Healthcare Finance News Podcast: To Cut Expenses, Hospitals Should Look at Indirect Spend
LogicSource Healthcare Managing Partner Brian White and Chief Executive Officer David Pennino recently sat down with Healthcare Finance News Executive Editor Susan Morse for a timely conversation discussing the dollars today’s hospitals and health systems are losing by neglecting their indirect spending.
As cash-strapped systems face shrinking margins, supply chain disruptions, and rising labor costs, reining in the non-medical spend that typically equates to 20-25% of revenue has the potential to save them millions. However, without category expertise, a reliable ecosystem of suppliers, and a resilient, diverse supply chain, systems will struggle to realize the potential that effective management of indirect spending can provide.
Healthcare Finance News
To Cut Expenses, Hospitals Should Look at Indirect Spend
Hospitals are looking to cut expenses in the midst of financial pressure from inflation, workforce costs and other challenges to already thin margins. LogicSource CEO and founder David Pennino and Healthcare Managing Partner Brian White, who work with health system executives, say they often see hospitals spending more on non-medical items than other businesses do.
“The spend difference is astronomical,” said White. The difference, 7-12% on indirect spend, could save millions of dollars a year for hospitals.”
Hear more in their conversation with Healthcare Finance News Executive Editor Susan Morse.
- Indirect spend is the stuff you buy to just be in business, and includes services such as marketing, technology, facility, corporate services and HR.
- The very same products bought by corporations often cost hospitals more.
- Health systems are overly reliant on group purchasing.
- Supply chain teams are often underfunded. During the height of the pandemic, executives were out in the hallway making phone calls to find masks and other supplies, because they didn’t have a team to do it.
- Hospitals need an ecosystem of suppliers willing to work with them.
- In corporate America, indirect spend represents about 20% of revenue, but for a $10B hospital system, it is 20-25% of revenue.
The innovative leader in procurement services and technology, LogicSource is purpose-built to drive profit improvement, mitigate risk, and ensure supply chain continuity through better buying. LogicSource focuses exclusively on the sourcing and procurement of indirect goods and services, which typically represent 20% of an organization’s revenue and the area of greatest spending inefficiency. These include complex categories like marketing, packaging, corporate services, facilities, information technology, distribution and logistics and more, for which organizations often lack the capacity, focus and scale to achieve best-in-class buying. Unlike traditional advice-based consultants, LogicSource is a purpose-built buying utility with assets that are configurable to their clients’ needs and ready to deploy. By combining decades of sourcing and procurement expertise, superior market intelligence, cross-portfolio spending leverage, and their OneMarket® Source-to-Pay technology, LogicSource executes customized solutions that deliver immediate savings and sustainable value. For more information visit www.logicsource.com.