Tag: hospital cost control

Nurse checking patients blood pressure

Clinical Services in Healthcare: When to Outsource & When Not To

By : | Published On : June 20, 2018

Key Takeaways

Choosing which clinical services to subcontract is not a straightforward task; nonetheless, it can be a time and money saver. Most hospitals have their radiology interpretations, laboratory testing, remote patient monitoring, and tele-ICU collaborations done by outside experts. This not only frees up more time for doctors to attend to patients but also facilitates faster results. However, outsourcing can also be risky, such as having a disparity in quality or losing a certain degree of control. Intelligent hospitals monitor costs, turnaround times, and patient outcomes, using software like Valify to help with decisions and ensure that outsourcing is indeed a value-adding activity.

One of the hardest decisions that a healthcare leader has to make is when to outsource clinical services. Hospitals that have to pay for clinical services at the same time that they are expected to provide high-quality patient care need a strong guideline to know which services to outsource and which to retain in-house. Healthcare outsourcing, mainly for clinical functions, is transforming the care delivery process and the way organizations manage their expenses. The healthcare outsourcing market, which is mainly driven by international demand, is expanding very quickly as providers are trying to attain better operational efficiency.

Why This Decision Matters in 2026

Today’s healthcare environment is more complex and competitive than ever:

These trends mean hospitals must understand not just if they should outsource, but when and how outsourcing fits into their strategy.

What Are Clinical Services in Healthcare?

“Clinical services” include all activities directly related to patient care, diagnosis, treatment, and therapeutic support. Common Clinical Services That May Be Outsourced

  • Imaging interpretation (radiology reads)
  • Pathology or specialized lab work
  • Dialysis support services
  • Tele‑ICU or remote monitoring
  • Pharmacy compounding or clinical support
  • Specialty clinician consult services

These differ from administrative outsourcing, like billing or scheduling; they affect clinical outcomes, quality, and patient experience.

The Growing Role of Outsourcing in Healthcare

Outsourcing clinical functions is no longer a niche strategy. Healthcare providers are increasingly working with third‑party specialists because:

  • Staffing shortages make it hard to recruit and retain specialized clinical professionals.
  • Hospitals face rising operational costs and need predictable budgets.
  • New technologies enable remote diagnostics and monitoring.
  • Regulatory complexity makes in‑house management more burdensome.

Today, hospitals can partner with outside specialists to deliver certain clinical services without compromising quality or continuity of care.

Benefits of Outsourcing Clinical Services

Let’s examine the fundamental reasons why hospitals choose to contract clinical services and how these reasons correspond with the overall business and clinical objectives.

  • Access to Specialized Talent

By outsourcing, hospitals get a chance to use the facilities of the most skilled professionals without incurring the burden of full in-house staffing costs. For instance, rural or community hospitals may send their radiology readings to imaging groups having the specialized expertise for better accuracy.

  • Better Control Over Costs

Most hospitals find that outsourcing leads to the reduction of costs in the whole process, particularly for the services that are highly specialized or require expensive equipment. Outsourcing changes the capital costs (CapEx) into predictable operating costs (OpEx), thus allowing the leaders to budget more confidently.

  • Faster Results for Critical Services

The dedicated outsourced partners generally provide faster results, especially in the areas of imaging reads or remote patient monitoring. This can also result in freeing up clinicians so that they can concentrate more on patient care, which will not only improve outcomes but also staff satisfaction.

  • Flexibility to Scale Up or Down

If there is an increase in the number of patients, outsourcing clinical teams can also increase according to the demand. This would eliminate the long-term hiring and training efforts, which are often costly. Hospitals that adopt outsourcing strategically can even increase or decrease their services without causing a major disruption to their workforce.

Risks & When NOT to Outsource Clinical Services

Outsourcing clinical functions isn’t risk‑free. It may be the wrong choice when:

  • Quality Control Is Essential

Some hospitals deliver consistently higher quality care because their internal teams understand organizational standards and culture. If outsourcing partners cannot meet quality benchmarks, patient outcomes may suffer.

  • Loss of Operational Control

Outsourcing means relying on an external team to manage workflows, data, and clinical protocols. This can be challenging if the partner’s processes are not tightly integrated. If there are no clear Service Level Agreements (SLAs) in the contracts, there can be gaps in care and accountability left unattended. 

  • Cultural or Strategic Misalignment

Certain clinical services need to be well integrated with the internal teams and the entire workflow of the institution. It is a must for outsourced partners to be on the same page with the institution in terms of values and goals; otherwise, the whole service delivery might seem alienating. 

  • Data Security and Compliance Concerns

One of the key elements of clinical outsourcing is the strictest following of privacy regulations (like HIPAA). If the vendors are lacking in the area of compliance, the probability of a data breach happening is greater.  Key takeaway: Outsourcing should not result in violation of patient privacy or compliance with regulations. 

How to Decide: Key Indicators for Outsourcing

To make a smart decision and avoid common pitfalls, hospitals should track both financial and quality indicators.

Financial KPIs to Consider

Metric What It Tells You
Cost per clinical service Whether internal costs exceed national or peer benchmarks
Spend variance over time Gaps between budgeted and actual clinical spend
Capital vs. operating costs Potential savings from outsourcing
Return on investment (ROI) Whether outsourcing yields measurable savings

Using a tool like Valify’s spend analytics, hospitals can uncover hidden opportunities and risks in clinical service spend.

Operational & Quality Metrics

  • Turnaround time for lab or imaging services
  • Patient outcome measures (e.g., readmission rates)
  • Clinical compliance scores and error rates
  • Patient satisfaction scores

A rising trend in delays or quality dips may signal that internal resources are stretched too thin.

Capacity & Strategic Considerations

Ask questions like:

  • Does our facility have the staffing to support this service internally?
  • Is demand for this clinical service growing faster than we can scale?
  • Would outsourcing improve patient experience or clinical outcomes?

If the answer is “yes” to multiple questions, an outsourced evaluation is likely warranted.

Best Practices for Outsourcing Clinical Services

Once the decision is made to outsource, execute with a strategy that protects quality and maximizes value.

  • Choose Partners With Proven Outcomes

Look for vendors with benchmarked performance data, ideally tied to quality and turnaround metrics.

  • Align Outsourcing With Internal Goals

Make sure the outsourcing partnership supports your broader clinical and operational strategy, not just cost reduction.

This means aligning performance metrics, communication frequency, and reporting structures.

  • Build a Strong Governance Framework

Set up review cadences, oversight committees, and performance dashboards with clear thresholds for quality and compliance.

Valify’s WorkPlan dashboard and benchmarking tools help ensure that outsourced clinical services remain on track.

  • Use Data to Monitor Performance

Track outcomes over time using objective data:

  • Monthly performance dashboards
  • Quality benchmarks vs. industry standards
  • Cost savings compared to forecasted internal costs

Real‑time visibility enables continuous improvement, not just quarterly or annual reviews.

Real‑World Examples of Clinical Outsourcing

Example 1: Radiology Reporting

A mid‑sized hospital outsourced radiology interpretations during peak hours. Turnaround time improved by 25%, while internal staff could focus on urgent inpatient needs.

Example 2: Specialized Laboratory Testing

A hospital without high‑complexity lab equipment partners with a specialized vendor for advanced tests. Internal costs drop while diagnostic accuracy improves.

Example 3: Remote Patient Monitoring

An integrated health system deployed outsourced remote monitoring services for chronic care patients. Patient follow‑ups improved, and hospital readmissions fell.

Decide, Outsource, Excel with Valify

Outsourcing clinical services can be a great advantage for hospitals, but only if the decision is backed up by data and is in line with the goals of patient care. It is not merely a matter of saving money; rather, it involves making intelligent choices that ensure quality and efficiency.

We provide hospitals with a comprehensive view of our Purchased Services expense, which covers clinical categories as well. Our analytics, benchmarking tools, and contract management solutions give you the insights essential for making decisions regarding the outsourcing of certain services or keeping them in-house.

Are you curious about how outsourcing can lead to the efficiency of the operations and better healthcare?

Schedule a demo with Valify today and get rid of the uncertainties in your decision-making process.

Frequently Asked Questions:

Which clinical services in hospitals should be recommended for outsourcing at the very beginning?

The top candidates include services that require specialized skills and involve high equipment costs: the likes of radiology reads, lab tests, tele-ICU support, and pharmacy compounding. Also, consider the areas where the internal staff are overworked or where the technology costs are the highest to start with.

What are the implications of outsourcing on patient wait times and care quality?

Outsourced specialists would probably be able to provide quicker results, which would consequently reduce the possibilities of delays for imaging or lab work. This, in turn, will allow the in-house clinicians to concentrate more on the bedside care which is very likely to improve the whole patient’s experience.

What should I be cautious of when selecting a clinical services vendor?

You should pay attention to the quality benchmarks, the reliability of the turnaround time, and the strict compliance standards. A difference in culture or lack of communication can lead to gaps in care, so always do a thorough check.

How is outsourcing actually saving my hospital money?

Monitor costs by service, ROI, and operating vs. capital expenses. Actual spending compared to industry benchmarks not only shows the true savings but also helps identify areas for further improvement.

Can benchmarking and data really point out the specific services that should be outsourced?

Definitely. Data analytics illuminate the ‘hidden’ costs, areas of discrepancies in performance, and places where efficiency can be increased. Expanding tools such as Valify’s spend insights allow empowered and informed, evidence-based decision-making from the leaders.

Marketplace Research

How to Distinguish a Vendor from a Strategic Partner in Healthcare

By : | Published On : November 29, 2017

Key Takeaways

In healthcare, vendors deliver services. Strategic partners stay involved when things change. The difference matters most in purchased services, which affect daily operations and make up a large share of hospital spend. Managing them transactionally leads to gaps in visibility, pricing, and accountability. A partner model brings clearer insight, steadier oversight, and more predictable outcomes.

Healthcare leaders are under real pressure to manage costs while keeping operations stable. According to the American Hospital Association, non-labor expenses are among the fastest-growing components of hospital operating costs, driven largely by contracted and purchased services.

As these services continue to expand across departments and facilities, the difference between working with a vendor and working with a strategic partner is no longer abstract. It shows up in budgets, day-to-day operations, and the experience of patients and staff.

Why Healthcare Often Confuses Vendors with Partners

Healthcare organizations rely on a wide ecosystem of external providers to keep daily operations running. Environmental services, facilities support, IT services, clinical support functions, and administrative services are often outsourced across multiple vendors and contracts. Over time, many of these relationships are referred to as “partnerships,” even when the structure of the relationship never moved beyond basic service delivery.

This confusion happens for a few reasons. Vendors often use partnership language during sales and renewal cycles. Account teams check in regularly. Contracts are renewed year after year. From the surface, the relationship feels collaborative. But in practice, many of these arrangements remain transactional. Expectations are never fully aligned, accountability is unclear, and performance issues repeat without meaningful resolution.

In healthcare, where complexity and risk are high, this gap between language and reality becomes costly.

What a Vendor Relationship Looks Like in Healthcare

A vendor relationship is defined by execution within a fixed scope. The vendor agrees to deliver a specific service, under specific terms, for a specific price. Success is measured by whether the service was delivered as contracted.

In healthcare, vendors typically:

  • Focus on fulfilling defined tasks or services
  • Operate independently within their contract boundaries.
  • Provide periodic reporting, often limited in detail.
  • Respond to issues once they surface

This model works in situations where services are discrete and risk is limited. The challenge arises when vendor relationships are expected to support broader operational or financial goals they were never designed to own. Vendors are not structured to manage system-wide alignment, anticipate downstream impacts, or continuously optimize performance across facilities.

What Defines a Strategic Partner in Healthcare

In healthcare, the difference between a vendor and a partner rarely shows up on day one. It shows up later, once systems are live, budgets tighten, or something doesn’t go as planned.

A strategic partner operates differently from the start, even if it’s subtle. They pay attention to how the organization actually works, not just what’s written in the scope. They understand that decisions made in one department ripple into others, and that efficiency, compliance, and patient experience are rarely isolated concerns.

Most importantly, partners don’t disappear after delivery. When outcomes drift or priorities change, they stay involved. They don’t just report what happened. They help work through what to do next.

You can usually tell whether a relationship was built for the long term when conditions shift. Market pressure, staffing gaps, regulatory changes, or unexpected operational strain tend to expose whether a provider was there for continuity or convenience.

The Core Differences That Matter in Healthcare Operations

The vendor-partner distinction becomes clearer once you look at how work actually gets done inside a health system.

  • Decision-Making and Governance

In many vendor relationships, decisions live in separate lanes. Each party focuses on its own responsibilities, and conflicts are addressed as they arise. When site-level needs conflict with system-wide priorities, resolution often depends on escalation rather than structure.

Partnerships introduce a different dynamic. Decision paths are clearer. There’s a shared understanding around tradeoffs. Conversations happen earlier, before small misalignments turn into larger operational problems. 

  • Transparency and Data Visibility

A common frustration with vendor-led models is timing. Information arrives late, summarized, or disconnected across facilities. By the time leaders see a problem, the cost or disruption has already landed.

Partners operate with fewer blind spots. They surface detail earlier, keep information flowing, and help teams see patterns instead of isolated data points. That visibility doesn’t just inform decisions, it prevents unnecessary ones.

  • Accountability Under Pressure

Pressure is where the difference really shows. When issues surface, vendor relationships often revert to contract language. Responsibility gets fragmented, and resolution slows while ownership is debated.

Partners stay present. They participate in working through the issue, help identify what went wrong, and stay engaged until it’s addressed. Accountability doesn’t shift when things get uncomfortable. That consistency builds trust over time.

  • Performance Measurement and Improvement

Vendor performance is usually reviewed in hindsight, against predefined metrics. There’s limited context for whether results are competitive or consistent across the organization.

Partnerships take a longer view. Performance is compared, trends are watched, and lessons from one area inform decisions elsewhere. Improvement doesn’t reset every quarter. It builds.

Here’s how the difference plays out in real hospital operations:

Area Vendor Relationship Strategic Partner Relationship
Scope of involvement Delivers a defined service Supports outcomes beyond delivery
Decision-making Made independently Shared, structured decision-making
Visibility Limited, often delayed reporting Ongoing, transparent insight
Performance review Periodic and historical Continuous and forward-looking
Accountability Ends at contract terms Shared ownership of outcomes
Response to issues Reactive Proactive and collaborative
Fit for purchased services Breaks down at scale Designed for complexity

Why Purchased Services Require a Partner Model

Purchased Services Touch Every Part of the Hospital

Purchased services are not isolated line items. They support daily hospital operations across departments and facilities, from environmental services and IT to clinical and administrative support. Because these services cut across teams and locations, decisions made in isolation often create inconsistencies elsewhere in the system.

Transactional Management Breaks at Scale

In many hospitals, purchased services account for 40–50% of operating expenses, yet they are often managed through fragmented contracts and limited visibility. When handled transactionally, this leads to inconsistent pricing, off-contract spend, redundant vendors, and higher compliance risk. Over time, these gaps quietly compound.

Continuous Services Require Continuous Oversight

Purchased services are ongoing, not one-time purchases. They change with utilization, market conditions, and operational needs. Managing them effectively requires governance, transparency, and shared accountability. A vendor-only approach cannot sustain this level of coordination. A partner model can.

How Strategic Partnership Improves Purchased Services Outcomes

A strategic partner model gives hospitals control instead of surprises. Purchased services move from reactive oversight to steady, predictable management.

  • Clear line-item visibility

Spend is no longer hidden in summaries. Teams can see where dollars go and spot issues early.

  • Market-based pricing context

Rates are evaluated against real benchmarks, not outdated contracts or assumptions.

  • Ongoing performance monitoring

Vendor performance is tracked continuously, not just during renewals or escalations.

  • Earlier compliance detection

Off-contract spend and policy gaps surface sooner, reducing risk.

  • Sustainable savings

Savings are maintained over time rather than achieved once and lost.

Most importantly, teams stop reacting to problems after they appear. Decisions become proactive, consistent, and data-driven.

How Valify Supports a Strategic Partner Model

Valify enables this approach by providing the structure and insight needed to manage purchased services strategically.

Valify’s spend analytics technology cleanses and categorizes over 95% of non-labor spend across 1,400+ purchased services categories, giving hospitals true visibility into where dollars are going. Purchased services benchmarking and PinPoint Benchmarks provide context that supports smarter negotiations.

The preferred supplier network, contract management tools, and WorkPlan dashboard support continuous monitoring, compliance tracking, and performance management. Advisory expertise helps align stakeholders and establish governance so insight turns into action.

Valify does not replace internal teams. It supports better decisions over time.

How Healthcare Leaders Can Evaluate Vendors vs Partners

Healthcare leaders can better understand the true nature of their relationships by asking a few practical questions. The answers often reveal more than any contract language.

  • Who owns performance monitoring after implementation?

If oversight falls entirely on internal teams, the relationship is likely transactional. Strategic partners stay engaged and help track performance over time.

  • How transparent and timely is the data provided?

Partners share clear, timely insight that supports decision-making. Limited or delayed reporting is a sign of a vendor model.

  • How are conflicts between site and system priorities resolved?

Vendors typically defer these decisions back to the hospital. Partners help balance local needs with system-wide goals.

  • How are risks identified before they escalate?

Strategic partners surface issues early and participate in mitigation. Vendors often respond only after problems appear.

  • What happens when conditions change?

When utilization, markets, or priorities shift, partners adapt with you. Vendors tend to stay fixed to the original scope.

Taken together, these answers make it clear whether a relationship is built for execution or for long-term outcomes.

From Insight to Outcomes with Valify

In hospitals, relationships don’t become valuable just because they last a long time. They become valuable when things get complicated, and the structure still holds. Purchased services tend to do exactly that. They spread across departments, budgets, and facilities, and they rarely behave the way a contract expects them to.

As these services take up more space in operating spend, hospitals are forced to be more selective. Some vendors are fine with staying transactional. Others sit too close to daily operations, compliance, and cost control to be managed that way. Those relationships need clearer visibility, steadier oversight, and fewer surprises.

Valify exists in that space. Not to replace internal teams or dictate decisions, but to make purchased services easier to see, easier to manage, and harder to lose control of when conditions change.

FAQs:

What’s the real difference between a vendor and a strategic partner in healthcare?

A vendor delivers what’s written in the agreement. A strategic partner stays involved after delivery and helps manage what happens next.

Why don’t purchased services work well with a vendor-only approach?

Because they don’t stop once they’re implemented. They run continuously, change with demand, and touch more than one team. That makes them difficult to manage through periodic reviews alone.

How can a hospital tell if a supplier is actually acting like a partner?

Look at who’s paying attention after go-live. Partners stay engaged, bring issues forward early, and help work through tradeoffs instead of stepping back.

Where does spend analytics fit into this?

It gives teams a clearer picture of what’s happening beneath the surface. Without that visibility, decisions are mostly reactive.

What does benchmarking really help with?

It provides context. It shows whether pricing and performance are in line with the market and where small gaps can turn into bigger problems if ignored.

Purchased Services Analytics

Why Purchased Services Audits Are Becoming Critical for Hospitals

By : | Published On : September 20, 2017

Key Takeaways

Purchased services aren’t new. What’s new is how much risk they carry when no one is really watching them. In most hospitals, service vendors pile up over time. Contracts get renewed automatically. Pricing drifts. Some services stop being used the way they once were, but the spend keeps going anyway. Because everything is spread across departments, no one sees the full picture unless they stop and look for it. That’s what audits do. They slow things down just enough to show what’s actually in place, which vendors are active, what’s being paid for, and whether it still makes sense. When hospitals use real AP data and add benchmarking, conversations with vendors change. Decisions get easier. Governance improves. Bottom line: if hospitals want control over service spend, they need visibility first. Audits are how that visibility starts.

Purchased services quietly support nearly every function inside a hospital. Environmental services, food and nutrition, facilities support, IT, transport, outsourced clinical support, these services keep operations running day after day without much attention.

For a long time, purchased services were treated as background spend. They were necessary, but rarely strategic. As long as services were delivered and invoices were paid, they stayed out of focus.

That reality has changed. Financial pressure, operational complexity, and tighter oversight expectations have pushed purchased services into the spotlight. Audits are no longer about squeezing savings wherever possible. They are about visibility, control, and understanding how service spend truly impacts the organization.

Purchased Services Represent One of the Largest Controllable Costs

Purchased services make up a meaningful portion of hospital operating budgets. In many health systems, they represent roughly a quarter of total operating spend. That places them on par with other major cost categories that receive far more attention.

Because these services span nearly every department, they influence both cost and performance. Decisions made years ago around service vendors can still shape budgets today, often without anyone realizing it.

Why This Spend Often Escapes Strategic Oversight

Purchased services are not clinical supplies. They are spread across departments and facilities, sourced at different times, and managed by different teams. Rarely are they viewed in aggregate.

Without a centralized view, leadership may know the total spend number but lack insight into vendor overlap, pricing consistency, or whether services still align with current needs. This makes strategic oversight difficult, even in well-managed organizations.

Why Purchased Services Are Structurally Hard to Manage

  • Decentralized Purchasing Creates Fragmentation

Most purchased services start with a practical need. A department needs something done, finds a vendor that can handle it, and moves ahead so work doesn’t stall. Procurement may review the contract, but usually after the decision has already been made.

When this happens repeatedly across departments and facilities, fragmentation sets in. The same type of service gets contracted multiple times. Different vendors do similar work. Pricing isn’t consistent, and no one is looking at it all together because no one was meant to.

  • Contracts Vary Widely in Structure and Terms

Purchased services contracts tend to reflect the moment they were signed. Some are detailed, others are bare-bones. Many are written on vendor templates, not hospital standards.

Pricing models, renewal language, escalation clauses, and service definitions change from one agreement to the next. As years pass, those differences pile up. At that point, comparing contracts isn’t straightforward, and managing them the same way across the organization becomes unrealistic.

  • Lack of Standard Pricing Makes Comparison Difficult

Services don’t price like products. There’s no unit cost to line up and compare. What a hospital pays often depends on local market conditions, how long the vendor relationship has existed, and how the original deal was structured.

Without benchmarks, pricing decisions rely on what feels reasonable rather than what the market is actually doing. That makes it hard to know whether a rate is fair, outdated, or simply accepted because it hasn’t been questioned.

What Hospitals Risk When Vendors Are Not Audited

  • Pricing and Contract Terms Drift Over Time

When contracts are not reviewed regularly, pricing and terms often drift away from what was originally negotiated. Billing may no longer align with contract language, and errors can persist unnoticed for years.

  • Paying for Services That No Longer Match Actual Use

Services that once made sense may no longer be used at the same level or at all. Workflow changes, staffing shifts, and new technology can reduce the need for certain services, while contracts continue unchanged.

  • Automatic Renewals Limit Flexibility

Many purchased services contracts renew automatically. Without proactive review, hospitals miss opportunities to renegotiate scope, pricing, or vendor mix. Over time, flexibility erodes and outdated agreements remain in place.

The Operational Impact of Unreviewed Purchased Services

  • Inconsistent Service Performance Across Facilities

When no one is checking in regularly, service quality starts to depend on the location, not the contract. One site stays on top of a vendor. Another doesn’t. Nothing is technically “wrong,” but the experience isn’t the same everywhere, and over time that gap becomes noticeable.

  • Increased Compliance and Governance Challenges

Unreviewed contracts tend to blur the rules. Spend slips off contract. Vendors stay active longer than they should. New ones get added because it’s easier than revisiting an old agreement. None of this usually happens at once, but it adds up and makes governance harder to hold together.

  • Internal Friction Between Departments

Finance sees the numbers. Operations sees the day-to-day issues. Procurement sees the contracts. When those views don’t line up, conversations slow down. Decisions get pushed back, not because people disagree, but because no one has the full picture.

Purchased Services Play a Direct Role in Patient Experience

Services That Patients Notice Immediately

Patients notice environmental services, food and nutrition, transport, and support services right away. These services shape comfort, safety, and overall perception of care.

When Cost Decisions Quietly Affect Quality

When services are managed purely as expenses, quality can suffer quietly. Without audits, there is limited accountability to ensure cost decisions do not undermine performance or patient experience.

What a Modern Purchased Services Audit Actually Involves

  • Starting With Accounts Payable Data

Accounts payable data shows what is actually happening, not just what contracts say should happen. Audits begin by examining real spend and comparing it to contract assumptions at the vendor level.

  • Understanding Vendor Overlap and Concentration

Audits reveal how many vendors are providing similar services within the same category. High overlap often indicates opportunities to simplify, consolidate, or renegotiate.

  • Reviewing Utilization and Ongoing Value

Audits help answer basic questions: Is the service still necessary? Does the cost reflect the benefit being delivered today?

Why Benchmarking Is Central to Effective Audits

Why Purchased Services Pricing Is Hard to Judge in Isolation

Local contracts and limited transparency make it difficult to judge pricing without context. What seems reasonable in isolation may be far from market norms.

How Peer Benchmarking Changes Decision-Making

Benchmarking provides market context. Comparing pricing, terms, and vendor market share against peer hospitals strengthens negotiating positions and supports more confident decisions.

Turning Audits Into Ongoing Governance

  • The Limits of One-Off Audit Exercises

One-time audits often produce short-term savings that fade over time. Without follow-through, old habits return.

  • Centralized Contract Visibility as a Control Point

Centralized visibility into contracts supports renewal awareness and consistent terms across facilities.

  • Aligning Departments Around a Shared Process

Clear ownership and shared processes reduce surprises and improve cooperation between departments.

How Valify Supports Purchased Services Audits at Scale

  • Creating Visibility Across Purchased Services Categories

Valify cleanses and categorizes accounts payable data across purchased services categories, providing clear, line-item insight.

  • Providing Market Context Through Benchmarking

Valify’s benchmarking shows vendor market share and competitive pricing context, supporting informed negotiations.

  • Supporting Sustainable Oversight and Compliance

Monitoring spend patterns and tracking initiatives helps hospitals maintain control and sustain improvements.

Why Regular Audits Matter for Hospitals Going Forward

  • Financial Control Without Undermining Care

Audits support savings that align with service performance, not at its expense.

  • Operational Simplicity and Reduced Risk

Fewer vendors and clearer governance reduce operational complexity.

  • Stronger Position for Long-Term Stability

Purchased services audits are not a short-term cost-cutting tactic. They are a management discipline.

Visibility is the Starting Point for Control

Hospitals can’t control service spend they don’t actually see. When purchased services sit in the background, decisions end up being made on habit, not information. Audits force a pause. They show what’s in place, what’s still useful, and what’s simply been left untouched. That kind of visibility is what allows hospitals to manage service spend with the same seriousness they already apply to labor and supplies.

If you want to see how clearer visibility and benchmarking can support better decisions around purchased services, schedule a demo with Valify.

Frequently Asked Questions:

What qualifies as purchased services in a hospital?
 Purchased services are outside services hospitals rely on to function every day. This includes things like environmental services, food and nutrition, facilities maintenance, IT and telecom, transport, clinical support, and administrative support.

How often should purchased services vendors be audited?
Most hospitals start by reviewing their larger service categories once a year. Ongoing checks in between help catch changes early, before contracts or spend drift too far.

What information is needed to conduct an audit?
 Accounts payable data usually tells the real story. Contracts, renewal terms, and a basic understanding of how services are actually being used fill in the gaps. Benchmarking helps add market context.

How does benchmarking improve audit outcomes?
 Benchmarking shows how pricing and terms compare to similar hospitals. That context makes it easier to have direct, informed conversations with vendors and make better sourcing decisions.

Can purchased services audits affect patient satisfaction?
 Yes. Many purchased services directly influence patient comfort, safety, and experience.

Paying Your Collection Agency

Are You Overpaying Your Medical Debt Collection Agency?

By : | Published On : May 19, 2015

Key Takeaways

Hospitals can overpay collection agencies without realizing it. Contingency fees range from 15 to 40 percent, and older or complex accounts cost more. Hidden costs include staff time, lost control, and patient frustration. Tracking spend, recovery rates, and agency performance helps uncover inefficiencies. Collect upfront, segment accounts, negotiate tiered fees, and use analytics to reduce costs. Valify provides full visibility into collection spend and purchased services, helping hospitals save money, optimize contracts, and free up resources for patient care.

Unpaid medical bills are more than a patient financial issue. They place sustained pressure on hospital margins and operational efficiency. Millions of Americans carry medical debt, and when balances move to collections, hospitals often incur significant fees without a clear view of the total cost.

The impact goes beyond dollars recovered. Medical debt can affect a patient’s credit and access to care, while hospitals absorb inefficiencies that consume staff time and divert resources away from patient services. Without visibility into how collection services perform and what they truly cost, these challenges compound quietly over time.

Why This Matters to Hospitals Right Now

Medical debt is everywhere. About 36 percent of U.S. households carry some form of medical debt. In 2024, roughly 10 million people had unpaid medical bills in collections.

For hospitals, these unpaid balances usually end up with collection agencies. But here’s the problem: without clear reporting, it’s tough to know what we’re actually paying. Are the dollars we spend delivering real results? Or are we just handing over fees without seeing real recovery?

This lack of visibility hits hospitals in multiple ways. Margins get squeezed. Inefficiencies remain hidden. And funds that could improve patient care are tied up in uncertainty. Meanwhile, patients feel the pinch too. Medical debt can hurt their credit and make accessing care more difficult.

When unpaid accounts stack up, the risk of bad debt grows. Hospitals face more financial strain, and the cycle keeps repeating. Understanding and managing these costs is no longer optional, it’s essential to keeping operations running smoothly and maintaining trust with patients.

How Collection Agencies Are Paid

  1. Contingency Fee Model (Most Common)
    Agencies are paid only when money is recovered. Rates typically range from 15 to 40 percent, depending on factors such as account age, balance size, and complexity. While this model aligns incentives, it often masks the true cost per recovered dollar when hospitals cannot connect fees, recovery outcomes, and account characteristics in one view.
  2. Flat Fee Arrangements
    Some agencies charge a fixed fee per account, usually for high-volume, low-balance portfolios. In healthcare, these models are less common due to regulatory requirements and account complexity.

The pricing structure itself is rarely the issue. The challenge is knowing which model delivers the best net outcome for your hospital’s mix of accounts.

What Drives Collection Fees Higher

Several factors consistently increase collection spend:

  • Debt Age
    Older balances are harder to recover and typically fall into higher fee tiers.
  • Debt Size and Volume
    Smaller balances often carry higher percentage fees, while larger volumes may qualify for lower negotiated rates.
  • Healthcare Specific Complexity
    HIPAA requirements and billing nuances demand specialized handling, which can affect both cost and outcomes.

How Much Hospitals Actually Pay

Example Cost Scenarios

Account Type Balance Typical Contingency Rate Fee Paid Net Recovery
Small Account $500 25% to 35% $125 – $175 $325 – $375
Medium Account $2,500 20% to 30% $500 – $750 $1,750 – $2,000
Large Account $10,000 15% to 25% $1,500 – $2,500 $7,500 – $8,500

As accounts age, fees increase while net recovery declines. Performance also varies widely between agencies. Some recover less than 15 percent of assigned balances, while stronger healthcare-focused agencies may exceed 25 percent.

Without clear visibility, these differences remain difficult to identify and act on.

This is where Valify helps. By categorizing collection services as a purchased services spend category and connecting fees, recovery outcomes, and benchmarks in one view, Valify enables hospitals to see what they are truly paying, compare performance across vendors, and make data-backed contract and sourcing decisions.

Hidden Costs Hospitals Rarely Track

Even when paid only on results, true costs include:

Operational Costs

  • Internal staff time spent preparing accounts for agency submission.
  • Resources for follow-up, dispute resolution, and appeals.

Opportunity Cost

  • Lost negotiating power when agencies take over accounts.
  • Reduced control over revenue forecasting and reporting accuracy.

Patient Experience Impact
Poor communication or unclear billing can create patient frustration. Dissatisfied patients may delay future care or leave negative reviews, affecting our hospital’s reputation.

What Hospitals Should Measure

Understanding collection spend requires more than reviewing invoices. Hospitals need visibility into what they pay, what they recover, and how performance varies across accounts and vendors.

Spend and recovery visibility

Track total dollars paid to collection agencies and break that spend down by account age, type, and outcome. Measuring net recovery after fees is essential to understand how much value is actually retained. Without this view, hospitals often overestimate agency performance.

Performance benchmarks

Compare recovery rates, time to collect, and cost per recovered dollar against industry norms. Typical healthcare recovery rates range from 15 to 25 percent. Meaningful variation below that threshold may signal contract or process issues that warrant review.

Patient impact indicators

Collections also affect patient experience. Monitor escalation rates, unresolved balances, and patterns that indicate breakdowns in early communication or billing clarity.

Using Valify’s analytics, hospitals can see all these metrics in one place. The platform shows performance across departments and service lines. It makes it easy to spot trends, identify problem areas, and take action to reduce costs.

Best Practices to Reduce Collection Costs

  • Improve Early Accounts Receivable Workflows

Collecting upfront payments before services are delivered can significantly reduce downstream collection costs. Clear communication around co-pays, deductibles, and insurance coverage at the point of care helps prevent confusion and delays later.

Early follow-up on late accounts is equally important. Reaching out sooner increases the likelihood of payment and limits the number of accounts that age into higher-cost collections.

  • Negotiate Better Agency Contracts

Collection agency contracts directly influence overall spend. Tiered pricing based on account age and complexity helps ensure hospitals pay appropriately for the level of effort required.

Including performance metrics, such as recovery rates or response times, provides accountability and makes it easier to evaluate whether agencies are delivering real value.

  • Segment Accounts Strategically

Not all accounts should be handled the same way. Newer or lower-risk balances may be resolved more efficiently in-house, preserving patient relationships and reducing costs.

Older or higher-risk accounts are better suited for agencies with the right expertise. Intentional segmentation improves recovery outcomes while controlling fees.

  • Invest in Technology and Analytics

Analytics help hospitals identify cost drivers before accounts reach collections. Line-item visibility into purchased services makes it easier to spot inefficiencies, adjust workflows, and support stronger contract negotiations.

Valify’s analytics provide this visibility by connecting spend data, performance outcomes, and benchmarks in one place, helping hospitals reduce unnecessary collection costs and improve operational efficiency.

How Valify Helps You Know What You Are Really Paying

Valify provides hospitals with complete visibility into collection services as part of total purchased services spend.

  • Purchased Services Spend Analytics

Categorize non-labor spend across 1,400+ service categories to clearly understand where collection costs sit.

  • WorkPlan Dashboard

Monitor contract usage, compliance, and spending trends in real time to catch issues early.

  • Benchmarking and Advisory

Compare collection costs and recovery outcomes against peer hospitals to identify gaps and opportunities.

  • Contract Management Solutions

Use data-backed insights to negotiate stronger vendor agreements, including collection agencies.

With Valify, hospitals understand total spend and performance, not just the nominal fee charged by a collection agency.

Track Costs & Save More Care

Medical debt collection does not have to be a mystery expense. Between tiered fees, debt age impacts, and net recovery outcomes, hospitals like ours can easily overpay without realizing it.

By tracking total cost, benchmarking performance, and optimizing spend across departments, we can reduce unnecessary collection fees and free up resources for patient care.

Ready to see what you are truly paying?
Schedule a demo with Valify today and gain full visibility into your collection costs and all purchased services spend.

FAQs:

How much do collection agencies typically charge hospitals on medical debt?
Most agencies work on contingency and charge 15-40 percent of recovered amounts, depending on debt age and complexity.

Are hospital collection agency fees negotiable?
Yes, especially for high-volume accounts or bundled contracts. Hospitals with better spend insights often negotiate lower rates.

Do collection agency fees include upfront costs?
Standard contingency models involve no upfront cost. Agencies only get paid when they recover money.

How can hospitals lower collection costs?
Improve early billing, segment accounts by age, negotiate better agency contracts, and measure outcomes for continuous improvement.

Does medical debt affect patients’ credit reports?
Yes. Millions of Americans have medical debt in collections, which can appear on credit reports and affect credit scores.