Hidden Gold Mining Savings from Contract Services Dave Kaczmarek, CMRP, FAHRMM Director, Wellspring Partners

Emergence/Supply Chain What does the supply chain include? Internal process from need to disposal External process from manufacture to payment Includes product selection and use Includes services as well as products Includes labor to effect the whole process

Contract Services CS is still very fragmented Supplies seen as materials responsibility Contracts seen as departmental resp. Many contracts Many authors No coordination Little visibility Little scrutiny M

Contract Services CS is still very fragmented Dept contracts full of issues Higher than necessary costs Haven’t tested the market Believe the sales representative Services they don’t need or use Haven’t pursued alternatives Less than optimal negotiation M

Contract Services CS is still very fragmented Dept contracts full of issues Higher than necessary costs Lack of standardization Different users have different suppliers Especially in a multi-hospital system Volumes may not be consolidated M

Contract Services CS is still very fragmented Dept contracts full of issues Higher than necessary costs Lack of standardization Onerous terms are accepted Evergreen clauses Penalties Non-competes Termination D

Contract Services CS is still very fragmented Dept contracts full of issues Other fruit has been harvested D

Take Action Implement policies Administrative level All must comply Shows importance Most important Agency Contract management M

Take Action Implement policies Work on current contracts Gather all current contracts Do in conjunction with policy publication Ask for copies Ask for contact information Work with AP M

Take Action Implement policies Work on current contracts Gather all current contracts Review and renegotiate Check for termination terms Cancel any evergreens Notify suppliers that MM now in charge Bring supplier in Continued business Good business partner Contract extension D

Take Action Implement policies Work on current contracts Establish new contracts Identify Opportunities Do an AP dump Top down by cost class Top down by vendor Determine what you are getting from each Select cost classes/vendors for additional analysis D

Take Action Implement policies Work on current contracts Establish new contracts Identify Opportunities Do an AP dump Act on what others are doing Articles Networking D

Take Action Implement policies Work on current contracts Establish new contracts Identify Opportunities Do an AP dump Act on what others are doing Hire a consultant (?) Familiarity Manpower Power with vendors M

A Real World Example The Bon Secours Richmond Experience M

Bon Secours Richmond Catholic Healthcare System One of the area’s largest employers,One of the area’s largest employers, Nationally recognized (AARP and Working Mother)Nationally recognized (AARP and Working Mother) Largest of the Bon Secours systemLargest of the Bon Secours system Four hospitals ( 850 beds)Four hospitals ( 850 beds) Extensive network of physician practicesExtensive network of physician practices School of nursing, a school of medical imaging, and two family practice residency programs.School of nursing, a school of medical imaging, and two family practice residency programs. Active in community outreach health programs and services.Active in community outreach health programs and services. M

Bon Secours Richmond Some Unique Challenges Multiple legitimate contracting agencies Campus independence Campus differences

Already Addressed Biomedical Movable equipment rental M

Opportunities Uncovered When you don’t look for a while Cost by container vs. weight Very high cost Must analyze current cost The value of competition Savings - $179K Red Bag Waste D

Opportunities Uncovered Are you getting contract prices? Are you paying for more than you need? Are you getting what is common? Savings - $33K Standard Waste D

Opportunities Uncovered The value of benchmarking Looking at all costs Relationship vs. reasonable cost Creating competition Savings - $253K Laundry Costs M

Opportunities Uncovered Dangers of a capped contract Who’s monitoring Easy to become complacent Buy vs. rent Looking at all alternatives Savings - $358K Specialty Bed Rentals D

Opportunities Uncovered Consider outsourcing of non-core functions Budget/expense rpt vs. actual cost Possible 20% savings Dangers Courier Services D

Opportunities Uncovered Understand current costs Bid it out Use potential Departmental cooperation Savings - $25K Courier Services (part 2) M

Opportunities Uncovered Power of a single contract Getting departmental cooperation Defining needed services Competition where there is none Savings - $65K Landscaping M

Opportunities Uncovered Even when – no hope of change Power of the consultant Cost of storage Reviewing destruction Savings - $64K Records Storage D

Opportunities Uncovered 14 different agencies No consistency in pricing Standardization of vendors? Standardization of costs Establish contracts Savings $592K Agency Costs D

Utilities (esp. gas) Pest control Transcription Snow removal Establish contracts Mobile modalities Yours? Opportunities Uncovered Some Others to Consider

Summary Some of your best savings opportunities are in contract services You need to centralize this function Many ways Renegotiate Consolidate Bid out Make/buy Find a place and start