3 Main Challenges Hospitals Face with Purchased Services

sdfsdsApproximately $100 billion each year is spent on purchased services. This amount typically surpasses supplies and Physician Preference Items (PPI). Hospitals are searching for ways to reduce the 18-30% of their operating budget that purchased services engulfs. With little comparative data, no accessible benchmarks and fragmented contracts, hospitals have an overwhelmingly complicated task to handle.

Purchased services (such as linens, waste management, food, transcription, elevator maintenance, medical coding, asset management, disinfection, security, dialysis, landscaping and revenue cycle management) are typically outsourced so hospitals can focus on their core competency: taking care of patients.

When Purchased Services does not receive the attention it needs, three main challenges occur:

  1. Contracts are fragmented throughout the hospital, leaving the health system with little to no control.
    MD Buyline has found that hospitals are experiencing difficulty with wrapping their arms around the sheer volume of outsourced contracts. Some hospitals have begun working toward centralizing service contracts, which will allow them to monitor vendors, costs and contract renewal dates.
  2. Contracts renew automatically without negotiating fees or terms and conditions.
    MD Buyline has heard from C-suites and supply chain directors nationwide that an alarming number of contracts renew automatically year after year without notice or review. For example: MD Buyline has seen transcription rates decline over the years due to advanced technology. But we’ve seen hospitals that are locked into multi-year transcription agreements that restrict reviews or the ability to restructure the contracts.
  3. Hospitals have little to no benchmarking or comparative data.
    MD Buyline has found when hospitals attempt to review contracts, they struggle with accessing comparative data, benchmarking rates and writing terms that meet their needs. Hospitals want to know if their pricing and terms are similar to other facilities in the area and similar facilities across the U.S.

Buyline Purchased Services can help hospitals reduce Purchased Services costs by 10% to 30%. MD Buyline analyzes contracts and quotes, compares rates and terms against benchmarks and provides recommendations. Read how MD Buyline helped one hospital reduce their transcription costs by 28%.

Rod Faulkner, BS
Rod Faulkner, BS, Analyst — Mr. Rod Faulkner joined MD Buyline in 1996 with over 15 years of business management experience. At MD Buyline, Mr. Faulkner works as an analyst in capital and purchased services, which enables him to consult with MD Buyline members as they work through researching, budgeting and purchasing projects. Mr. Faulkner graduated from Texas Tech University with a Bachelor of Science in sociology.