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March 28, 2024

Purchased Services: The Hidden Costs Driving Health Care Operating Expenses

What are purchased services in health care?

Purchased services make up more than 40% of a health system’s operating expenses. Despite being the highest expense for health systems beyond labor, it is often the most overlooked.

Purchased services include any non-labor expenses that a hospital may contract, purchase or outsource to a third-party vendor. Often health systems have duplicate contracts or operational inefficiencies that drive up the cost of purchased services. For health systems looking to directly improve their bottom line, purchased services spend is a great place to begin looking to determine where waste may exist.

Why is purchased services management important?

“Purchased services carries the most expense, behind labor for health systems, but is the category that receives the least amount of attention.” John Wright, COO, Advantus Health Partners.

Purchased services management is the key to improving your health system’s bottom line. Every dollar saved through health care purchased services contracts can be directly attributed to a health system’s bottom line. Additional benefits of deep diving into purchased services spend include:

  • Creating sustainable margin improvement in health care.
  • Improving operational efficiencies.
  • Understanding efficiencies in procurement management.
  • Centralizing your health system’s purchasing power.
  • Fostering collaboration and communication through the procurement management process (sourcing, obtaining and paying for goods and services).

Advantus enjoys fostering a culture of communication and collaboration with our members, strategic suppliers and partners.  Learn how Advantus Health Partners helps members understand their purchased services spend and maximize the value they receive from that spend. Contact us today.

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