HealthTrust: Optimizing Purchased Services
In this Business Profile, Andrew Motz, assistant vice president, supply chain consulting at HealthTrust, discusses the value of a data-driven approach when procuring purchased services.
How do you help healthcare systems?
HealthTrust is a group purchasing organization (GPO) that goes above and beyond the traditional GPO model. For example, our experienced consulting group—called inSight Advisory Services—guides customers through the entire purchased services vendor selection, contracting, and implementation process. We strive to help organizations tighten their accounts payable spend and realize meaningful improvements in cost, quality, and performance. Through the team’s more than 15 years of purchased services experience, our aligned membership model, and our comprehensive advisory services, we offer scaled innovations to strengthen organizational performance and clinical excellence.
What are some of the biggest challenges you see affecting healthcare organizations?
In general, hospital operating expenses fall into three categories: labor, products, and purchased services. Labor usually accounts for about 50 percent of these expenses, and products and purchased services split the remaining 50 percent. In this context, purchased services are any service that a hospital or health system contracts with a third party to perform. Some examples might include laundry and linen management, elevator services, interior landscaping, security staffing, and so on.
It can be difficult for facilities to fully appreciate their purchased services spend because the management process for these services is often quite decentralized, covering multiple departments within a hospital. For instance, both laboratory staff and pharmacy staff may use a courier service, but unless the two departments communicate with each other, they may be using different services or not using the same one in the most efficient manner. Things get even more complicated for health systems with more than one hospital because they have to make sure their hospitals are talking to each other, standardizing vendors, and improving efficiencies where possible.
How does your service offering address these needs?
Through our end-to-end consulting, HealthTrust works to optimize the purchasing effort. We walk clients through analysis, strategy development, the request for proposal (RFP) process, contract negotiation, and vendor implementation.
To begin, we evaluate a customer’s accounts payable spend. This involves leveraging sophisticated tools to categorize every outside service expense. We benchmark each category against that of other similar organizations in our membership portfolio, allowing us to quickly spot potential savings opportunities.
We then work with hospital and health system leadership to determine how the organization’s strategic priorities align with savings opportunities and develop an overall purchasing strategy. We closely engage with stakeholders in each department to refine the strategy because it’s critical to talk directly with the people who will be using the purchased service. We interview the department to find out why staff use the current vendor, what they like about the company, and the quality of service the vendor provides.
Next, we manage the RFP process, looking to see whether there are other vendors who could provide additional services at a comparable or lesser price. As a guideline, we include a minimum of three vendors in every RFP to ensure we completely understand the market expectations for the category in terms of services and cost. When possible, we leverage our HealthTrust purchased services portfolio, which includes contracts that span more than 100 categories and 160 vendors. In many cases, using existing HealthTrust relationships can elevate purchasing power and accelerate the purchasing process. That said, we also include any local vendors that our clients request.
Once we receive responses from vendors, we analyze them and provide a detailed report to organization leaders so they can decide on the appropriate vendor. We advise our clients that they should consider more than just the price of the vendor’s service and seek companies that demonstrate a willingness and ability to partner with the organization to continually improve performance while meeting price expectations. These are the companies that go above and beyond what’s asked for in the RFP, thinking outside the box about how to fully meet a client’s needs.
After the hospital or health system selects the vendor, we handle the negotiation process, working with the vendor on behalf of the hospital to get the best service-level agreements. Note that this could be a brand-new vendor or an incumbent depending on the RFP results. We employ best practices in setting up these contractual arrangements, applying lessons learned from our HealthTrust members across the country.
One particularly beneficial aspect of our service offering is that we don’t stop after negotiation ends. We take the lead on contract implementation, ensuring the vendor-provider relationship meets everyone’s expectations. We also provide our clients with technology that allows them to monitor back-end savings once implementation is complete.
What are some key considerations for healthcare leaders when choosing this type of service?
Organizations should look for a group purchasing partner that has deep experience in analytics and benchmarking, as well as contract negotiation. These are often complex conversations, and you want to be sure that the company representing you has a high level of experience, as well as intimate knowledge of hospital operations.
It’s also valuable to work with a company that has strong familiarity with a wide range of vendors. Because HealthTrust has a comprehensive contract portfolio in place, we can recommend a variety of vendors that have already been vetted regarding quality, service, and reliability. Using this knowledge, we are able to suggest the best options to consider during the RFP process.
The other thing to keep in mind is how you pay for consulting services. At HealthTrust, we offer a back-end risk-sharing model, meaning we only get paid if our clients save money—we don’t charge a retainer or any other fees. This lets our clients explore their vendor options with negligible risk.
As healthcare organizations implement use of your service into their day-to-day operations, what advice would you offer so they can best set themselves up for success?
It’s vitally important to involve front-line staff during each phase of the process, taking their feedback into consideration and keeping them informed along the way. These individuals are the ones who are going to work with a vendor on a day-to-day basis, so they should be on board with the selection process and comfortable with any new vendor. You can’t just take a new laundry contract, for example, and give it to the facilities department and tell them that this is their new vendor. Not only is that going to negatively affect staff morale, you also may miss key details about the department’s specific needs and vendor requirements. Without this information, you may contract with a company that does not exactly align with organizational goals. This may result in quality and performance problems, and lackluster cost savings, not to mention alienating your staff in the process. To be successful, you must constantly communicate about the purpose behind vendor review and what the organization is looking for by involving staff in the selection process and including them in the final decision.
Are there any educational materials you would like to share to help healthcare providers in these efforts?
For more information about HealthTrust and its inSight Advisory Services, go to healthtrustpg.com
HealthTrust (HealthTrust Purchasing Group, L.P.) is committed to strengthening provider performance and clinical excellence through an aligned membership model and the delivery of total spend management advisory solutions that leverage our operator experience, scale, and innovation. Headquartered in Nashville, HealthTrust serves approximately 1,600 acute care facilities and members in more than 26,000 other locations, including ambulatory surgery centers, physician practices, long-term care, and alternate care sites. Follow us on Twitter at @healthtrustpg.
Content for this Business Profile is supplied by HealthTrust. This published piece is provided for advertisement purposes. HFMA does not endorse the published material or warrant or guarantee its accuracy. The statements and opinions of those profiled are those of the individual and not those of HFMA. References to commercial manufacturers, vendors, products, or services that appear do not constitute endorsement by HFMA.