The Top Six Mistakes Hospitals Make in Managing Their Vendor Relationships

 In Revenue Cycle Vendor Management

The Top Six Mistakes Hospitals Make in Managing Their Vendor Relationships

There have been numerous articles written over the past couple of years about what keeps hospital CEOs up at night. Not surprisingly, maintaining profit margins in the face of changing reimbursement models and increased regulation is nearly always one of the top concerns. To address these growing pressures, hospitals are increasingly turning to outsourcers—to the tune of $30 billion each year, an increase of 50% over the past five years.

To be successful, hospitals need to ensure they’re getting the highest level of return on these investments. Healthfuse, the industry’s first “at-risk” vendor performance management company, has performed extensive research on vendor management practices. They have compiled a list of the top six mistakes hospitals make that lead to a lower ROI on these relationships.

  1. Not setting expectations up front
    Establishing the appropriate service level agreement (SLA) may be one of the most essential elements of a successful vendor relationship as it sets expectations for both the hospital and the outsourcer. An appropriate, comprehensive SLA sets the framework for measuring ongoing vendor performance and improving accountability.
  2. Negotiating contracts without the right information
    Putting together the most favorable contract terms takes more than just finesse. It requires broad industry insight to compare multiple vendors’ pricing and services accurately. Without that visibility, you are, in essence, negotiating blind.
  3. Relying on vendors to report their own success
    Many hospitals depend on their vendors’ analysis to determine outcomes. This is problematic as most vendors have their own methodologies for reporting results, which are often skewed in their favor. If you have multiple vendors, as most hospitals do, it becomes challenging to create an accurate, system-level evaluation of the financial impact of your outsourcing program.
  4. Failing to monitor performance
    According to Healthfuse research, more than half of all early out vendors are non-compliant with best practices. Without in-depth auditing and monitoring of vendor processes—such as comprehensive inventory reconciliation—it is impossible to measure their effectiveness accurately. It also becomes difficult to identify problematic trends.
  5. Not leveraging technology
    Evaluating vendors requires a level of transparency not possible without the right technology. Manual review is costly and time-consuming and often falls short in identifying issues such as accounts that have been placed with multiple vendors or whether vendors have applied the correct fee to the payment.
  6. Overlooking the importance of coaching and remediation
    It takes a lot of work to find and implement a vendor. Identifying a performance issue, especially in a long-term relationship, is unpleasant for both you and the vendor. Unless the issue is egregious, it is generally more desirable to correct the problem than to replace the vendor. However, the process can be arduous, requiring honest and open communications and a high level of commitment from both parties. Hospitals will need to establish process improvement goals, perform weekly or monthly reviews, and provide counseling and training to vendor teams. Many hospitals won’t commit the resources necessary because they don’t recognize the value of remediation in attaining optimal performance improvements.

Next steps
In our new healthcare ecosystem, hospitals find themselves challenged to do more with less. It can be daunting to think about the level of effort it takes to manage vendor relationships effectively. Partnering with a vendor management company like Healthfuse can remove this burden and bring optimal results faster.

Healthfuse works alongside clients and their vendors to set goals and discuss process inconsistencies and performance issues. Healthfuse advisors have worked with hundreds of vendors and have expansive knowledge of best practices across the industry and peer groups. Using this insight, they help both clients and their vendors achieve a higher level of efficiency, effectiveness, and value in their relationships.

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