Purchased services are an untapped source of cost savings and value creation at many hospitals and health systems.
Purchased services are any outsourced service performed for a hospital by a third party. They can account for up to 35 percent of a hospital's operating expenses, and add up to more than $1 billion in spending across the healthcare industry each year.
While CFOs are focusing on reimbursement levels, the ICD-10 transition and consolidation, among other issues, purchased services may recede into the background. However, when managed effectively, this space can present an opportunity to drive savings.
Take St. Joseph Health System Northern California for example. The division of Irvine, Calif.-based St. Joseph Health had perfected supply chain management, but purchased services remained "all over the board," according to Laurie Clayton, its regional director of contracts.
St. Joseph Health's purchased services contracts lacked protective language and the system saw large duplication of services. By implementing a narrow signing policy and getting C-Suite leaders involved in contract signing, the system was able to gain control of its purchased services, according to Ms. Clayton.
Every hospital CFO should have an understanding of the complex Purchased Services supplier market, how it impacts their organization's revenue and cost structure, how leadership can engage to drive improvement in this space and why managing these contracts can be worth the effort.
For more information on how CFOs can drive cost savings and value creation in the Purchased Services space, join Becker's Hospital Review and MD Buyline in a complimentary webinar June 30.
More articles on finance:
13 standout healthcare CFOs
S&P revises Adventist Health's outlook to negative: 3 things to know
Premiums to rise $3.3k if Supreme Court strikes subsidies, study finds