Six Must Do Activities For Healthcare Purchased Services Success

SIX “MUST DO” ACTIVITIES FOR HEALTHCARE PURCHASED SERVICE SUCCESS

James BouchardVP Operations

MedPricer

April 2015

1 FACILITIES REPRESENTATIONDEVELOP A COMPLETE FACILITY ROSTER & TEAM

Do you have a complete list of facilities that source the purchased services you intend to bid? The answer may not be as simple as it seems – particularly in the context of a rapidly-growing organization, or when considering non-acute care facilities.

AfterAfter compiling this list, identify individuals to represent the needs of the local facility for the category you intend to source. Recruit user representatives who can serve as stakeholders within a sourcing decision-making and award team. These individuals should be senior enough to make supplier decisions and tradeoffs to support system-wide category objectives. Representatives must clearly articulate the facility’s requirements – scope of work, quality levels, preferred suppliers, etc. Representatives must also know the process for transitioning suppliers and implementing new programs.

2 AWARD PROCESSAGREE ON PROCESS PRIOR TO STARTING PROJECT

Prior to starting the project, it is critical to develop an agreed-upon award process championed by either the corporate supply chain and/or facilities representatives. It must be defined at the beginning of the project who will be responsible for deciding which suppliers are awarded contract(s) and the criteria behind those award decisions. Without this key step, the sourcing project is at risk of ending as a “no decision.”

3 INCUMBENT ROSTERDEVELOP AND ENRICH A COMPLETE INCUMBENT ROSTER

What vendors currently provide the services your organization’s facilities intend to source? While accounts payable and invoicing data both provide a solid starting point, their accuracy should be confirmed by facilities representatives. Ultimately, your ability to establish superior rationalization and award structure bundles will hinge upon your understanding of the capabilities, capacity and geographic coverage of the supplier pool. Enrich the incumbent roster with new suppliers that can cover greater geographic areas or have additional capabilities, which can ultimately reduce the number of suppliers and increase potential savings.

Are you about to source healthcare services across your organization? Based on MedPricer’s experience e-sourcing almost $1 billion dollars over 200

projects, there are six “must-do” activities for purchased services success:

4 ACCURATE DATAGET ACCURATE PRICING, USAGE AND CONTRACT INFORMATION INTERNALLY AND FROM INCUMBENTS

Unlike purchased goods, organizations use blanket purchase orders or simple statements of work to procure purchased services with little detail on each billable task and the associated quantities and prices. Typically, contracts will outline the task and price, but rarely identify potential quantities.

In addition to contracts not having the complete breadth of information required for sourcing, many organizations cannot locate contracts for purchased services without a herculean effort. MedPricer’s experience, for instance, has demonstrated that suppliers offer a better source of contract information, helping you identify previous pricing and delivered work quantities. Facilities representatives can also judge whether supplier provided data appears accurate. As a rule of thumb, a comparison to accounts payable total amounts to supplier provided total amounts should not vary by more than 10% in any category.

5 PURSUIT STRATEGYAGREE ON PROCESS PRIOR TO STARTING PROJECT

Reviewing contracts will provide a global view of the overall variability among existing contract expiration dates and cancellation clauses. Understanding these contractual milestones will let you know the extent to which aggregation of volume across your system is feasible and in what timeframe. For example, how do you source a category with three large incumbents whose contracts expire two, five and seven years from today? One pursuit strategy would be to offer a supplier the option to buy-out an incumbent’s early termination penalty as a means for earning more business up-front.

6 AWARD BUNDLINGGROUP SERVICES INTO “AWARD READY” BUNDLES FOR MAXIMIZING NEGOTIATING POWER AND AWARD OUTCOMES

Based on your pursuit strategy, begin with the end (i.e. your overall goal) in mind. How will you negotiate award contracts to suppliers to maximize savings while ensuring facilities’ needs are met? MedPricer, for instance, considers contract expiration dates, facility size, supplier geographic limitations and network vs. local facility needs when creating our own award bundles.

At 20% of a typical hospital systems’ operating budget, purchased services cannot be ignored. While challenging to get started, successfully executing a purchased

services sourcing strategy can result in 20% average savings across all categories. LET US SHOW YOU HOW.

SUMMARY

FOR MORE INFORMATIONTo understand how MedPricer’s Purchased Services Program can help you get started, contact MedPricer today at 203.453.4554 or [email protected].

MedPricer, Inc.

2351 Boston Post RoadGuilford, CT 06437

T 203.453.4554 www.medpricer.com

MedPricer, Inc.

2351 Boston Post RoadGuilford, CT 06437

T 203.453.4554E [email protected]

www.medpricer.com