Four Key Factors in Getting the Most Value From Your Vendor Relationships
Hospitals need a profit margin of 3.5% to fuel growth. To do that, many turn to outsourcers for self-pay collections, expecting greater efficiencies and lower costs. Today, nearly a third of hospitals employ between ten and 15 vendors, with the majority spending between 21 – 30% of their budget on those partnerships. While this can be a viable approach, the value these relationships deliver often falls short of expectations. More than half of hospitals are either unhappy with their vendors’ performance, or they don’t know if they’re getting a full return on their outsourcing investment. This lack of insight can lead to millions in lost revenue.
Healthfuse, the nation’s first at-risk vendor performance management company, has found most hospitals lack the level of transparency needed to identify vendor performance issues. This leaves hospitals with little choice but to rely on the vendors themselves to provide their own performance analysis. Given that each vendor uses its process for measuring success, the data provided is likely to be skewed in their favor. Lacking a standard for evaluating vendors across the board inhibits a hospital’s ability to employ consistent best practice standards for all their outsourcers.
As hospitals continue to face growing pressure from value-based care and rising self-pay accounts, settling for underperforming vendors can have a significant on the bottom line.
Below are four key factors hospitals need to consider to get the most from their vendors.
- Make sure you’re hiring the right vendor the first time
- Negotiate the best Service Level Agreements (SLAs) up front and re-evaluate regularly
- Leverage technology to evaluate current vendors
- Increase the value of existing relationships
There are thousands of vendors in the U.S. Choosing the one that’s right for your hospital can be challenging. Word-of-mouth references are great, as are industry rankings. However, those are still general in nature and don’t take into account each hospital’s unique needs. A vendor performance management company can help. For example, Healthfuse has information on more than 3,000 vendors, including demographics, service levels, and pricing. They can quickly identify the very best vendors for each hospital. This is much more cost effective than hiring and trying to manage an underperforming vendor for years on end.
Beyond choosing the right vendor, negotiating terms, and SLAs is one of the most important factors in getting a positive return on your outsourcing investment. Understanding where the vendor stands in respect to their competitors is essential in this effort. They should be completely transparent and open to sharing the information. If they say they don’t have that type of information or that they can’t share it, it may be best to walk away.
Getting the most from your outsourcing investment requires full transparency into vendor processes and problematic trends. The right technology can deliver this level of intelligence. By scrubbing invoice and inventory reconciliations, hospitals can match invoices against hospital transactions or payment files. This can help identify things such as accounts that have been placed with multiple vendors. It can also highlight whether vendors have applied the correct fee to the payment. In this way, hospitals can proactively identify discrepancies and create work lists to get them resolved.
It is important to work alongside your vendors to establish goals up front. When you’re not working from the same set of expectations, it will be challenging to hold your vendors accountable. There should be regular communications through which performance issues and inconsistencies are addressed. When systemic issues are identified, vendors should be open to remediation. Working with an unbiased third-party to manage the remediation process can be beneficial. Using industry best practices, these vendor performance management experts can design a process improvement strategy aligned to each hospital’s unique needs. Salvaging an existing relationship, when possible, is generally more desirable than sourcing a replacement.
A Win-Win Approach
The most valuable vendor relationships are those that are open and honest and beneficial for both parties. The best vendors should welcome the highest level of transparency and should embrace opportunities for improvement. Having greater insight can help vendors increase their value to the hospital while helping the hospital improve long-term financial viability. Partnering with industry experts like Healthfuse can give hospitals and health systems, the insight they need to achieve the highest return for their outsourcing investment.