Top Four Things the CFO Needs to Know About Purchased Services

CFOs must evolve along with the purchased service landscape

Screen Shot 2015-07-13 at 1.05.20 PMIn today’s ever-evolving healthcare environment, hospital CFOs face a number of challenges. These include changing reimbursement levels, the transition to ICD-10 and the trend toward hospital consolidation, in addition to their ongoing effort to drive cost savings and drive value creation for their hospital. According to a report by Standard & Poor’s, healthcare systems in the U.S. saw expenses outpace revenue growth for the first time since 2008.

So, how do hospitals stay ahead of the curve? By focusing on purchased services.

This is an area of spend that has risen to the top of the cost containment strategy for CFOs nationwide. Purchased services have a clear effect on the cost structure of an organization, often accounting for up to 25-30 percent of a hospital’s nonlabor costs. Industry research shows hospitals have the potential to reduce their purchased services costs by 10-30 percent. However, purchased services largely escape the same level of scrutiny applied to capital, consumable and physician presence items.

As the purchased service space continues to evolve and change, there are four key points hospital CFOs should keep in mind.

  1. Purchased services affect a hospital’s revenue and cost structure.
  2. Driving purchased services improvement often requires leadership engagement.
  3. The purchased services supplier market continues to mature and gain complexity.
  4. Managing purchased service contracts is challenging but worth the effort.

With these four key points, CFOs can precisely focus their efforts in the purchased services space and drive value for their organizations.

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Peter Stelling, MBA
Peter Stelling, MBA, General Manager Purchased Services — Mr. Peter Stelling joined MD Buyline in 2015. Mr. Stelling has over 20 years of leadership and management experience. Mr. Stelling was a consultant with A.T. Kearney and Ernst & Young with a focus on Hospital Supply Chain operations, system implementation and strategic sourcing. Before A.T. Kearney, Mr. Stelling managed various financial operations for Capital One and served a combined 15 years in the U.S. Army and U.S. Army Reserve in combat and logistics leadership roles. Mr. Stelling has a Bachelor of Science from the United States Military Academy in West Point, New York and a Masters in Business Administration from the Cox School of Business at Southern Methodist University in Dallas.