Dental Supply Expense Review Audit

Project Overview

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.

Dental Supply Expense Audit Results

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.