Strategic Contracting for Lower Costs on Multiple Fronts

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Strategic Contracting for Lower Costs on Multiple Fronts

HealthTrust

Hackensack University Medical Center was guided by HealthTrust's experts to convert to same or similar on-contract products, sign new contracts for medical devices and renegotiate existing contracts with purchased services suppliers. The result? More than $25.7 million in savings across all areas of spend, facilitated by the buy-in of leadership, physicians and vendors on contracting tactics.

CLIENT
Hackensack University Medical Center

FACILITY TYPE
Nonprofit teaching and research hospital, 775 beds

LOCATION
Hackensack, N.J.

SPECIALITIES
Largest provider of inpatient and outpatient services in New Jersey, healthcare hub for Northern New Jersey and New York metropolitan areas, teaching and research

THE CHALLENGE

Strengthening the bottom line was the organizational strategy for Hackensack University Medical Center in 2011. As they sought ways to increase efficiencies and cut costs without impacting their focus on patients and quality care delivery, joining HealthTrust became an important part of that strategy.

THE PROCESS

HealthTrust began by reviewing Hackensack's annual spend and purchase order history, looking at every contract for products currently being used by the hospital in search of lower-cost exact matches already on contract with HealthTrust. These conversions alone saved Hackensack close to $5 million dollars immediately.

Outside of the medical/surgical contract portfolio, key areas of additional savings included:

Pharmacy Services
Working closely with Hackensack's pharmacy department, HealthTrust's Pharmacy Services team provided an in-depth clinical review of our value offerings, pharmacy initiatives, contract alternatives, clinically preferred products and product substitutions. Because Hackensack was dedicated to making the switch to a committed model, the organization was able to save in excess of $1.9 million dollars in pharmacy costs the first year.

Medical Devices
Using a data-driven approach for market price comparisons, the custom contracting team at HealthTrust—SourceTrust— worked with vendors on a national level rather than with local reps to obtain best pricing. But pricing is just part of the equation. The process began with an initial benchmark by analyzing high-level purchase data as well as in obtaining the appropriate levels of buy-in.

SourceTrust developed a strategy using this data to gain Hackensack leadership buy-in and engage physicians in the process. The proposal identified targeted savings, project leadership, team roles, timelines and costs. Physician buy-in at Hackensack was outstanding because they understood the hospital's objectives and the impact of escalating costs and declining reimbursements. Once buy-in was achieved, SourceTrust presented vendors with supporting market data in collaboration with physicians and leadership to negotiate new pricing and terms and conditions.

But that's not the end of the story. After the new vendor contracts were signed, HealthTrust continued to support Hackensack by maintaining pricing agreements, tracking results, re-evaluating new technologies and providing ongoing clinical education. In just the first year, Hackensack's medical device savings averaged 10 percent with $5.9 million in savings identified.

Purchased Services
By partnering with HealthTrust's purchased services program—ServiceTrust—Hackensack was able to further reduce expenses by an additional $4.3 million. The three-step process began with a comprehensive analysis of Hackensack's outsourced services spend using 12-month AP spend reports, three months of invoices and a thorough review of all existing contracts.

Immediate cost savings was achieved by converting the current services that Hackensack was outsourcing to existing HealthTrust contracts with proven, high-level service providers. Hackensack has realized an average savings of 27 percent for each purchased services contract category that has been converted.

ServiceTrust's analysis also found that Hackensack facilities were using 33 different vendors in eight service categories. By consolidating and re-negotiating just these contracts, ServiceTrust was able to decrease costs
by more than $4.3 million dollars.

THE RESULTS

Hackensack's effort to drastically reduce costs was effective because it was grounded in positive relationships—most critically the solid partnership between HealthTrust's team on the ground and Hackensack's vice president of finance and supply chain leaders.

HealthTrust identified upwards of $25.7 million in savings across all areas of spend for Hackensack. They realized $16 million in implemented savings.

Hackensack - Key Areas of Savings Identified in Year One

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"More ramifications of healthcare reform are on the horizon, and the only way to address them is to have a strong bottom line. Strengthening our bottom line was our major focus in 2011, and becoming a member of HealthTrust was
an important part of that."

— Karl Blomback, vice president of finance,
Hackensack University Medical Center