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Achieving Sustainable Savings in Purchased Services Through Best Practices

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Modern Healthcare
Modern Healthcare

Purchased-service agreements present an area of potential savings for operational budgets if hospitals have the right data, research and tools to control and reprioritize their purchased-services spending. Join us as we learn how SSM Health, a four-state non-profit health care system, implemented a best-practices approach to purchased services to secure large-dollar savings across its entire purchased-services spend. During this webinar Cris O'Neal-Gavin, System Contract manager for Purchased Services at SSM Health, will share how they drove savings in large national purchased-services categories, and achieved even larger savings in more strategic regional services. Also get exclusive access to MD Buyline's most recent research showcasing how the nation's most innovative hospitals are implementing common strategies to reduce the cost and complexity of purchased-services contracts.

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SSM Health and MD Buyline Achieving Sustainable Savings in Purchased Services through Best Practices
Presenters David Rodriguez SVP Marketing • 15 years of experience in healthcare product marketing for revenue cycle, supply chain and payer solutions • Previous positions held at Trizetto, Interpoint, Concuity and The Advisory Board Cris O’Neal System Contract Manager – Purchased Services SSM Health Care Corporation • Manager of SSM System-wide Purchased Services • Appointed member -Premier National Purchased Services Strategic Planning Committee • Active Member of CCG Purchased Services Committee • Active Member of AHRMM Education Committee
Agenda • Introductions to MD Buyline and SSM Health Systems • Overview of Purchased Services • SSM –Transcription and Laundry Services • Purchased Services Best Practices • SSM –Transcription and Laundry Services Results • Q&A
SSM Health - The Facts Mission-Through our exceptional health care services, we reveal the healing presence of God. • 1st Health-care Organization to receive Malcolm Baldridge Quality Award • 19 Hospitals in 4 States • 30,000 Employees • 3,900 Licensed Beds Annual Spend on Purchased Services • $300 million • 20% of system’s annual expenditures
MD Buyline – The Facts Industry-Leading and Proprietary Data • 500,000+ unique products and services tracked • 100+ clinical specialty areas covered • 60,000+ quotes, contract reviews, and analyses annually • 30+ years of historical data Clinical and Financial Research • 600 years of collective experience, averaging over 20 years of experience each • Broad collective expertise across a range of specialties • Over 3,700 research reports and surveys published annually Technology Solutions • Capital: Proprietary product configurator analyzes thousands of possible configurations • Consumables: Item-level benchmarking and sophisticated analysis capabilities • Purchased Services: Sophisticated data and service contract analysis
Our Research: How to Outperform the Market • Challenge: Growing non-labor costs, increased risk, compliance mandates The CAGR for all healthcare expenditures is projected to grow at 6% annually from 2013 to 2022, according to a 2014 HSCA report. • Process: Identifying opportunities: 3 keys – cost, risk, process Understand your spend (AP review). Evaluate the ROI. Align stakeholders to ensure utilization. Manage the contract. Reduce your exposure. • Savings: Equipping hospitals with actionable data and research Vendors on GPO contracts are offered at a discount, but healthcare providers achieve greater savings when applying industry-leading benchmarks and research. medical devices15% healthcare IT14% purchased services30% medical/surgical11% %SAVINGS GPO 10% Medical Capital 15%PPI/Consumables 30% Purchased Services Status Quo Savings
Our Research: How to Outperform the Market • Execution: Managing contracts, risk and performance Centralize contracts and establish a formalized contracting process with transparency and accountability. Leverage healthcare subject-matter experts. • Alignment: Bridging the clinical, savings and contracting gap between stakeholders Coming together like never before, clinicians, physicians, department heads, supply chain, vendors, finance, compliance, audit and legal teams will be able to collaborate and use data to improve decision making and reduce risk for their health system and patients. financial accountability contract repository manage risk financial accountability
25% 20% 15% 10% 5% 0% Save more every month 5% sustainable improvement to operating margins 10% to 30% average savings in a purchased services category savings before after experience the direct impact purchased services savings fall straight to the bottom line. before after 20% 15% 4% 9% PURCHASED SERVICES OPERATING MARGIN Hospitals implementing Purchased Services’ best practices spend 25% less on purchased services. Hospitals with a defined Purchased Services Program quickly realize a 5% sustainable improvement in their operating margins.
Poll Question #1 Q. Do you have clinical outsourced services that have not been re-evaluated or re-contracted in 3 or more years? A. Yes B. No C. Unsure
SSM Purchased Services Transcription and Laundry Services – Strategic Services that needed a facelift HOWTO FINDTHE RIGHT FOCUS Immediate, high-impact savings • Look at top 10 • Then top 50 Best Practice 1. Set our goals 2. Formulate the plan 3. Implement Price is only one factor • Strategic Services • Regional Providers • OptimizeTechnology • Regulatory Compliance Implications • Risk
Transcription – Current State MModal • Is the incumbent the best choice? • How is the current pricing? • What do the clinicians think of the vendor? • How do we build a solid contract?
Laundry Services – Current State SevenVendors • What are existing obligations (e.g. Expire dates,Termination clauses)? • What is the current linen/laundry model? – On-Premise Laundry – Customer Owned Goods – Rental Service – Cooperative – Other –Vocational Services • What is price Unit Of Measure (UOM) – Clean or Dirty – Poundage or piece rates • What does regional stakeholders think of incumbent vendor? • Do we source for system agreement or leverage locally?
Purchased Services Categories Addressed Transcription • Identified asTop Spend • Negotiated on System level • Challenges beyond price • NewTechnology • Clinical Improvements Annual Spend $3.8M Laundry Services • Identified asTop Spend • Identified as Strategic Importance • Negotiated on local level • Challenges beyond price • Regulatory Compliance • Existing Relationships Annual Spend $7.2M Leveraged Existing Relationships
Best Practice Approach • Analyze spend • Rank the opportunities • Analyze T&C • Service performance • Utilization • Identify stakeholders • Perform interviews • Gather requirements • Many points of data • Scenario driven pricing • Service-based pricing • Engage incumbents • Bid the service • Pick the vendor • Define the contract terms • Monitor the spend • Monitor the service • Monitor the users • Monitor the quality Opportunity Identification Analyze the data Research Category Pricing Benchmarks Bid the Service Implement and Manage the Contract
The Opportunity Assessment Built a database with our contracts, AP and PCard data, centralizing our purchased services. Categorized the data, then prioritize projects based on our initiatives and our identified opportunities.
Gathering Requirements Understanding the Needs 1. Meet with key stakeholders 2. Utilize MD Buyline’s resources to identify action items for service category 3. Review payment history 4. Agree upon goals and expectations Transcription • Physicians • Health Information Management (HIM) • CIO/IHT • Supply chain • Quality • Legal Laundry • Environmental Services • Operations • Supply chain • Accounts Payable • Quality • Legal
Dialysis C-SUITE CONSULTANT DIALYSIS PROVIDER • Relationship with the dialysis provider since 2001 • Contracted: hemodialysis, CAPD,CRRT and apheresis • Parallon initially involved to negotiate contract • Could not achieve maximum savings SUPPLY CHAIN $$ MEMBER FACILITY • Benchmarked the contract • Identified $132K annual savings • Empowered the supply chain to achieve greater savings with MD Buyline’s recommendation • Believed in MD Buyline’s recommendation • Contracting achieved $142K savings annually • $10k over MDB • Achieved $71Ksavings over the contract term
Contracting Matters Dialysis • Service • Legal • Risk • Liability The best performing hospitals achieve 30% additional savings through better data research and contracting$$$$ $$$ • Better terms • Better price • Better service Ambulance Services • Legal requirements • Service requirements • Regulations • Risk • Liability
Poll Question #2 Q. Do you have local or regional outsourced services that have not been re-evaluated or re- contracted in 3 or more years due to local or regional regulatory issues? A. Yes B. No C. Unsure
Duration of Projects 5 months 5 -12 months Opportunity Identification Analyze the data Research Category Pricing Benchmarks Bid the Service Implement and Manage the Contract Opportunity Identification Analyze the data Research Category Pricing Benchmarks Bid the Service Implement and Manage the Contract
Transcription – Results Contracting and Pricing Improvements for added contract value SSM now saves $1.3M annually Course of Action • Negotiated new rates: too high for hospital volume • Terms and conditions were not industry best practice. Evergreen Clause and annualCPI • StandardizedTurnaround times to improve efficiency. • Explore Regional flexibility - Outsource Transcription Resolution • Achieved 35% cost reduction • Improved contract language for turnaround times • Waived Charges (Hardware and Maintenance) • Tiered pricing new Fluency Direct technology • EliminatedAnnual CPI for years 1-3 of 5 year agreement ($123K cost avoidance) • Achieved additional $1.2M – Separate Outsource Initiatives. RESULTS 35% reduction in previous contract rates Improved escalation clauses Option to renegotiate deal at years 4 and 5 of the contract. Added Fluency Direct Technology to improve efficiencies and drive further savings $1,356,264/YEAR COST REDUCTION
Laundry Services – Results Contracting and Pricing Improvements for added contract value SSM now saves $1.1M annually Course of Action • Negotiated benchmarked rates. (STL/JC) • Renegotiated billing method : soiled wet linen to clean dry (WI) • Regionalize 9 separate contracts with 4 vendors to 1 vendor.(WI) • Source for new Laundry supplier due to incumbent sale of market andAssessCBA of COG vs. Rental. (SOIL) • RenegotiateT &Cs – Strong language, penalties, rates too high, auto increases and change per piece UOM. (MV) Resolution • Achieved reduced rates. $291K • Achieved savings of $240K • Achieved Aggregate contract savings of $322K • ReducedVendor Pool from 4 to 1. Awarded new Supplier and transitioned from COG model to Rental model. Achieved $170K savings. • Achieved new contract terms and changed per piece UOM to clean poundage. $110K RESULTS Achieved 16% Annual Cost Reduction Contract terms improvements Improved Competitive rates per pound Added SLAs for quality $1,132,341Annual Cost Reduction
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Achieving Sustainable Savings in Purchased Services Through Best Practices

  • 1. SSM Health and MD Buyline Achieving Sustainable Savings in Purchased Services through Best Practices
  • 2. Presenters David Rodriguez SVP Marketing • 15 years of experience in healthcare product marketing for revenue cycle, supply chain and payer solutions • Previous positions held at Trizetto, Interpoint, Concuity and The Advisory Board Cris O’Neal System Contract Manager – Purchased Services SSM Health Care Corporation • Manager of SSM System-wide Purchased Services • Appointed member -Premier National Purchased Services Strategic Planning Committee • Active Member of CCG Purchased Services Committee • Active Member of AHRMM Education Committee
  • 3. Agenda • Introductions to MD Buyline and SSM Health Systems • Overview of Purchased Services • SSM –Transcription and Laundry Services • Purchased Services Best Practices • SSM –Transcription and Laundry Services Results • Q&A
  • 4. SSM Health - The Facts Mission-Through our exceptional health care services, we reveal the healing presence of God. • 1st Health-care Organization to receive Malcolm Baldridge Quality Award • 19 Hospitals in 4 States • 30,000 Employees • 3,900 Licensed Beds Annual Spend on Purchased Services • $300 million • 20% of system’s annual expenditures
  • 5. MD Buyline – The Facts Industry-Leading and Proprietary Data • 500,000+ unique products and services tracked • 100+ clinical specialty areas covered • 60,000+ quotes, contract reviews, and analyses annually • 30+ years of historical data Clinical and Financial Research • 600 years of collective experience, averaging over 20 years of experience each • Broad collective expertise across a range of specialties • Over 3,700 research reports and surveys published annually Technology Solutions • Capital: Proprietary product configurator analyzes thousands of possible configurations • Consumables: Item-level benchmarking and sophisticated analysis capabilities • Purchased Services: Sophisticated data and service contract analysis
  • 6. Our Research: How to Outperform the Market • Challenge: Growing non-labor costs, increased risk, compliance mandates The CAGR for all healthcare expenditures is projected to grow at 6% annually from 2013 to 2022, according to a 2014 HSCA report. • Process: Identifying opportunities: 3 keys – cost, risk, process Understand your spend (AP review). Evaluate the ROI. Align stakeholders to ensure utilization. Manage the contract. Reduce your exposure. • Savings: Equipping hospitals with actionable data and research Vendors on GPO contracts are offered at a discount, but healthcare providers achieve greater savings when applying industry-leading benchmarks and research. medical devices15% healthcare IT14% purchased services30% medical/surgical11% %SAVINGS GPO 10% Medical Capital 15%PPI/Consumables 30% Purchased Services Status Quo Savings
  • 7. Our Research: How to Outperform the Market • Execution: Managing contracts, risk and performance Centralize contracts and establish a formalized contracting process with transparency and accountability. Leverage healthcare subject-matter experts. • Alignment: Bridging the clinical, savings and contracting gap between stakeholders Coming together like never before, clinicians, physicians, department heads, supply chain, vendors, finance, compliance, audit and legal teams will be able to collaborate and use data to improve decision making and reduce risk for their health system and patients. financial accountability contract repository manage risk financial accountability
  • 8. 25% 20% 15% 10% 5% 0% Save more every month 5% sustainable improvement to operating margins 10% to 30% average savings in a purchased services category savings before after experience the direct impact purchased services savings fall straight to the bottom line. before after 20% 15% 4% 9% PURCHASED SERVICES OPERATING MARGIN Hospitals implementing Purchased Services’ best practices spend 25% less on purchased services. Hospitals with a defined Purchased Services Program quickly realize a 5% sustainable improvement in their operating margins.
  • 9. Poll Question #1 Q. Do you have clinical outsourced services that have not been re-evaluated or re-contracted in 3 or more years? A. Yes B. No C. Unsure
  • 10. SSM Purchased Services Transcription and Laundry Services – Strategic Services that needed a facelift HOWTO FINDTHE RIGHT FOCUS Immediate, high-impact savings • Look at top 10 • Then top 50 Best Practice 1. Set our goals 2. Formulate the plan 3. Implement Price is only one factor • Strategic Services • Regional Providers • OptimizeTechnology • Regulatory Compliance Implications • Risk
  • 11. Transcription – Current State MModal • Is the incumbent the best choice? • How is the current pricing? • What do the clinicians think of the vendor? • How do we build a solid contract?
  • 12. Laundry Services – Current State SevenVendors • What are existing obligations (e.g. Expire dates,Termination clauses)? • What is the current linen/laundry model? – On-Premise Laundry – Customer Owned Goods – Rental Service – Cooperative – Other –Vocational Services • What is price Unit Of Measure (UOM) – Clean or Dirty – Poundage or piece rates • What does regional stakeholders think of incumbent vendor? • Do we source for system agreement or leverage locally?
  • 13. Purchased Services Categories Addressed Transcription • Identified asTop Spend • Negotiated on System level • Challenges beyond price • NewTechnology • Clinical Improvements Annual Spend $3.8M Laundry Services • Identified asTop Spend • Identified as Strategic Importance • Negotiated on local level • Challenges beyond price • Regulatory Compliance • Existing Relationships Annual Spend $7.2M Leveraged Existing Relationships
  • 14. Best Practice Approach • Analyze spend • Rank the opportunities • Analyze T&C • Service performance • Utilization • Identify stakeholders • Perform interviews • Gather requirements • Many points of data • Scenario driven pricing • Service-based pricing • Engage incumbents • Bid the service • Pick the vendor • Define the contract terms • Monitor the spend • Monitor the service • Monitor the users • Monitor the quality Opportunity Identification Analyze the data Research Category Pricing Benchmarks Bid the Service Implement and Manage the Contract
  • 15. The Opportunity Assessment Built a database with our contracts, AP and PCard data, centralizing our purchased services. Categorized the data, then prioritize projects based on our initiatives and our identified opportunities.
  • 16. Gathering Requirements Understanding the Needs 1. Meet with key stakeholders 2. Utilize MD Buyline’s resources to identify action items for service category 3. Review payment history 4. Agree upon goals and expectations Transcription • Physicians • Health Information Management (HIM) • CIO/IHT • Supply chain • Quality • Legal Laundry • Environmental Services • Operations • Supply chain • Accounts Payable • Quality • Legal
  • 17. Dialysis C-SUITE CONSULTANT DIALYSIS PROVIDER • Relationship with the dialysis provider since 2001 • Contracted: hemodialysis, CAPD,CRRT and apheresis • Parallon initially involved to negotiate contract • Could not achieve maximum savings SUPPLY CHAIN $$ MEMBER FACILITY • Benchmarked the contract • Identified $132K annual savings • Empowered the supply chain to achieve greater savings with MD Buyline’s recommendation • Believed in MD Buyline’s recommendation • Contracting achieved $142K savings annually • $10k over MDB • Achieved $71Ksavings over the contract term
  • 18. Contracting Matters Dialysis • Service • Legal • Risk • Liability The best performing hospitals achieve 30% additional savings through better data research and contracting$$$$ $$$ • Better terms • Better price • Better service Ambulance Services • Legal requirements • Service requirements • Regulations • Risk • Liability
  • 19. Poll Question #2 Q. Do you have local or regional outsourced services that have not been re-evaluated or re- contracted in 3 or more years due to local or regional regulatory issues? A. Yes B. No C. Unsure
  • 20. Duration of Projects 5 months 5 -12 months Opportunity Identification Analyze the data Research Category Pricing Benchmarks Bid the Service Implement and Manage the Contract Opportunity Identification Analyze the data Research Category Pricing Benchmarks Bid the Service Implement and Manage the Contract
  • 21. Transcription – Results Contracting and Pricing Improvements for added contract value SSM now saves $1.3M annually Course of Action • Negotiated new rates: too high for hospital volume • Terms and conditions were not industry best practice. Evergreen Clause and annualCPI • StandardizedTurnaround times to improve efficiency. • Explore Regional flexibility - Outsource Transcription Resolution • Achieved 35% cost reduction • Improved contract language for turnaround times • Waived Charges (Hardware and Maintenance) • Tiered pricing new Fluency Direct technology • EliminatedAnnual CPI for years 1-3 of 5 year agreement ($123K cost avoidance) • Achieved additional $1.2M – Separate Outsource Initiatives. RESULTS 35% reduction in previous contract rates Improved escalation clauses Option to renegotiate deal at years 4 and 5 of the contract. Added Fluency Direct Technology to improve efficiencies and drive further savings $1,356,264/YEAR COST REDUCTION
  • 22. Laundry Services – Results Contracting and Pricing Improvements for added contract value SSM now saves $1.1M annually Course of Action • Negotiated benchmarked rates. (STL/JC) • Renegotiated billing method : soiled wet linen to clean dry (WI) • Regionalize 9 separate contracts with 4 vendors to 1 vendor.(WI) • Source for new Laundry supplier due to incumbent sale of market andAssessCBA of COG vs. Rental. (SOIL) • RenegotiateT &Cs – Strong language, penalties, rates too high, auto increases and change per piece UOM. (MV) Resolution • Achieved reduced rates. $291K • Achieved savings of $240K • Achieved Aggregate contract savings of $322K • ReducedVendor Pool from 4 to 1. Awarded new Supplier and transitioned from COG model to Rental model. Achieved $170K savings. • Achieved new contract terms and changed per piece UOM to clean poundage. $110K RESULTS Achieved 16% Annual Cost Reduction Contract terms improvements Improved Competitive rates per pound Added SLAs for quality $1,132,341Annual Cost Reduction