Too Much Data: The Paradox of Purchased Services Analytics

In the realm of healthcare procurement, data is king. For more than a decade, Valify has been a leader in purchased services data analytics. Yet, within this domain lies a paradox: while having data is a required step to make measurable progress on purchased services cost reduction, too much data can present a paralyzing challenge. This article delves into the challenges faced by healthcare systems, the evolving role of artificial intelligence (AI), and how integrating data with AI can lead to significant savings.

Aren’t We a Data Company?

Throughout our tenure, Valify has maintained its reputation as the gold standard in purchased services data analytics. Over the past decade, we’ve meticulously curated over $1 trillion in spend data, furnishing healthcare systems with invaluable insights into their financial landscapes. However, as we’ve labored alongside the professionals on the front lines, our users, we’ve always known one truth: while data serves as a cornerstone, achieving significant cost savings requires more than just numbers. It demands a strategic fusion of data, expertise, and manpower. The perennial question is what we can do as an analytics provider to empower our clients to make progress not just on the usual categories that everyone tackles, but on the full breadth of services spend?

What Are the Challenges?

The challenges confronting healthcare systems in managing their purchased services expenditures are diverse and complex. With an extensive range of over 1700 unique categories, it’s understandable that attention often gravitates towards the most visible areas of spending, such as food management or waste disposal. However, these categories only scratch the surface, with numerous smaller categories often overlooked and under-optimized. Adding to the complexity is the limited capacity of healthcare teams tasked with overseeing these expenditures. Despite their dedication, the sheer volume of data and the intricacies of sourcing across diverse categories can feel overwhelming. Moreover, time constraints further compound these challenges, as teams find themselves juggling competing priorities and struggling to allocate resources effectively.

AI and Its Potential

In recent years, the emergence of artificial intelligence has opened up exciting possibilities in the realm of data analytics. Powered by advancements in machine learning and natural language processing, AI holds the promise of revolutionizing how healthcare systems approach purchased services analytics. Imagine a world where teams can gain efficiency with machine-learning models that sift through the mountains of data, uncovering hidden opportunities for cost savings across various spending categories. With AI-driven algorithms that extract meaning from the data and present it in concise narratives, these teams gain valuable insights into vendor relationships and market trends, empowering them to make well-informed decisions that deliver substantial financial benefits for their organization. As we explore the potential of AI in this space, we anticipate new avenues for enhancing efficiency and driving impactful outcomes in purchased services analytics.

How Do We Solve This as an Industry?

The key lies in strategically integrating AI into healthcare procurement processes. Procurement teams must be equipped with AI-driven tools and insights that save them time by extracting valuable insights from the mountains of spend data. They need tools which speak their language to tell them the story behind the data, not just confront them with tables and charts. They need best in class software that serves as a force multiplier and which increases in value as they interact with it. And most importantly, these tools have to be built on top of pristine data – like that created by the tools, processes, and teams that Valify has worked hard to perfect over the last decade.

As we envision the future of purchased services analytics, it’s crucial to recognize that data alone won’t carry us forward. While data forms the bedrock of insights, it’s the strategic fusion with AI that will drive real progress. Through AI-driven analytics, healthcare organizations can break free from the constraints of conventional methods, unlocking new avenues for cost savings and efficiency. At Valify we’re leaning into this, and we’re excited to see how it will pave the way for a more sustainable future in healthcare procurement.

Matt Clark, an author on the Valify Blog

About the Author

Matt Clark is the Chief Technology Officer of Valify, responsible for the Valify products and the engineering organization. As a co-founder of Valify Matt is responsible for the initial design and development of the Valify products.

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Valify: Bringing a Unique Value Proposition to Healthcare Purchased Services

Despite best efforts towards reducing the overall cost of operations, healthcare companies often miss out on regulating one of their most expensive cost-drivers. Generally sidelined and overlooked, purchased services contribute to about 45 percent of a hospital’s non-labor budget. It is the vastness and uncertainty of outsourced services that bring complexities, making it difficult for hospitals to identify an appropriate service contract benchmark and derive savings. When hospitals outsource services, they can unwittingly fall prey to unnecessary costs which include duplicated services, hidden contract fees, and automatic price escalations. 

Valify, a company specializing in purchased services analytics uses a web-based solution that identifies, benchmarks, and monitors savings on purchased services categories. “We are the only company 100 percent dedicated to purchased services,” says Chris Heckler, CEO and founder of Valify. 

In order to mitigate the uncertainty in the broad description of indirect spend, Valify has classified the domain that has approximately 1,200 specialties into seven primary categories, namely, financial and administration, facility support, HR, insurance, clinical, ancillary, and IT-telecom. By working with the customer’s finance or IT division, Valify accesses the data and links the information to its solutions. The company then processes the data through proprietary algorithms and classifies them in less than 10 days. The firm also provides dedicated analyst support for the client to maximize the use of this information for savings opportunities. 
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Clinical Services: To outsource or To Not Outsource, That Is the Question

When providers think of purchased services, their minds typically go to facility support, IT, and ancillary services. However, this  scope is too limited and doesn’t encompass the full breadth of what falls under the definition of purchased services. The fact is, there are over 250 clinical services that are categorized as a purchased service including pharmacy compounding services, dialysis services, imaging services, and neurology services.

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What’s Ahead for Hospital Purchased Services Cost Reduction Technology in 2018

Purchased services represents up to 45% of the non-labor expense budget within a health system. As more executives look to purchased services categories for potential expense reduction, 2018 is an important year, and Valify has several important innovations planned to assist clients in controlling and reducing purchased services expense in the year ahead:

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Monitoring Purchased Services Expenses – Part 2: Best Practices and How to Get Started

In part one of this two-part series, we stated that continual monitoring is the only way to ensure actual spend aligns with budgeting expectations. We discussed at length the many red flags, pitfalls, and common missteps on the path to successful and regular monitoring.

Though the process of tracking and monitoring expenses to find realized savings is difficult perhaps more difficult for purchased services than for any other area within a hospital below are best practices that have been proven effective.

In part two of this series, we discuss the top best practices and tips to make monitoring expenses easier, faster, and more successful.

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Monitoring Purchased Services Expenses – Part 1: Understanding the Road Blocks, Red Flags and Pitfalls

Unlike with tracking expenses for products and capital within a health system, purchased services are difficult to quantify. Purchased services have no item number, are primarily fulfilled by local vendors, and are purchased off-PO 75-85% of the time. These factors make purchased services a complex area in which to manage budgets, to track expenses, and to implement compliance without the proper tools and best practices.

If purchased services expenses are not monitored regularly, there is no guarantee health systems will see the savings that were planned for following a rigorous vendor negotiation. This can be defeating for those who spent the time and energy finding a better deal and can ultimately be bad for business when expected savings are missing on the bottom line at year end.

Continual monitoring is the only way to ensure actual spend aligns with savings expectations. Purchased services expense tracking and monitoring is an ongoing process with plenty of pitfalls and common missteps. However, purchased services professionals can make the monitoring process more manageable and productive by knowing the pitfalls to look out for and by following the industry best practices (see blog: Monitoring Purchased Services Expenses. Part 2: Best Practices and How to Get Started). Continue reading

3 Simple Ways to Accelerate Your Sourcing Process with Better Results


From standard purchased services categories like laundry and linen or HVAC services to seasonal/geographic driven categories such as snow plow services, there are hundreds of categories and thousands of vendors that hospitals and health systems utilize daily. Every hospital and health system is different and has unique needs based on their location and the patients they serve. Aligning these particular needs with the unique factors that pertain to each purchased services category is challenging, and most of the work that is done during the RFP process can be daunting as well.

Depending on the complexity of the category, an RFP cycle can take four to six months from start to finish and require a time commitment of 5-20% from each sourcing professional during the bidding event (Robert J. Engel. Strategic Sourcing: A Step-By-Step Practical Model, The Procurement Centre). Insight from Valify’s database shows, a typical health system’s purchased services spend is spread out, on average, across 383 individual categories (some have spend across as many has 734 categories). These figures directly correlate to the number of vendors a health care provider has on contract.

It’s fair to say that sourcing professionals spend a significant amount of time working on RFPs – including conducting research specific to each category, defining award criteria, managing vendor communications, evaluating responses, analyzing impacts, and negotiating final terms. While each of these aspects could benefit from process improvement measures, our purchased services experts have put together a list of the top three tips for accelerating the RFP process while achieving better results.

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Solve the top 3 purchased services spending challenges with timely data and analytics

One of the biggest difficulties healthcare purchased services professionals face is trying to negotiate more favorable vendor contracts for their hospital or health system. With hundreds of vendors spread across numerous departments and facilities, it is nearly impossible — without the right data analytics platform — to have enough time and information to build a persuasive case.

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