Dental Health Maintenance Organization Partners with Expense to Profit to Analyze Their Medical Supply Spend
A Midwest Dental Health Group was searching for a partner to compliment its capabilities and expertise in providing superior service to its patients. They were looking for a partner with expertise to deliver meaningful and sustainable funding by reducing overhead cost. They wanted a partner who could also provide expertise in the area of best practices, vendor selection and management that is unique to each expense category without taking on any additional risk or expense.
We identified and ranked the top spend categories and vendors for savings opportunities by reviewing their past twelve (12) months spend by Expense Category. It was determined that we would start with their Medical Supplies. While they had agreements with vendors, there was nothing in writing to specify the exact terms. With an annual spend of over $5 million, purchasing over 6,600 different medical products and having supplier relationships with over 30 vendors, they were not able to measure compliance with their vendors for pricing, terms and service. Their largest vendor had an agreement with them for a cost + 15% pricing structure.
Our first goal was to analyze all of the data and get terms and pricing from their vendors. Once that data was analyzed we presented our findings to the client and determined that there were potential opportunities for savings and better tracking for vendor compliance. The RFP process began and invitations were sent to the 16 vendors that could provide the majority of all items within the client’s parameters for pricing, terms and service.
15 of the 16 vendors submitted proposals. After analyzing all of the proposals there was a savings of $542,000 per year for new three-year agreements without changing vendors. What the client found most amazing was the vendor with the cost + 15% arrangement seems to be able to deliver the same products with the same terms for just “COST.” Because the client did not define “COST” they never really knew what made up that benchmark. The second solution was to consolidate the spend utilizing just a couple of vendors. The three-year agreements will provide savings estimated to be over $1.1 million.
Support Services and Asset Management Savings Opportunities
As a CEO, CFO or Healthcare Administrator, you are feeling the pressure of shrinking reimbursements and increasing costs. As a healthcare provider, you are doing what you can to provide quality healthcare while keeping patients, payers, and providers happy. You are feeling pressure to reduce operating costs and services to remain competitive in the healthcare marketplace. All too often, cost savings involve reducing your workforce, reducing services, or compromising quality healthcare. Which way do you turn?
Our industry experts are being asked to review expenses incurred by health care organizations. Our clients include hospitals and outpatient care facilities, physician practice groups, home health care services, nursing and other residential care facilities, diagnostic imaging centers and medical laboratories. We specialize in the cost-effective management of all healthcare based assets, including the physical plant and associated equipment, fixed and mobile medical devices, and more. Our expertise continues by improving service contracts and device rental/lease agreements.
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