An untapped opportunity
In the new world of healthcare, the pressure has never been greater to cut costs while maintaining quality of care. Health systems everywhere are looking at their entire spend for new opportunities to save money. For Halifax Health, that search has uncovered substantial savings that have been ‘hidden’ in a most unexpected place: the renewal of IT maintenance contracts.
“Every health system and hospital has savings goals to achieve,” said Steven Frederick, Vice President of Business Development and Marketing for Seprio. “Working together with Cardinal Health, we identify new savings opportunities in an arena that, until now, has been relatively untapped. Purchased Services can save health systems and hospitals significant dollars. Imagine for example, if a health system could suddenly save five percent of a $300 million budget. That’s what we do at Seprio: unlock the savings that our customers are missing — and often, didn’t realize were possible.”
Purchased Services encompass many areas, such as facilities management, business services, support services and technology. For Halifax Health, the outsourcing of IT contract renewal negotiations has become a major opportunity, tapping into the unique expertise of the Cardinal Health and Seprio team.
At various times of the year, Halifax Health has IT maintenance agreements that are up for renewal. In years past, the health system’s IT managers would be responsible for negotiating contract renewals, in addition to all of their other duties. Not only were these negotiations time consuming, but they also distracted the IT managers from their primary focus: to successfully manage the vision and day-to-day operations of the Information Technology (IT) department.
“For us, outsourcing contract negotiations for IT services is a no-brainer,” said Dustin Leek, Director of IT Technical Services for Halifax Health. “Our IT managers no longer spend hours and days on contract negotiations. This gives time back to them to manage and lead our IT efforts.”
Now, Halifax Health’s IT managers can make best use of their time and energy to support the health system’s goal of providing quality, cost-effective care. Leek explained, “Our managers’ core expertise is in IT. We want them to be the best IT managers — not necessarily the best contract negotiators.”
On the other hand, Seprio is in the business of negotiation. “They’re experts at it, so they naturally have more experience than our IT managers,” Leek said. “Put another way, people throughout our health system come to us for IT needs, because they expect us to know it all. We look at Seprio the same way, when it comes to contract negotiations. The proof is in the pudding, and Seprio has created more favorable contract renewals than my IT managers could have. Now, our managers’ focus is where it belongs: solving business problems.”
In addition to saving time and improving the managers’ focus on the business of IT, there are other advantages. Because managers no longer deal with pricing, there’s no wedge driven between the vendors and them. As a result, outsourcing negotiations has created a much stronger relationship between managers and vendors. And that has paved the way for quality IT results at a substantially reduced cost.
11 percent savings, with no risk
In the first year of using Seprio, Halifax Health saved 11 percent on IT maintenance contract renewals. “Eleven percent is nothing to sneeze at. I can spend it on other projects — it’s found money,” Leek said. “And that’s why I’m advocating Seprio to other areas of the health system that also have high-dollar capital expenses.”
As Leek and other Seprio customers have found, the pricing model has no risk. Seprio is compensated based on the savings it achieves for Halifax Health. “If they don’t save me a dime, then I don’t pay them a dime.”
How are such significant savings possible? “Because Seprio has nationwide experience negotiating IT contracts, they know what other health systems are paying,” Leek explained. This benchmarking, based on Seprio’ real-world experience, helps determine what Halifax Health should be paying for IT services.
Proactive, not reactive
Knowledge and experience come together to create a foundation for proactive negotiations that yield fair contract pricing and terms.
A proven process
Seprio achieves the best pricing from more than 1,000 suppliers, including Microsoft, Oracle, SAP, McKesson and Thomson Reuters
“Seprio works to get the best prices from a vendor, and then uses them as a baseline for negotiation on behalf of our customers,” said Don Greenwood, Executive Sales Vice President for Cardinal Health. “It’s a very collaborative, non-adversarial working relationship with vendors. Seprio brings them volume, they deliver better pricing and as a result, our customers win.” Volume is the key: “It’s actually less risky for us,” Leek said, “because Seprio has negotiated the same contract we need probably 60 or 70 times before, while we may only have done it once.”
Some IT managers might feel like outsourcing is a risk — that it might sour a vendor relationship. “In our experience, silence is golden. Vendors are not pushing back,” Leek said. And it’s a misperception to think that the savings are ‘not-invented-here.’ There would be no savings without collaboration initiated by outsourcing. “As an IT executive, if it’s your idea, it’s still your idea. Outsourcing contract negotiations doesn’t make you look bad — it makes you look good. You can’t lose.”
Leek added, “If Seprio can save you money, it’s proof that you shouldn’t have been doing your own contract negotiations in the first place. If you save nothing, you’ve lost nothing — and you know you’re on the right track without any assistance.”
Because IT technology changes significantly about every five years, there’s an ongoing need to manage IT capital expenses. And that means an ongoing need to manage IT contract negotiations, both for renewals as well as new acquisitions.
Another factor driving the need is the acceleration of new technologies to meet the demand for Electronic Medical Record (EMR). “Doctors and nurses will soon see EMR as a tool that’s as important as a stethoscope,” Leek said. “The future of healthcare isn’t paper: It’s 100 percent digital.” This emerging reality will command even more attention from IT managers to ensure the most effective solutions are in place for their health systems, both now and for the future. So relieving them of the burden of contract negotiations will become increasingly vital in the months and years ahead.
Beyond negotiating maintenance contract renewals alone, Leek is also looking to Seprio to help establish new contract relationships. And, he’s spreading the word beyond the IT department and into other areas of the health system. “How do we best expand outside of IT? I’m looking at other aspects of Seprio and speaking with our Chief Revenue Officer and Director of Finance.”
In short, the savings opportunities for Halifax Health are just beginning — and it couldn’t come at a better time. “There’s only so much margin to work with in product pricing today,” Frederick said. “Purchased Services are a different story, and Seprio is here to help health systems unlock new savings opportunities.”
Saving across the entire healthcare system
Beyond IT alone, hospitals and health systems such as Halifax Health can take advantage of a broad range of opportunities to save money with Purchased Services. It’s a 100 percent self-funded solution that requires no monthly fees, subscription, software or need for substantial time and effort on the provider’s part. Cardinal Health and Seprio tailor Purchased Services in four major categories:
About Halifax Health
Recognized by The Joint Commission as a Top Performer on Key Quality Measures, Halifax Health serves East Central Florida, providing a continuum of healthcare services through a network of organizations including a tertiary hospital, community hospital, psychiatric services, a cancer treatment center with four outreach locations, the area’s largest hospice, a center for inpatient rehabilitation, primary care walk-in clinics, a walk-in clinic specializing in women’s health, two community clinics, three children’s medical practices, a home healthcare agency, and an exclusive provider organization. Halifax Health offers the area’s only Level II Trauma Center, Comprehensive Stroke Center, Neonatal and Pediatric Intensive Care Units, Pediatric Emergency Department, Child and Adolescent Behavioral Services, complete Neurosurgical Services and OB Emergency Department. For more information, visit halifaxhealth.org