• Know Your Numbers
  • Make Informed Decisions
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Examine and centralize your purchased services

According to the American Hospital Association*, purchased services spend has eclipsed 50% of non-labor costs for many organizations.

Unfortunately, purchased services are a broad category that’s difficult to standardize. Whether it’s IT or facility management, when any purchased services you employ aren’t fully examined, you lose opportunities to:

  • Gain actionable insights
  • Reduce costly redundancies
  • Align teams and save valuable time and effort
  • Increase efficiency across multiple locations
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Purchased Services Benchmarking

Purchased services benchmarking is the process of comparing the performance and costs of outsourced business services with those of other providers within the same industry. Benchmarking involves analyzing key performance indicators (KPIs) and financial data to identify cost-saving opportunities and develop best practices in the procurement of services.

Purchased services benchmarking plays a vital role in business strategy and decision-making processes by providing valuable insights into how a company’s outsourced services measure up against industry peers.

Role of Hospital Benchmarking Companies in Purchased Services Benchmarking

Hospital purchased services benchmarking companies are specialized entities that collect and analyze data from various healthcare facilities to provide insights in the context of purchased services comparisons.

Hospital benchmarking companies play a crucial role in numerous aspects of purchased services benchmarking, including:

  • Data collection
  • Data standardization
  • Data analysis
  • Benchmark development
  • Insights and Reporting

Purchased Services Benchmarking in Hospital Settings

In a hospital setting, purchased services refer to outsourced services that the hospital acquires to support its operations, such as laundry, catering, facility maintenance, waste management, and more.

Hospitals may use benchmarking for purchased services to:

  • Improve Operational Efficiency – By comparing their service providers’ performance with benchmarks, hospitals can identify inefficiencies and adopt best practices to streamline operations.
  • Save Costs – Benchmarking helps hospitals identify cost-saving opportunities, negotiate better contracts, and ensure they pay competitive rates for services.
  • Deliver Quality Patient Care – Efficiently managed purchased services contribute to better patient care indirectly by allowing the hospital staff to focus on patient-facing tasks.

Understanding Purchased Services

Purchased services cover a wide range of areas and help businesses focus on their core operations by outsourcing non-core activities to specialized vendors.

What Are Purchased Services Good for?

Purchased services offer numerous benefits, including cost savings, increased efficiency, access to specialized skills, and improved flexibility and risk performance.

Purchased Services in Healthcare

Purchased services examples in healthcare include:

  • Medical Waste Disposal: Specialized companies handle the safe collection, transportation, and disposal of medical waste generated by healthcare facilities.
  • Laundry Services: Hospitals often outsource the cleaning and sterilization of linens and scrubs to ensure hygiene.
  • Food Services: Healthcare institutions often contract external catering companies to provide nutritious meals for patients and staff.
  • Facilities Management: Outsourced services may also include maintenance, janitorial services, landscaping, and pest control.
  • Medical Imaging Services: Some hospitals partner with diagnostic imaging centers for advanced imaging procedures like MRI and CT scans.

Significance of Purchased Services in Healthcare Settings

Outsourcing certain services helps hospitals manage costs effectively. Additionally, specialized vendors can provide high-quality services, leading to better patient experiences and outcomes. Purchased services providers often possess industry-specific expertise and stay updated on regulatory requirements.

Finally, by outsourcing non-medical functions, healthcare providers can concentrate on their most important task: delivering excellent medical care to patients.

Types of Purchased Services in Healthcare and Other Industries

There are several types of purchased services commonly used throughout various industries, including healthcare.

  • Professional Services: Legal, accounting, and consulting services fall under this category.
  • Information Technology (IT) Services: Outsourcing IT support, software development, and network management are common examples.
  • Human Resources (HR) Services: Organizations may contract HR services for recruitment, payroll, and benefits administration.
  • Transportation Services: Companies may outsource transportation and logistics functions.
  • Security Services: Outsourced security firms can handle physical and cybersecurity needs.

In the healthcare industry, the impact of purchased services is particularly significant. The use of purchased services in healthcare frequently contributes to cost control, improved quality of patient care, and greater operational efficiency overall.

Best Practices For Benchmarking Purchased Services

To successfully benchmark purchased services, organizations can adopt the following best practices:

  • Define Clear Objectives: Clearly define the goals and objectives of the benchmarking process. Determine what specific aspects of the purchased services you want to compare and improve.
  • Select Relevant Metrics: Identify key performance indicators (KPIs) that are relevant to your industry and align with your objectives. Common metrics include cost per unit, service quality, response time, and customer satisfaction.
  • Choose Appropriate Peers: Select benchmarking peers that are similar in size, industry, and service scope to ensure relevant and meaningful comparisons.
  • Gather Comprehensive Data: Collect accurate and comprehensive data on your own purchased services and those of your benchmarking peers. Ensure data consistency and reliability.
  • Normalize Data: Standardize data to adjust for any variations in organizational size, service scope, or external factors that could impact the results.
  • Analyze Performance Gaps: Compare your organization’s performance against your benchmarking peers. Identify performance gaps and areas where improvements can be made.
  • Identify Best Practices: Analyze the top-performing peers to identify best practices that can be adopted in your organization to enhance efficiency and service quality.
  • Implement Improvements: Based on your benchmarking results and best practices, implement changes and improvements in your purchased services processes.
  • Monitor and Continuously Improve: Regularly monitor the impact of the changes made and continue to benchmark periodically to ensure ongoing performance improvement.

Importance of Benchmarking in Procurement

Benchmarking allows organizations to evaluate their procurement performance against industry best practices and competitors. It also makes it easier to identify opportunities for cost reduction and process streamlining, helping organizations achieve better procurement outcomes and savings.

Furthermore, benchmarking uncovers inefficiencies in the procurement process, allowing for better process optimizations and leading to increased operational efficiency. Using benchmarking to understand how competitors manage procurement risks can also help organizations develop more effective risk mitigation strategies.

Benchmarking Process

Organizations can use this process for effective benchmarking:

  1. Identify Objectives and Scope: Determine the specific objectives of your procurement benchmarking and define the scope, which could include the entire procurement process or specific stages.
  2. Select Peer Organizations: Choose benchmarking peers based on industry relevance, procurement complexity, and comparable size.
  3. Collect Data: Gather data on procurement metrics (such as cycle time, supplier performance, cost metrics, and process costs) from both your organization and your benchmarking peers.
  4. Data Normalization: Adjust data for any differences in organization size, procurement volume, or other relevant factors to enable fair comparisons.
  5. Analyze and Compare: Analyze the data and compare your organization’s procurement performance with benchmarking peers to identify gaps and areas for improvement. Study the practices of top-performing peers to identify strategies that you could adopt in your procurement process.
  6. Implementation and Monitoring: Implement changes and improvements in the procurement process and monitor the impact on performance over time.
  7. Continuous Benchmarking: Periodically repeat the benchmarking process to ensure continuous improvement and stay ahead of industry trends. Continuous benchmarking empowers organizations to remain competitive and adapt to changing market conditions, contributing to overall organizational growth.

Healthcare Procurement Solutions

Healthcare procurement is unique from procurement in other sectors due to the critical nature of its products and services, its strict regulatory requirements, and the complexity of the healthcare supply chain. Various healthcare procurement solutions have been designed to handle the specific challenges of healthcare procurement and supply chain management.

Healthcare Procurement Process

The healthcare procurement process involves several steps tailored to meet the unique needs of the healthcare industry. While it shares similarities with procurement in other sectors, there are some specific aspects that differentiate it, including:

  • Need Identification: Healthcare organizations must identify the goods and services required to support patient care and operational activities.
  • Supplier Selection: Selecting suppliers is a critical step in healthcare procurement. Vendors must meet rigorous quality standards and comply with regulatory requirements.
  • Request for Proposal (RFP): Issuing an RFP allows healthcare providers to gather detailed proposals from potential suppliers, ensuring they can meet specific requirements.
  • Evaluation and Negotiation: Healthcare organizations must assess proposals using factors such as price, quality, and delivery terms and negotiate with providers to finalize contracts.
  • Contracting: A comprehensive contract must be drafted to cover terms and conditions, pricing, service levels, and compliance requirements.
  • Receiving and Quality Assurance: Upon delivery, received goods must be inspected for quality assurance and compliance with specifications.
  • Inventory Management: Healthcare organizations must carefully manage their inventory levels to ensure timely replenishment and avoid stockouts.
  • Invoicing and Payment: Invoices must be reconciled with all agreed-upon contract terms and payments must be processed accordingly.

Healthcare Procurement Challenges

Healthcare procurement presents unique challenges for organizations in the healthcare industry, including strict regulations, important patient safety considerations, advancing technology, and more.

First and foremost, healthcare products and services must adhere to specific regulatory requirements, making supplier compliance and verification critical. These requirements exist because the quality and reliability of medical supplies directly impact patient safety.

Additionally, healthcare is a dynamic field with ever-evolving medical technologies, requiring procurement processes to adapt quickly. Complicating this issue is the fact that healthcare organizations often face budget limitations that make cost optimization crucial.

Hospital Procurement

In a hospital setting, procurement encompasses a wide range of goods and services essential for patient care and facility operations.

Hospitals can optimize their procurement strategies by centralizing procurement to consolidate purchasing power, negotiate better contracts, and standardize processes. Effective procurement process benchmarking practices should be used to thoroughly evaluate vendors based on reliability and compliance with healthcare industry requirements.

Moreover, proactive collaboration with medical staff and stakeholders allows hospitals to align procurement with specific patient care needs. By combining this active communication with data analytics and benchmarking, hospitals can make fully informed procurement decisions and drive efficiency.

Talk with our experts to learn how to realize your savings goals and develop sustainable best practices for your health system's purchased services needs.

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