The health IT roadmap for purchased service savings

Purchased services account for approximately 20 percent of a hospital's total operating cost. Since these services collectively influence every department in a hospital, management of purchased services partnerships and costs is often decentralized and a prime target for efficiency improvement.

The opportunity for savings is ample. Medpricer, a purchased services cost management platform, estimates hospitals overspend $39 billion each year on purchased services. With providers increasingly being asked to do more with less, hospitals and health system finance leaders can no longer permit such wasteful spending. Leaders should feel doubly incentivized to identify cost savings in purchased services as emerging technologies have made the process easier and more affordable than ever before.

New tech, new opportunities

In the past, identifying savings opportunities in purchased services meant providers had to either partner with consultants or devote a large amount of internal human capital to the cause. Either way, these initiatives came at a steep cost.

"Those types of engagements were extremely expensive — we're talking multi-million-dollar, multi-year engagements," Mickey Meehan, Medpricer's chief customer officer, told Becker's Hospital Review. According to Mr. Meehan, emerging technologies have improved the accessibility and affordability of purchased services management.

"By integrating machine learning into our platform, we've been able to bring that total cost of a purchased services solution way down," Mr. Meehan said. "Now any hospital, whether it's a 50-bed rural hospital or one of the largest health systems in the country, can afford a platform to find savings in their purchased services spend."

The benefits of a historical perspective

If emerging technologies are the keys to unlocking purchased services, then data is the means by which these keys are cut. Historical purchased services data allow health systems to identify savings opportunities specific to their organization, and Medpricer has more than a decade's worth to offer.

"We've been focused on purchased services for 14 years, and this gives us years of worth of purchased services data and insight that nobody else in the marketplace can offer," Mr. Meehan said. "We know the market prices and best in class service-level terms across clinical and non-clinical purchased services categories. And we're able to take that information and use the newer technology to really provide actionable insights for hospitals."

The Medpricer platform collects information about an organization's current purchase services spend and uses market intelligence to identify areas where a new contract negotiation may be warranted. The platform also tracks an organization's savings over time.

The bottom line: Dollar-for-dollar savings

The supply chain is a common target for cost reduction efforts. However, these efforts often overlook purchased services in favor of reining in spending on physician preference items and the medical, surgical supply. While excessive costs related to PPI can be an issue, hospital leaders often overlook the fact that they spend a comparable amount of money on purchased services. Additionally, the benefits of PPI and med/surg cost-cutting are not nearly as easy to quantify as those for purchased services.

"The money you save in purchased services goes dollar for dollar to the bottom line," Mr. Meehan said. "If you save money in physician preference items or some other area, you don't see the same kind of direct benefit to the bottom line."

Medpricer enters collaborative relationships with partners and relies on customer feedback to inform the development of new solutions. Last quarter, the company released its mSource® Predictive Plan solution, which leverages an algorithm powered by artificial intelligence that identifies an organization's top 15 savings opportunities. The company is also on track for yet another launch this quarter - an analytics module that can identify unnoticed, faulty reoccurring charges and other areas where costs can be cut with minimal effort. 

"We're creating a roadmap to help guide clients down the path to better purchased services management," Mr. Meehan said. "Ours is the only solution in the market to uniquely address all aspects of purchased services lifecycle management — from benchmarking and analytics, to e-negotiation and automated contract analysis."

To learn more about Medpricer's offerings, click here.

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