Managing Purchased Services Contracts | E. 107 The Healthcare Leadership Experience

Purchased services is often the most overlooked expense in healthcare yet offers opportunities for cost savings. Brian Bartel shares his best practices for effective contract management, with Jim Cagliostro. 
 
Episode Introduction 
Brian explains the unique challenges of purchased services, why a centralized contract repository is the first step to successful purchased services management, and why hospitals should never allow contracts to auto-renew. He also explains why ‘’red flags’’ aren’t always necessarily malicious and why it’s vital to question the line-item details of your purchased services invoices. 
 
Show Topics
 
Purchased services present a unique challenge in healthcare
#1 tip: Create a centralized contract repository
Review your contracts on a minimum annual basis
Don’t assume all red flags are malicious
The hidden cost savings in your line-item details
Be inquisitive, be patient, be strategic – and build relationships




06:35 Purchased services present a unique challenge in healthcare
Brian explained the difference between supplies and purchased services. 
‘’…When you're talking about supplies, it's pretty easy. You've got a specific item number, you've got your power set, your requisitions, everything is very orderly. So things are coming in, you can track it, you've got the data behind it, there's a contract with that line item pricing. And then when you get confirmations back, usually people are using some form of EDI, which makes it relatively easy, and you can track that. Item A is item A, item B is item B. Purchased services is different because it typically is not on a PO. Again, I've worked places where it is, but that comes with its own challenges. It's very department specific, so you've got usually a department manager or leader that's kind of running that point with it. We don't have as much interaction on the supply chain side of this either. Communication is usually kind of sparse between supply chain and a purchased service provider as compared to a typical supply vendor. And again, the data is just, it's more difficult. When you start looking at how things are being invoiced because there's no PO line, it gets very challenging to try to figure out, "Okay, what's actually happening with this spend?" Typically, an invoice will come in, the department manager signs off on it, it gets paid, and that's it. So a lot of opportunity there.’’
 
08:30 #1 tip: Create a centralized contract repository 
Brian said a centralized contract repository was the essential first step to successful purchased services management. 
‘’I think that at square one, I think the biggest thing you can do is if your organization or your hospital, your ASC, your clinic, whatever it is, if you don't have a centralized contract repository, that's step one. Again, stepping into certain roles in my past, you've got contracts that might be down in admin. You've got department managers that have signature execution authority and they've got them in their files, and then you realize three years later that there's been this contract that nobody's really paying attention to because it's just a paper copy. Really I think that that's the biggest thing for me is getting your hands around it. Number one, you've just got to have that centralized repository. Again, that doesn't mean that you need to use software. Software obviously makes things easier. I'm a big proponent of that. But again, even just saying, "All right, nobody can sign contracts except for," whether it be your CEO, your CFO. "Send all these down and we're going to put them in a file cabinet." At least then you can go and try to find where those contractual documents are.’’
 
10:07 Review your contracts on a minimum annual basis
Brian said it’s important not to let contracts auto-renew. 
‘’It’s always good to have that check-in annually, even if it’s just pulling the contract