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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/ William.Reau@HallMarkHealthcareit.com https://www.linkedin.com/in/william-reau © 2020 Hallmark Healthcare Solutions LLC