Driving Hospital Margin Improvement With A Purchased Services Pricing Strategy (PSPS)

This article was written by Lisa Miller.

Driving margin improvement for your hospital is achievable with a purchased service pricing strategy (PSPS) from VIE Healthcare Consulting.

Managing rising healthcare costs while providing quality patient care is a challenge for all healthcare systems. We recommend achieving that by analyzing your non-labor costs, the bulk of which are often concealed in your purchased services spend.

The Rising Cost of Purchased Services Spend

Purchased services spend can comprise as much as 40-50% of a hospital’s non-labor spend. In our experience, most hospitals don’t have an accurate understanding of this significant portion of their budget, yet it can represent potentially millions of dollars in annual savings.

These costs cover areas such as dietary, housekeeping and waste management for example. At VIE Healthcare, we utilize a framework to place your purchased services spend into the following six categories:

• Clinical
• Facilities/Support
• Finance, HR, HIM
• Biomed/Service and Maintenance
• IT/Telecom/Telehealth
• Administrative

Gaining clarity of your purchased services spend can improve patient care and satisfaction as well as realize unparalleled cost savings for your hospital.

4 Challenges with Purchased Services Spend

When health systems lack visibility over their purchased services spend, a number of issues arise:

• Departments may have different contracts with the same vendor at significantly different rates.
• Some contracts are run on automatic annual renewal which have rarely been reviewed. In these situations, hospitals have no control or understanding of what that arrangement is costing them.
• Price fluctuations are often overlooked.
• Visibility of cost detail is impossible.

Purchased services are increasingly complex and often ignored although they are vital to your pricing strategy. That’s why our team of experts developed our unique Purchased Services Pricing Strategy (PSPS), a subscription service that optimizes purchased services for hospitals around the country.

Our purchasing pricing strategy delivers a customized prescription from VIE Healthcare, designed to save your hospital millions of dollars.

Purchased Services Pricing Strategy (PSPS)

A unique price benchmarking tool, PSPS helps hospitals obtain market-competitive pricing and best-in-class terms on their purchased services agreements.

Most hospitals make the common mistake of underestimating how much money is tied up in purchased services.

VIE Healthcare’s PSPS subscription service works to:

• Thoroughly analyze contract and pricing data at your hospital with our automated patented technology Invoice ROI™.
• Achieve massive expense reduction and optimal results.
• Deliver benchmark analysis for purchased services.
• Identify opportunities for cost savings throughout the process.

Since 1999, VIE Healthcare has used PSPS to create a comprehensive database of 107 purchased service categories. When PSPS was tested among our current clients, the results were remarkable.

One client achieved over $200,000 in savings on a single purchased service agreement.
Another saved over $10 million in non-labor expenses focused on purchased services.

In addition, each PSPS report includes the following specifically designed for your hospital:

• A competitive pricing benchmark analysis.
• Review of terms and conditions and an overview of the competitive marketplace.
• A detailed negotiation strategy.

Every report gives unsurpassed visibility into the marketplace, which will allow your hospital to negotiate with vendors to obtain best pricing.

Discover how a customized PSPS service can help your hospital to save money and transform patient care. 

Identifying the cost-saving opportunities hiding in your line item details.

Invoice ROI™ empowers your hospital to track these costs in real time and compare them to historical data to deliver actionable intelligence. That data can be used to make significant cost savings, improve your margins, track purchased services spend and monitor ongoing performance.