Tips for Finance Leaders to Tackle Non-clinical Costs

Indirect spend and purchased services─IT, facilities, support services, and more─now represent around 20-25% of a health system’s total spend, according to Vizient Supply Analytics data. With clinical margins tightening, leaders must work to control these costs.

Several challenges can make that difficult.

• Fragmentation and silos: Overlapping vendors and inconsistent contracts reduce leverage.
• Long contract cycles: Renewals happen infrequently (3-5 years), making it hard to renegotiate effectively.
• Limited category expertise: Organizations may lack benchmarks or specialized knowledge, which heightens the chance they will pay above-market prices.

To overcome these issues, CFOs and their teams can implement near-term remedies.

Run a Baseline Spend Audit: Collect data on all nonclinical categories, current contracts, renewal dates, vendor performance and pricing.

Establish Measurable Targets. Example goals include:

• Percent savings by vendor consolidation.
• Contract clauses that include service level agreements tied to measurable outcomes (eg, improving facilities’ response time by 15%, reducing IT downtime hours by 10%).

Implement a Governance Framework: Oversight structures (eg, steering committees) should include procurement, finance and department heads to ensure transparency and accountability.

Use Benchmarking: Compare the organization’s costs and contracts to those of industry peers and identify outliers.

Phase Implementation: Start with large expense categories or those that are known to be fragmented (eg, IT, facilities, support services) to achieve high-value wins and build momentum.

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