How healthcare organisations can cut costs by consolidating contract data
Healthcare organisations are looking for ways to remain competitive in the market while optimising business performance. These organisations are spending a significant amount of time and money managing external contracts to develop their capabilities for IT hardware/software maintenance. To manage the growing list of active and completed contracts, organisations typically rely on several non-integrated systems (such as Excel and SharePoint) for vendor and contract management.
Forrester Research conducted a recent study, finding that 82 per cent of respondents were still using spreadsheets to manage third parties. Additionally, the survey reported that one third of organisations are increasing their reliance on third parties for support, leading to an increasing need for improved visibility into overall and specific vendor spend. Healthcare IT News reports that for healthcare providers, electronic health record (EHR) systems expenditure reached $14.5 billion in 2019, with an expected growth to $19.9 billion by 2024.
The challenge with increasing reliance on third parties is there is often limited ability for an organisation to have a single view of financial and contractual data, especially in high spend areas like IT maintenance. In addition, organisations typically lack a consolidated and integrated tool for planning, budgeting, analytics, and reporting of IT Vendor Maintenance Contract metadata, only further complicated by existing contracts in place at the time of a merger or acquisition. The lack of visibility and transparency limits an organisation's ability to optimise the IT maintenance portfolio and achieve the most efficiencies.
Opportunities for healthcare organisations to better manage spend
Healthcare organisations have a significant opportunity to improve their current IT maintenance management practices and better manage contract spend. In addition, this provides an opportunity to have a consolidated view of financial data to perform financial planning and budgeting on contracts.
Healthcare organisations should ensure their core business processes are standardised and invest in best-in-class solutions which focus on integration to optimise the IT maintenance portfolio to maximise efficiencies.
There are three primary ways healthcare organisations can achieve this:
- Standardise finance and contract management processes. Processes that typically have high degrees of variation include managing contract renewals and terminations in addition to conducting month-end financial analysis. Differences in contract length, terms and other conditions created by non-standardised processes can lead to risk to an organisation. If adequate time is not provided with notice, for new negotiations to begin or new vendors to be sought, organisations run the risk of being “held hostage” to remaining with their existing vendor. From a compliance standpoint, healthcare organisations are required to meet certain retention standards, which often relies on third party vendors for data storage. In the event a contract is not renegotiated the organisation is left to continue with their existing contract, and usually under less-than-ideal terms to maintain legal compliance of their data.
- Improve oversight and management of contracts to reduce contract spend. This can be achieved by implementing a solution that provides a single view of all contractual obligations and financial performance. This allows for overall management of spend at a single vendor and exploring other contractual rates spent across an organisation as well as pushing for improvements in volume-based discounts. This may prove especially useful for high-cost systems, such as an electronic health record. Healthcare providers may benefit from revisiting these large contracts, especially integration-point type contracts in large scale deployments where renegotiation may be possible.
- Streamline financial planning, budget management and forecasting. This is particularly important given healthcare market disruptors such as COVID-19. To ensure financial resilience, healthcare institutions should implement a solution with streamlined and granular financial planning capabilities. A consolidated view can be achieved when matching actual spend against budget and revising forecasting as needed throughout the year to better track spend against budget in a single consolidated view.
Healthcare organisations will continue to face increasing pressure to optimise costs, particularly as a result of COVID-19. By standardising their finance and contract management processes in addition to investing in a best-in-class solution to optimise the IT maintenance portfolio, they will be able to meet these cost saving goals.
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