Shopping Tips to Save Hospitals Money

Negotiate a win-win. While it's important for healthcare CFOs to manage their vendor relationships, it can also be crucial to work with physicians to help them manage their vendor relationships. A tried-and-true way to keep costs down is to establish some type of gainsharing arrangement with providers.

St. Luke's Health System, a six-hospital health system based in Boise, ID, successfully used gainsharing at two of its hospitals, said Cam Marlowe, the system's director of contracting and sourcing for supply chain management. After an analysis showed that combined spending at St. Luke's for cardiology, spine implants, and total joint implants totaled $39 million, Marlowe worked with physicians to implement a gainsharing plan beginning in 2009.

After a year of trial and error and limited returns, he says, the initiative showed fruit in year two. The organization reduced the cardio, joint implant, and spine implant spend by $1.3 million for the two participating hospitals, and garnered another $450,000 in rebates from implant device vendors. By year three, St. Luke's had saved another $7.1 million, and it anticipates an estimated savings of an additional $3.7 million by the end of this year.

"We needed to reduce our costs and wanted to get the doctors involved to help us determine how we could lower our cost while maintaining or improving quality. The gainsharing program was the best way to jump-start that collaboration," says Marlowe.