New Year’s Resolution: Improve Spend Management

10, 9, 8, 7… Countdown to savings.

10, 9, 8, 7… Countdown to savings.

Saving money is one of the most popular personal New Year’s resolutions—right up there with exercising more. Saving money is also an important goal for healthcare organizations, particularly at a time when many hospitals are struggling to improve operating margins decimated by COVID-19. Supply chain spending is one of the biggest expenses for healthcare organizations, accounting for up to one third of operating expenses at some hospitals. Reducing your supply chain spending is a great way to improve your organization’s financial fitness.

Linen service, capital equipment, disposables, med-surg supplies, ambulance services, laboratory/blood bank… the list of healthcare expenses seems to go on forever. Controlling non-labor spend is difficult at the best of times. In the midst of the COVID-19 pandemic, the task seems even more daunting. Fortunately, however, several strategies can help you improve your spend management so you can focus on the most important part of what you do—treating patients.

In 2021, resolve to take these steps to control your non-labor spend:

Analyze your spend. To identify opportunities to save money, you have to know where you’re currently spending it. The first step is to document your spend over time, organizing and standardizing your spend data. Measure your suppliers’ performance to be sure they are delivering high-quality products and services at the best prices.

Use benchmarking data. Are you overpaying for your capital equipment, med-surg, and/or purchased services? Do you know how much you should be paying? Compare your quoted or contracted prices to local, regional, and national benchmarks to determine whether the prices are competitive. Be sure to examine benchmarking data for list price, component price, warranty terms, and other measures.

Don’t assume a GPO-negotiated contract delivers the best price. You can often beat the prices GPOs negotiate because GPOs are not fully independent or unbiased. They negotiate prices based on established vendor relationships. To avoid leaving money on the table, benchmark GPO pricing against what is possible in your region and negotiate for deeper discounts when you see the opportunity to do so.

Strengthen your negotiation skills. Benchmarking tells you what you should be spending on equipment, supplies, or purchased services, but that knowledge is only the first step in saving money. Benchmarked pricing data gives you leverage at the negotiation table, but you have to know how to use that unbiased information to get the best deal. In short, you need solid negotiation skills. To improve your negotiation skills, implement these top 10 contract negotiation strategies for healthcare providers. Or you may choose to rely on experienced negotiation experts who have a demonstrated ability to deliver savings.

Work together. When supply chain teams operate in hard silos, purchasing staff in one department don’t know what the other teams are doing. Some departments may make purchasing decisions based on physician preference, while others consider clinical evidence. Different departments, or different hospitals in the same health system, may be paying different prices for the same supplies or services. This may occur when there is no contract, or when multiple contracts are stored in different locations, so one department or hospital doesn’t know what another is paying. When purchasing isn’t coordinated and contracts aren’t centralized, you may wind up with duplicate or unnecessary contracts, and/or off-contract or rogue spend. You can avoid these problems by centralizing your contracts and by standardizing your purchasing decisions using workflow software.

RELATED WHITE PAPER: Validate & Verify: How to Establish Healthier Vendor Relationships During and After the Pandemic

Many New Year’s resolutions are abandoned by January 31. TractManager’s Spend Management solution can help you stick with this essential resolution throughout 2021 and beyond. Our spend analytics tools and 3+ million benchmarking data points make it easy to analyze your non-labor spend and save money. Our expert contract negotiators are standing by to help you achieve an additional 6%–9% annual savings. Those numbers are worth celebrating!


Michael Costantini

Vice President, Sales & Marketing, EMTS

Michael Costantini joined EMTS in 2017 as Vice President of Sales & Marketing.


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