case study insourcing vendor management helps a healthcare...
TRANSCRIPT
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Insourcing your outsourcing is an outstanding innovation
CASE STUDY
Insourcing Vendor Management helps
a healthcare system in Michigan solve a
$6 million workforce contract labor
problem
A group of nine owned, managed, and
affiliated hospitals – was facing a
serious staffing problem. Outsourcing
the procurement of their contracted
labor needs to a third-party Managed
Service Provider (MSP) had created a
$6 million – and growing! – Annual
expense that was threatening their
ability to deliver health care programs
and education to their local community.
As they provide over $60 million in
financial support to the community
annually, a $6 million premium labor
spend created an unhealthy constraint
on their ability to serve the community.
In response, they knew they had to take
control of their own fortunes. They
transferred handling of contract labor
staffing from a third-party to their own
system by “insourcing” the function with
the help of their workforce strategy
partner, Hallmark Health Care Solutions.
The result was greater control, more
insight into their own operations, and –
most critically – bill rates that
immediately plummeted by 25% on
average across all disciplines.
Here’s how they did it, and all the
benefits the system gained as a result.
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Quick Overview
The Problems with Outsourcing Vendor Management
Goals are not aligned
when a for profit
company (MSP)
manages an
organizations labor cost
• Vendor Neutrality is a nice phrase but doesn’t really
exist
• Staffing vendors prefer a direct relationship with the
health systems they service and with an MSP in
place they become removed
• Limited focus and dedicated account management
from MSP managing many health systems
Little-to-no transparency They identified that there was limited to zero insight into
why they were spending so much with rising bill rates,
the vendors that were supporting them or how to fix the
problem.
Zero control The health system couldn’t exercise any direct control or
put stop gaps in place over the situation.
Individual sites siloed Each location was accessing the MSP without a central
clearing house to ensure all internal resources were
used prior to going to agency.
The Challenges
Change management How we assist the health system to get everyone and all
departments to accept the new way of doing business?
Pushback from the MSP • Hard to get data from the MSP as to the Agencies
providing staff and setting a transition date from
outsourced to insourced.
• How to deal with the former MSP working hard to
convince the vendors not to support the transition
and that the attempt to in-source would fail?
Technology
Requirements
How they handled the technology piece, when they did
not have a VMS tool in place already.
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The Solution
Decide to insource Make the decision to control the vendor management
process entirely in-house.
Hire outside Consultants
to help with Strategy
Hire experts in contingent labor management to walk
you through best practice and design the best program
for your hospital/ health system.
The right VMS
Technology
Choose the best VMS technology to procure contract
staff through, avoid technology owned by Staffing
Companies, easily configurable tech, interface with TA
and performance/productivity tools, scalable and
automated.
Welcome the right
Vendors to participate
Communication to Vendors about the change in
process, new standardized contracts and preferred bill
rates, webinar sessions, choose the right agencies to do
business with that want to do business your way.
The Outcomes
Cost savings Once they insourced vendor management, they
immediately started saving a significant amount of
money, replacing bill rates of $95/hr with bill rates of
$70/hr.
Greater visibility Gained real-time eye-opening insight into where they
were spending, how long they had contractors on site
and best suppliers’ performance. They now have the
real time data they needed to make better decisions and
control costs.
Improved labor sourcing Insourcing contract labor created an effective feeder for
filling FTE's internally, making it easier and faster to fill
vacancies with new hires.
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Improved vendor
relationships
Without having to go through a 3rd party MSP controlling
the relationships, vendors approach the client directly
with any questions or concerns – resulting in better
candidates and no delay in communication thus
improving fill rates. 100% of Vendors prefer direct
relationships over working through a 3rd party or MSP.
Faster time-to-fill rates Average time-to-fill has shrunk from 47 days to 11 days.
What does it mean to “insource” vendor management?
It’s never been more important, nor
more difficult, to optimize health care
staffing.
MSPs have long had a valuable role to
play in offering access to a large, often
nationwide pool of contract nurse labor
to organizations suffocating from nurse
shortages.
However, this approach externalizes the
function, removing control over it and
obscuring transparency into what
options are truly available to the
hospital, and places the function in a
source whose incentives do not align
with the hospital’s. An MSP’s best
interest is not to drive down labor costs
but to keep increasing bill rates.
Functionally, a dedicated VMS works
much like the MSP model itself, giving
hospitals all the access to labor it needs.
With an effective VMS platform
deployed, functionality remains the
same, but labor management becomes
more transparent and cost-effective, and
more forward-looking.
A dedicated VMS grants hospitals
access to multiple staffing resources
through a single, clear portal that can
use “credential templates” to streamline
finding specific candidates.
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The problem
Our client was spending millions of dollars each year on
contract labor with no visibility into, or control over, what
factors were driving up the bill rates, nor which vendors were
being utilized by the MSP. Worse, they had no insight into
how to fix the problem.
This situation caused a heavy financial
burden, especially on the smaller critical
access and community hospital
locations. It was not a healthy way to
handle their staffing needs, and it
threatened to compromise the system’s
ability to provide maximum health and
education services to their patients,
neighbours, and community.
They couldn’t exercise any direct control
over the situation. The MSP maintained
and controlled all external relationships,
as well as bill rates. Complicating the
situation further, they lacked a
standardized approach to working with
MSP’s; each individual site dealt with
the same MSP but did so separately –
and they were each billed at different
rates. No single site or group had
oversight or insight into what was
happening organization wide.
Ultimately, they didn’t have the
transparency into or control over what
was happening throughout their system
when it came to meet their staffing
needs through the MSP.
The Solution: In-Sourcing
Vendor Management
After reviewing the situation with the leaders of the
health system, we asked, “Why not take control of your
situation and manage the vendors yourselves?”
With this solution, they could identify vendors that would
work in alignment with the organizational goals while
still providing quality candidates and allow them to
control their bill rate and length of contract. It would
further enable them to exhaust all internal options
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before seeking high cost agency contract staff through
external vendors.
The healthcare system already leveraged technology
(Einstein II) as their internal float pool scheduling
system from their workforce strategy partner, our
company Hallmark Health Care Solutions. We offered
them recommendations on a solution and offered our
support to guide them through each phase of the
resolution.
Fortunately, their float pool deployment scheduling tool
(Einstein II) was equipped with a Vendor Management
System (VMS) designed to handle insourcing vendor
management. This was a significant step in solving the
problem.
The Solution: Step by Step
Step 1: Decide to insource
Once it became clear that the health system wasn’t
going to be able to resolve the problem by working with
the MSP, they had no choice but to move forward with
the strategy around in-sourcing. Hallmark was already a
trusted technology vendor and consultant of the
organization with proven success around strategy and
implementation. We embraced their direction and
began the work to assist this organization with
insourcing their process.
Step 2: Standard contract and bill rates
Know they had to answer a series of critical questions.
How do we create system wide standard vendor
agreement and what should we set as bill rates? How
do we drive down the bill rate and still have our needs
filled? To find the answers, we did a system analysis on
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department usage to determine who uses what type of
contract resources, how the rates varied by contractor
and then we benchmarked those average bill rates by
the region, statewide and nationally. For example, we
looked at OR nurses. We pulled data from all OR
nurses across the system and averaged their rate to
help pinpoint the average labor spend. We further
sorted data from individual staffing agencies to identify
how they formulate their guidelines and rates. From this
data investigation and our own internal data on
statewide and national rates we figured out how to drive
our client’s rates down to create a substantial savings.
This piece in the step was crucial to identifying a Bill
Rate that was financially acceptable for our organization
but still competitive in the agency industry.
The client also chose to have us handle all
communication with the agencies during the contracting
phase, this was decided as their legal team didn’t have
the time to manage the back and forth of emails and
calls addressing any concerns at this stage. After we
helped create a standard contract with their legal
counsel, and approval from finance and service line
leaders, we at Hallmark sent the contract and
information letter about the decision to insource out to
the Vendor community. 100% of the vendors connected
with responded positively and even with the lower bill
rates, signed the new agreement.
Step 3: VMS Technology Matters
Configurable, Cloud Based, Artificially Intelligent
software is the key to success. Labor procurement
needs, internal workflows and reports needed are
different at every Health System, so the VMS product
matters. You also want to ensure the VMS technology
company chosen is well respected by the vendors /
agencies you want to work with. Vendors are 100%
more comfortable using VMS tools owned by pure
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technology companies and not competing staffing
companies.
We configured our VMS product (Einstein II VMS) for
their specific workflow needs, creating the dashboards
and reports they wanted to see, while ensuring the
system could also handle all relevant functions
(capturing and automating timesheet data, handling
invoices and integrating data into their weekly
productivity reports the managers relied on) Most
importantly, we made sure the system was easy,
standardized and seamless for all users across the
system. Onsite training was handled by us as well as all
training and communication with the outside vendors.
The Outcomes
After a 90-day insourcing implementation, by taking
control of their vendor relationships and gaining
insight they reported a net savings of over $3M
dollars.
1: Saving money
The main return on investment is straight-forward:
once they in-sourced, they started saving money. For
instance, the MSP bill rates for an OR nurse was
$110 an hour. Once we did our analysis and talked
directly with the agency, they were able to work out
an $80/hour bill rate. They also gained control over
the rates as they directly manage the relationships
with the vendors. They also help them develop their
own internal float pool to support staffing across all
locations by leveraging the Einstein II IRP technology
part of E2. They know use the same software from
us for managing both deployment of their own
regional float pool resources as well as agency staff.
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18 months into their insourcing journey and they
have reported a net savings of over $3M dollars.
2: Greater transparency and visibility
Our client has a better outlook on what's going on
within their entire organization. The greatest benefit
at first was their visibility into the $6 million spend
where it was coming from and how it was distributed
by location, department and resource type.
Meaningful data transparency is key to any
organization that wants to improve and gain control,
helping to make better decision going forward.
3: Improved labor sourcing
First and foremost, the client noticed a greater level
of attention from the Vendors and days to fill went
from an average of 47 days with the MSP to 11 days
when they insourced. Many of the agencies told our
client that they have a priority or tiering system for
their recruiters and if the agencies are working
through an MSP the priority of focusing on those
needs is moved down the list, agencies focus their
recruitment efforts on direct relationship clients, so
any hospital that insources the vendor management
process gets priority.
Also insourcing contract labor created a feeder for
filling their own FTE's internally. Prior to this change,
if they wanted to hire someone from an agency, they
would have to pay a hefty buyout fee or wait a
minimum of one year. Those constraints have
disappeared. They have already hired candidates
after completing 13-week assignments through the
new agreement.
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4: Improved vendor communication
Before, vendors were not allowed to communicate
directly with the client due to the MSP. That
introduced delays that were later found to be falsely
attributed to our client. For instance, if there was a
problem with a timesheet, the MSP would initiate a
process that would take weeks to execute, because it
involved a lengthy communication chain. Now, they
can quickly fix this once common problem
immediately. If there is a concern or question, these
vendors can reach out directly to the client. They also
only partner with about 20 vendors now that focus
their attention on our clients need and want to work”
their” way, it’s a win-win for both parties.
To learn more about how Hallmark Health Care can help your organization and or if you would like to be connected to our Client please contact me below William Reau Chief Operating Officer Principal Workforce Strategies Hallmark Health Care Solutions http://www.hallmarkhealthcareit.com/ [email protected] https://www.linkedin.com/in/william-reau © 2020 Hallmark Healthcare Solutions LLC