HealthLeaders Finance Editor Amanda Schiavo recently interviewed LogicSource client Keith Noll, Chief Administrative Officer for WellSpan Health, an eight-hospital system in central Pennsylvania. The interview describes how WellSpan optimized their non-clinical purchasing process to save $6MM during 2022, with the organization on track to save more than $20MM throughout the life of WellSpan’s multi-year agreement with LogicSource.
Beginning with extensive internal audits of the health system’s non-clinical procurement activities, Noll defines how WellSpan reengineered processes to “ensure every purchase is made better.” Working together with Noll and his team, LogicSource healthcare procurement experts validated the cost savings opportunity through their Mutual Value Assessment, and developed a customized solution in partnership with WellSpan to ensure the value would be realized.
Advice from WellSpan Health
Several best practices included in the interview are shared by Noll. Any health system looking to uncover hidden cost savings is encouraged to analyze their non-clinical supply chain activities using the following steps.
Assess every category of non-clinical purchasing. Look at “who” makes the decisions and “how” goods and services are purchased including categories such as facilities maintenance, benefits, couriers, and more.
Compile data from your assessment and analyze by each department.
Tap into procurement professionals with expertise in these complex non-clinical categories
Use the experts to renegotiate terms of each department’s vendor relationships, making it easier for each department to maintain a positive relationship with their vendor partners.
Review benchmarking information from industries outside of healthcare to gain valuable insights into the latest pricing and overall rates for non-clinical goods and services.
Incorporate newly learned best practices into your procurement processes to drive faster decisions and a quicker return on investment for each purchase.
Every Dollar Counts
Earlier in 2023, the American Hospital Association (AHA) released a series of reports that showed hospitals and health systems will continue to face pressure on staff and resources while also dealing with rising expenses across the board. More recent reports reveal hospital and health system margins have improved slightly. However, provider cash flows remain fragile and finance executives must continue to monitor every dollar they spend.
Traditionally, spend focus has been on direct clinical expenses, but as the WellSpan story reveals, now is the time for healthcare finance executives to turn their attention to non-clinical spending—a cost base that typically represents 20% of net patient revenue for most health systems. What’s more, GPO partnerships typically only address between 10-25% of these costs, representing a significant opportunity for cost savings and margin improvement.
During a time when every dollar counts, we’re extremely proud of our partnership with WellSpan Health. We celebrate the savings realized together, and we appreciate their conversation with HealthLeaders on this important finance topic. View the full interview here.
And learn more about LogicSource and the company’s innovative combination procurement expertise and technology for healthcare provider organizations in our virtual Idea Lounge here.
