Hidden Gold Mining Savings from Contract Services

1. Hidden Gold Mining Savings from Contract Services • Dave Kaczmarek, CMRP, FAHRMM • Director, Wellspring Partners • dkaczmarek@huronconsultinggroup.com

2. 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

3. 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

4. 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

5. 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

6. 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

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

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

9. 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

10. 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

11. 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

12. 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

13. 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

14. A Real World Example The Bon Secours Richmond Experience M

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

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

17. Already Addressed • Biomedical • Movable equipment rental M

18. Opportunities Uncovered Red Bag Waste • 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 D

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

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

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

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

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

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

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

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

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

28. 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