In today’s challenging healthcare financial environment, healthcare providers are under tremendous pressure to reduce costs without compromising patient access and quality of care. Traditionally, healthcare providers have been able to achieve significant cost reductions by leveraging Group Purchasing Organizations (GPOs) to negotiate national and regional contracts for commonly used healthcare products.

However, while GPOs are effective at securing savings for direct spend categories, their model is less effective for indirect expenditures in areas such as corporate services, distribution and logistics, facilities, fixed assets, furniture and equipment (FFE), information technology, and marketing. In fact, we’ve discovered that GPOs can only address between 12% – 25% of non-clinical expenditures.

Non-clinical spending can consume up to 25% of net patient revenue. This spending category is vital for smooth hospital operations and represents a tremendous opportunity for profit improvement. Effective and sustainable non-clinical procurement requires a deep understanding of the market, the ability to foresee future trends, and the skills to negotiate terms that are favorable to the healthcare organization.

That’s why these organizations must find new ways to optimize their non-clinical procurement, especially in a time of rising costs and tightening margins. When expenditures in these categories are undermanaged, millions of dollars of savings are left on the table. We’ve identified four actionable steps that can help organizations get on the right path to unlock new cost savings opportunities for their operations:

• Capitalize on non-healthcare benchmarks and rates
  Non-clinical expenditures for health systems are often considerably higher than rates paid by peers in other industries such as retail and manufacturing. Organizations can significantly benefit from collaborating with a partner who looks at spending and benchmarks for non-clinical categories across multiple industries. This is especially important for those non-clinical products and services that are often better sourced locally.
• Leverage partnerships with experts
  When it comes to getting the best deals and rates on non-clinical spending, organizations should engage with subject matter experts to help negotiate these deals. These advisors bring with them a vast pool of industry and category-specific knowledge that will help to craft contracts with rates and terms that are not only the best within healthcare but the best for that service.
• Establish complete visibility into non-clinical spending
  A lack of visibility into indirect spending brings a level of risk that can no longer be tolerated. Organizations should demand and expect visibility on where and how every dollar is spent. The right partner can provide technology that offers real-time insights into spending data, benchmarks against cross-industry data, and access to a diverse and proven supplier network.
• Ensure ongoing engagement with the marketplace
  Securing the best rates and deals for non-clinical spending is never a one-time deal. Opportunities for efficiency change every day, so it’s essential to have a partner who is in the market for these categories every day. They will work continually to ensure pricing and service are optimal and that the partnership delivers to the fullest.

A robust and sustainable strategic partnership can deliver more opportunities for deep cost savings instead of relying on GPOs. That’s why healthcare systems must have a dedicated technology and implementation partner working on their behalf to drive savings on non-clinical spending, improve supply chain resilience, and execute on behalf of the health system to ensure savings goals are met. With this operational plan in place, resources can be prioritized for high-impact initiatives such as those focused on delivering care.