Product Exception Usage

Challenge

A major healthcare facility saw costs spiral due to equipment cost overruns for ‘Product
Exception’ items that were out of contract.

Contracts were locked in with equipment manufacturers to cover major products and
most frequently used products to be delivered at set prices. However, there was no
flexibility built in to the contracts to make allowances for items such as an individual
product that was used at one location only, or a product used for one very specific
purpose, or for new technologies that came out. In addition, the hospital had no way of
knowing what other products were available on the market that could deliver exactly the
same benefit, but at lower costs. Consequently, many ‘Exception’ products, not included
in the contracts, were provided to individual facilities by vendors, allowing for higher
pricing on these exception items.

There was no visibility, at a local level, as to which products were out of contract at that
particular facility. No reporting was available to show the Exception items, at a local or
regional level, to see how much these items were costing each month.

Resolution

Sentinel C3 built a report that allowed the client to look at just the business that was
being billed as an ‘Exception’ at each facility.

With this information, they could evaluate similar items to see if there was something
more cost effective available on the market or that was already covered in contract
pricing with another vendor. They could now analyze what the expense was for the
exception item versus what the cost would be for an identical product at contract pricing,
and project the cost savings on a daily/monthly/annual basis.

This information enabled the regional managers to go to an individual facility and
challenge why the facility was using an exception product, instead of using an identical
product that was available at contract pricing. The clerical staff was able to satisfy the
facility that the therapeutic efficacy of the contract product was exactly the same as the
exception item, and changes were made to phase out the higher priced items and
incorporate the products under contract pricing.

Result

healthcare cost savings

The hospital chain was able to reduce exception cost overruns by driving compliance at
each individual source and cross-selling to equally effective items provided by contract
vendors.