Savings Beyond Price™
Innovative Supply Savings and Quality Solutions That Work
by Strategic Value Analysis® in Healthcare
Did You Know...?
That Value Analysis Was Developed Back In the 1940's After World War II as a Way to Find Lower Cost but Higher Quality Alternative products and methods. This was Due to the Lack of Material Resources At The End of The War.
Savings Beyond Price -Weekly eNewsletter - August 12, 2010
Robert T. Yokl
President & Chief Value Strategist
Are you Leaving-the-Driving to your Contractors?
Greetings,
No matter what size your healthcare organization is you are spending at least 13, 49 or 97 million on your outsourced contracts (telecom, utilities, food service, transcription services, temporary help, records storage, waste management, etc.) that for the most part you are “leaving-the-driving” to your outsourced service providers.
In essence, you turn these functions or duties over to a contractual partner who is charged with taking care of this service for a fee. This could save you money and improve your service quality in the short-term, but could be very costly and counterproductive over the long-term.
“After a lot of cost and service-levels benefits have been achieved in the first few years of a (contractual) relationship, then what? Older relationships need new frameworks and ways to structure those relationships to achieve new success” says Adrian Gonzalez, Director, Logistics Viewpoints.
We have seen this scenario played out with healthcare organizations throughout the country who repeatedly sign new contract service extensions with their current contractual partners without structuring a new performance-based framework for their relationship going forward.
We recently observed this exact situation that Gonzalez talks about when one of our clients renewed their laundry/linen services contract for seven years without even changing one word in their agreement with the exception of a new starting, ending date and fee. Ouch!
To avoid this embarrassing, costly and harmful behavior at your healthcare organization make sure that every outsourced contract that you sign (new or renewal) is structured as a performance-based relationship. Meaning, you set specific performance standards for your contractual partner to meet or exceed during your contract term. For instance, reduce laundry/linen cost by two cents per pound; cut linen replacement cost by seven cents per pound; improve par level stock outs by three percent. Get the idea!
My whole point here is that you need to be in the “driver’s seat”, and not “leaving-the-driving” to your contractual partners. Or else, you will be giving your contractors a blank check to spend as they please without regard to specific performance standards, rules of the road and utmost accountability to you, the payee.
Your Partner In Savings Beyond Price™,
Robert T Yokl
Chief Value Strategist
Strategic Value Analysis® In Healthcare
1-800-220-4274
P.S. As a corollary to this article you might want to read “Contracts need to be Benchmarked Too”, from our 400+ article archive. It will show you how to measure and monitor if your contractual partners are living up to their end of your contracts.
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