Key Takeaways
Hospitals often spend more than necessary on purchased services. This happens because contracts aren’t easy to track, and buying decisions are spread across different departments. As a result, the same vendors may be used in multiple areas, contracts may auto-renew without review, and benchmarking doesn’t provide much value. The biggest cost areas are typically staffing, IT, cybersecurity, facility services, and revenue cycle management.
Top 25 Purchased Services Categories Hospitals Overspend On
Hospitals have made great strides in controlling the cost of medical supplies. In contrast, many health systems have used strategic sourcing, inventory controls, and deeper vendor relations to enhance supply chain performance while holding down costs.
However, one of the biggest categories of non-labor spend is frequently paid less attention to.
The billions of dollars Americans spend each year on purchased services. These contracts differ from medical supplies, as they are often cross-department contracts, negotiated separately and reacquired without effective oversight. For this reason, organizations can become blind to vendor performance, contract price discrepancies, and cost savings initiatives opportunities.
Purchased services should get the same strategic attention as the traditional supply chain for healthcare leaders as they look to improve financial performance. Only improved transparency, enhanced benchmarking, and centralized contract intelligence enable these likely opportunities to be identified without a negative impact on patient care or operational excellence.
Valify helps health systems be more organized, bring purchased services data together in one place, benchmark vendor agreements against healthcare market data, and prioritize opportunities that can achieve the highest financial impact.
Why Does Overspending Happen in Purchased Services?
Unlike supplies purchased in hospitals, services do not have a standardized purchasing process. Often, a variety of factors lead to excess expenditure across healthcare organizations.
- Limited Contract Visibility: Service agreements are often run in silos that create challenges in tracking spending and contract renewals.
- Vendor Proliferation: Similar services may be offered by multiple vendors across departments, which can reduce negotiating power and increase complexity.
- Auto-Renewals: Without review, contracts may renew automatically, often at outdated prices and with missed opportunities for savings.
- Absence of Benchmarking: Organizations typically do not have the market data to know if vendor pricing is competitive.
- Decentralized Purchasing: When departments buy, they might create inconsistent pricing, duplicative contracts, and differentiating service levels.
Top 25 Purchased Services Categories Hospitals Overspend On
Valify’s purchased services analytics discover the same high-level opportunity areas for organizations to uncover contract optimization opportunities and measurable savings, knowing each healthcare organization has its very own spend profile.
1. Environmental Services (EVS)
Providing consistent service levels across numerous facilities can be a challenge. When benchmarking pricing of contracts or aligning the scope of services, plenty of opportunities for enhanced value appear.
2. Medical Waste Management
Without proper pricing, wrong waste classification and disposal surcharges repeatedly deteriorate costs. A sharp decrease in spending on waste stream analysis and contract reviews can help cut out unneeded costs.
3. Laundry and Linen Services
Lost inventories and inconsistent utilization, compounded by separate vendor contracts, routinely drive unnecessary costs. Analysis of contract volume, along with utilization, helps establish efficiency.
4. Food and Nutrition Services
Costs are dramatically impacted by vendor mark-ups and organizational processes. Competitive sourcing and performance benchmarking empower better purchasing.
5. Security Services
Overtime billing, inconsistent staffing models, and varying service requirements can increase expenses. Reviewing service scope and benchmarking regional pricing often creates opportunities for savings.
6. Physician Staffing Services
Long-term dependence on staffing agencies and premium contract rates can place pressure on operating budgets. Benchmarking rates and evaluating vendor performance help organizations negotiate stronger agreements.
7. Temporary Clinical Staffing
Escalating agency costs remain a challenge for many health systems. Consolidating suppliers and renegotiating contracts can improve both pricing and workforce flexibility.
8. Revenue Cycle Management
Performance-based outcomes often vary between vendors. Comparing fee structures alongside operational results helps organizations identify stronger long-term partnerships.
9. IT Managed Services
Technology environments evolve quickly, but service agreements do not always keep pace. Legacy contracts, overlapping support, and outdated service levels often create unnecessary costs.
10. Telecommunications Services
Unused circuits, legacy infrastructure, and aging communication contracts frequently remain in place long after business needs change. Utilization reviews help eliminate excess spending.
11. Cybersecurity Services
Most healthcare organizations use a variety of vendors to suit different security requirements. Having overlapping tools and duplicate services is expensive and complex. The optimization of vendor consolidation and contracts can not only bolster security but also improve financial performance.
12. Software Licensing and SaaS Contracts
Software is often purchased independently by departments, creating duplicate applications, unused licenses, and subscriptions. Enterprise-wide visibility allows organizations to cut back on redundancy and better license use.
13. Patient Transportation Services
Transportation contracts vary a lot from facility to facility. Taking a closer look at utilization, pairing with vendors, and assessing routing strategies tends to reveal some possible cost savings without service degradation.
14. Laboratory Reference Services
Pricing agreements that are not vetted on a consistent basis can make the send-out testing progressively costly. The variation in test utilization, coupled with limited contract benchmarking, can also obfuscate whether rates remain competitive.
15. Diagnostic Imaging Partnerships
Imaging partnerships are established through long-term contracts that might not reflect the market. The value and performance of your fees can be enhanced by benchmarking interpretation language service providers from different aspects, such as interpreting fees, service level, and volume-based pricing related to negotiating.
16. Biomedical Equipment Maintenance
The great majority of hospitals continue to use original equipment manufacturer (OEM) service contracts even though alternatives from non-OEM supporters may provide comparable solutions.
If your equipment is such that you do not want to risk reducing reliability, review maintenance schedules, consolidate vendors, and evaluate contracts with an eye for service agreements that can cut costs.
17. Elevator Maintenance Services
Long-term contracts, comprehensive maintenance plans, and annual price increases can add up over the years and silently expand your budget. Periodic scope-of-work reviews and competitive rebidding validate that contracts meet operational requirements.
18. HVAC Maintenance and Facility Services
Continue to operate on a reactive basis, often ending up paying higher for service levels that will be spread across many facility vendors. Preventive maintenance programs, vendor consolidation, and enhanced asset visibility can help in long-term cost management.
19. Energy Procurement Services
Utility rates are not constant over time with market movement; energy procurement is an area that warrants continuous scrutiny. By benchmarking energy contracts, evaluating sourcing strategies, and monitoring consumption patterns, healthcare organizations can take control of these expenses.
20. Legal Services
Legal spend is usually fragmented across many firms and departments, which makes monitoring challenging. Unsurprisingly, hourly-based billing schemes, disparate fee arrangements, and rudimentary reporting drive needless costs. Transparency and financial insight are improved through preferred provider programs and legal spend analytics.
21. Consulting Services
Consulting engagements offer deeper capabilities, but without an effective governance framework, projects can easily grow beyond their initial plans. Rather than just rolling over an annual budget with this year’s vendor, defining deliverables, tracking results, and vetting vendors keeps organizations on track to get value out of consulting decisions.
22. Collection Agency Services
Many hospitals work with multiple collection agencies that deliver varying levels of performance. Benchmarking recovery rates, reviewing contingency fees, and consolidating vendors can improve both financial results and operational consistency.
23. Document Management and Shredding Services
Although digital transformation continues across healthcare, many organizations still maintain costly paper storage and legacy document management processes. Reviewing storage requirements, reducing redundant services, and optimizing service frequency can generate ongoing savings.
24. Courier and Logistics Services
Courier networks often expand over time without regular evaluation. Multiple providers, emergency delivery premiums, inefficient routing, and fuel surcharges can increase expenses. Route optimization and vendor consolidation help improve efficiency while controlling transportation costs.
25. Insurance and Risk Management Services
Insurance premiums continue to rise, making regular market evaluations increasingly important. Reviewing coverage levels, benchmarking policies, and assessing broker performance can help organizations identify opportunities to improve value without increasing risk.
A Common Thread Across Every Category
There are 25 categories, and they cover a lot of ground, but they all face the same problem: poor visibility.
Healthcare organizations can only optimize what they see clearly. Having contracts spread across departments, inconsistent tracking of vendor performance, and variances in pricing comparison make it less easy to identify savings opportunities.
Spending analytics and benchmarking solutions that are specific to healthcare help eliminate these obstacles. Centralized Purchased Services data enables increased visibility into areas of spending, including contracts, vendor relationships, and pricing benchmarks, to better inform decisions.
Don’t Let Hidden Purchased Services Costs Impact Your Margin
Most hospitals have achieved substantial savings simply by optimizing their supply chain, but purchased services frequently remain one of the last significant non-labor spending categories to benefit from total cost management strategies.
Healthcare organizations can use this to get more strategic about purchased services to find vendor duplication, improve contract administration, benchmark against the entire healthcare ecosystem, and enhance vendor performance in high-expenditure categories.
Valify accelerates this process with healthcare-specific Spend Analytics, benchmarking intelligence, contract visibility, and advisory expertise. Rather than searching for savings contract by contract, healthcare leaders gain the insights they need to discover, prioritize, and act on opportunities with confidence.
Organizations that build on visibility, benchmarking, and contract intelligence will be in a stronger position to rein in costs, enhance operational efficiencies, and safeguard margins without getting into shortchanging quality of care.
Request a Spend Analytics Demo to discover how Valify can uncover hidden purchased services savings for healthcare organizations and empower better sourcing decisions.
Frequently Asked Question’s
- What are the purchased services in healthcare?
Purchased services that are outsourced services to healthcare organizations that support clinical, operational, administrative, and technology functions performed by an outside vendor.
- Which purchased services offer the greatest savings opportunities?
Common areas include clinical staffing, IT services, Cybersecurity and privacy, revenue cycle management, and environmental services, as well as software licensing and facility management.
- Why do hospitals overspend on purchased services?
Overspending is often an outgrowth of a lack of contract visibility, decentralized purchasing, duplicate vendors, automatic renewals, and the absence of a price benchmark.
- How can hospitals identify savings opportunities?
Hospitals can analyze spending, benchmark vendor pricing, review contracts, and evaluate vendor performance to uncover cost-saving opportunities.
- How often should purchased services contracts be benchmarked?
Contracts should be benchmarked regularly to maintain competitive pricing, adapt to market changes, and identify ongoing savings opportunities.
The Valify Editorial Team is dedicated to sharing insights, strategies, and innovations that help healthcare organizations gain control of purchased services spend. Backed by years of expertise in data analytics, procurement, and healthcare technology, the team curates practical resources and thought leadership to guide hospitals and health systems toward greater efficiency and savings. By combining industry knowledge with real-world case studies, the Valify Editorial Team delivers content that empowers decision-makers to drive smarter, data-driven sourcing strategies.
