s Innovative Model What was the process to getting the team in place? FINDING AND DEVELOPING TALENT Purchased services are complicated and require critical thinking, attention to detail and industry/service knowledge. DECIDING ON THE SCOPE OF WORK Do you include physician agreements, staffing agreements or property management/leases? SETTING UP AN INFRASTRUCTURE
St. Joseph Health’s Innovative Model How do you start up a program/process? Identify your purchased service contracts and the contracts you need Prioritize the analysis, draft and negotiate all services Get executive buy-in and develop the infrastructure Review all agreements for cost and risk reduction opportunities Analyze vendor spend trends Maintain a central contracting database and management system Coordinate legal intervention, as appropriate Track purchased services budget variances Implement tools to enhance productivity and keep track of services portfolio identified above
St. Joseph Health’s Innovative Model How does the system manage this now? Purchased services have a centralized, regionalized approach All agreements are funneled through the Contracting and Purchased Services department, which ensures: No money is released without a contract No contract signature (limited to CEO and CFO) without contracting director approval Multi-facility opportunities are identified and leveraged Contracts are all drafted and negotiated by skilled staff Regulatory compliance is ensured Proposed services are analyzed All active agreements are managed and processed via a dynamic spreadsheet system that quantifies and tracks an agreement’s progress through to execution
St. Joseph Health’s Innovative Model Centralization has spread over the region. Centralization Best Practices Negotiation of system agreements takes place once instead of multiple times for each facility Recommendations are made based on best practices of others. Single Negotiation SAVINGS Multi-million dollar savings.
SSM’s Innovative Approach What was the state of purchase services contracting before your team was put in place to monitor and control? CHALLENGES Decision making was highly decentralized Contracts repository was decentralized Data was not readily accessible Long standing local supplier relationships Department think vs. system think Benchmarking data was not readily available
SSM’s Innovative Approach What was the process to getting to your purchased services initiatives underway? CREDIBLE DATA SET UP INFRASTRUCTURE Information Technology team Dedicated resources AP data file MMIS system Standardized tools (e.g., presentations, data collection, tracking, communication) DECIDE ON CATEGORIES In-scope vs. out-of-scope High spend/high savings return Expiring agreements Level of complexity Quick wins MONITOR SAVINGS Quarterly business reviews Market competitive contract language Cost reduction reports
SSM’s Innovative Approach How do you monitor your progress? Project management tool Meeting tracker Savings tracker Regular team updates
SSM’s Innovative Approach What has worked? What hasn’t worked? How do you innovate moving forward? WORKS INNOVATION INITIATIVES Team approach Transparency Technology improvements – contracts and data management systems Collaborative partnerships (e.g., GPOs, MD Buyline) Standard legal contract template Standard vendor rules and engagement Increase aggregate partnerships DOESN’T WORK Duplication of efforts Continuing status quo “business as usual”
SSM’s Purchased Services Approach Seven-step process followed 1. IDENTIFY OPPORTUNITY Collect AP data Assess expenditures Collect contracts Collect invoices 4. PURSUIT Sourcing Go to market (RFP) Negotiations 7. MEASURE Develop reminder tool on things to review Audit results 3. INITIAL APPROVAL 2. PRELIMINARY ANALYSIS Current obligations Benchmark Identify key stakeholders Develop pursuit strategy 5. FINAL APPROVAL Supplier selection Gain consensus Legal contract review SAVINGS REALIZED! Multi-million dollar savings. Present initial findings and recommendations Gain consensus and validation 6. IMPLEMENTATION Communication Conversion
MD Buyline’s Value Analysis Approach to Purchased Services build an online platform scale educational resources members and MD Buyline work together to identify, categorize and prioritize all purchased services opportunities to immediately provide visibility into a hospital’s purchased services spend arm yourself and your team with the best knowledge to confidently contract purchased services and enable your team to do more with the industry’s largest database of educational content, covering over 200 purchased services categories use workflow and reporting tools help from purchased service experts implement a long-term, sustainable approach to managing purchased services with an online workflow, analytics and management reporting tools, which allows stakeholders to improve efficiency, create processes and drive home results execute contracts with help from MD Buyline experts from the research to the negotiation stage
MD Buyline’s Value Analysis Approach to Purchased Services ASSESS REVIEW FINALIZE MEASURE ENLIST AN EXECUTIVE CHAMPION This can be anyone from the VP-level in Supply Chain to the CFO or CEO directly. Enlist a task force and key stakeholders around purchased services. Prioritize, categorize and create a single point of focus for purchased services contracting and sourcing. ARM YOURSELF WITH DATA Learn market highlights, industry best practices by category, pricing metrics, competitive vendor directory and key performance indicators. Create a knowledge library to include RFPs, SOWs, SLAs, sample contracts, price benchmarks and more. FOLLOW THE PLAN Continue to monitor both the performance and billing of the service under the terms of the contracts against your expectations and utilization.
MD Buyline’s Value Analysis Approach to Purchased Services When value analysis is applied Key Initiatives Spend Cost Savings Range Date Range Create protocols/standards for imaging fee for service 12,690,000 850,000 - 1,500,000 12 month Standardize rates for perfusion services 5,330,000 260,000 - 385,000 12 months Consolidate tissue storage vendors 4,545,000 500,000 - 850,000 12 months Standardize rates for intraoperative monitoring 3,345,000 245,000 - 320,000 24 months Improve reprocessing utilization 6,485,000 850,000 - 1,250,000 Immediate Reference Laboratory 27,598,000 2,705,000 - 4,305,000 Immediate Renegotiate document management shredding costs 1,110,000 105,000 - 205,000 12 months Consolidate and negotiate photocopier price/copy 13,520,000 1,000,000 - 1,200,000 12 months Renegotiate facility cleaning contracts 3,950,000 340,000 - 985,000 12 months System level consolidation of vending contracts 985,000 99,500 - 128,500 6 - 12 months 79,558,000 6,954,500 - 11,128,500 Key initiative totals
MD Buyline’s Value Analysis Approach to Purchased Services Translation prices Contract Rate Variations by Service Types Service Description Hospital Ranges over 5 Facilities Industry Range Over-the-phone 1.38 - 1.65 0.98 - 1.20 Per word Document translation 0.18 0.15 - 0.18 Per hour On-Site 39.50 - 44.50 32.40 - 46.80 Per hour On-Site ASL 55.00 - 65.00 50.00 - 60.00 Per minute Video remote 1.99 - 3.25 1.59 - 2.20 Unit of Measure Per minute Healthcare Facilities Translation Services Spend Price per Unit Total Spend Vendor: 1.38 630,085 Industry high: 1.20 547,899 Industry low: 0.98 447,451 13% SAVINGS 29% SAVINGS
Case Study Transcription Services 2 Million cost reduction over the committed three-year period 200 million annual purchased services spend Centralizing purchased services is a key strategic priority Historically relied on a contingency consulting firm to support their efforts CONTRACT REVIEW RESULTS Savings: Achieved 28% cost reduction based on current annual transcription services spend of 2.5 million. Domestic vs. global transcription: Offshore transcription was dropped for domestic transcription. Price benchmarking: Vendor rates for transcription services were above industry accepted rates. Transcription volume: Pricing was adjusted to account for an increase in volume. Contract length: Contract length was reduced from a seven years to three years with annual reviews. Contract language: Penalties for error rates were inserted into the agreement along with a defined dispute resolution (extremely important for offshore transcription services). Added a 98% accuracy guarantee along with penalties when SLAs are not met. Price Benchmarking Type of Service Vendor Rate Target Rate Domestic transcription services 0.00256 0.00253 Domestic transcription services with speech recognition 0.00227 0.00221 Global transcription services with ASR 0.00206 0.00190
Conclusion ASSESS REVIEW FINALIZE TAKING CONTROL OF PURCHASED SERVICES REQUIRES a process industry best practices collaboration data driven benchmark analytics to achieve, sustain and measure best results MEASURE
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The Purchased Services Opportunity Healthcare Providers' Operating Budget Purchased services account for 100 billion in annual spend across the healthcare industry.
SuperSignal West Pico Chemiluminescent substrate kit were purchased from Pierce. Azide-Fluor 488 and N-Boc-ethylenediamine were purchased from Sigma-Aldrich. RNaseOUT Recombinant Ribonuclease Inhibitor, and SYBR Gold were purchased from LifeTechnologies. RNA ladders were purchased from New England Biolabs. All reagents were used as
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Purchased Metals or Scrap---- Lookup PSC 5/15/1991 URL POSTED SOON 331315 . Plate, Sheet, Strip, Foil, & Wire; High Nickel Alloy ; 331491 . 9515 ; Nickel And Nickel Alloy Pipe, Plate, Sheet Strip, and Tubing Made From Purchased Metals or Scrap or Pipe & Tubing, Nonferrous Metals (Except Aluminum, Copper), Made From Purchased Metals or Scrap .
unstained protein standards, Protein A agarose beads, penicillin/streptomycin solution, and geneticin (G418) were purchased from Invitrogen (Grand Island, NY). Precision plus protein standards were purchased from Bio-Rad (Hercules,CA); the BCA kit and the In-gel tryptic digestion kit were purchased from Pierce (Rockford, IL);
3006 AGMA Toilet Additive 1338 (3006) 19.0% 2914 CERAVON BLUE V10 DC (2914) 0.05% 2922 FORMALDEHYDE REODORANT ALTERNATIVE (2922) 0.6% 3 Water (3) 80.05% Constituent Chemicals 1 Water (3) 80.05% CAS number: 7732-18-5 EC number: 231-791-2 Product number: — EU index number: — Physical hazards Not Classified Health hazards Not Classified Environmental hazards Not Classified 2 Bronopol (INN .
