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Case Study

Supply Savings Secure Financial Stability: Faith Regional Health Services

THE SITUATION

Rising supply expenses pose significant challenges for hospitals struggling in today’s uncertain healthcare environment. Price increases have taken a greater toll on community and rural hospitals, which typically pay more for supplies than their larger counterparts.

Community hospitals like Faith Regional Health Services, a 131-bed acute-care hospital in Norfolk, Neb., must consider every available option to blunt the impact of increasing supply costs, the second-highest expense for community hospitals. In Faith Regional’s case, the hospital switched GPO providers to keep supply costs down and improve its financial and operational performance.

BACKGROUND

In 1996, two local faith-based hospitals merged to create Faith Regional, which provides care to a community of about 25,000 residents. Since then, the hospital has been widely recognized for its achievements, including Newsweek magazine’s 2024 Best-In-State Hospital award.

A large group purchasing organization (GPO) had provided supplies and services to the hospital for 30 years. However, frequent service-related issues and the GPO’s inability to significantly reduce the hospital’s supply costs strained the decades-long relationship.

A few years ago, hospital officials met with CHC Supply Trust to discuss its supply chain services, which include Tier 1 pricing access to the HealthTrust Performance Group GPO.

Initially, hospital leadership decided not to change GPO providers due to concerns about conversion and the true potential for cost savings. But the pandemic was an inflection point for Faith Regional’s practices, particularly in purchasing supplies. The global public health crisis made it difficult, or even impossible in some cases, for many hospitals like Faith Regional to procure enough supplies to treat COVID-infected patients.

Post pandemic, inflated supply costs remained and likewise strained the hospital as government subsidies came to an end.

A heightened need to reduce costs made Faith Regional leadership reevaluate and reconsider its conversion to CHC Supply Trust.

Another key factor in choosing CHC Supply Trust was its proven track record of delivering contracted products and services or finding alternatives for rural facilities. The hospital, located about two hours from the nearest large city, must have “the right supplies and services” — a critical incentive needed to recruit and retain physicians and other clinical staff, shared David Morfeld, director of materials and contract management for Faith Regional.

IMPLEMENTATION

Consistent communication and collaboration between Faith Regional’s supply procurement team and CHC Supply Trust was important to ensure that CHC’s onboarding went smoothly. Throughout the five-month transition, “it became a big-team environment that made it a successful conversion,” Morfeld said.

For example, CHC Supply Trust met regularly with hospital department heads to understand and respond to their supplies needs. If the specific items were not under contract through HealthTrust, CHC Supply Trust would quickly find suitable alternatives. Morfeld said CHC Supply Trust account directors were “fantastic in getting those items addressed and finding different solutions for us.”

RESULTS

  • As a result of CHC Supply Trust’s relationship with Faith Regional, the hospital’s supply costs fell well below its projection for their 2023 budget, exceeding the hospital’s expectations. “I told our executive team that we did not see any year-over-year increase in supply costs,” Morfeld said. “That just never happens.” If the hospital stayed with its former GPO, according to Morfeld, its supply spend would have increased between 3 percent and 5 percent last year.
  • CHC Supply Trust saved Faith Regional at least $1.8 million, or 10 percent, on around $18 million of spend on exact match or direct conversion items. Exact matches or direct conversions accounted for nearly two-thirds of total annual spend, meaning these savings were only a portion of the total realized. This excludes purchased and other contracted services.
  • CHC Supply Trust’s ability to significantly reduce Faith Regional’s supply costs, provide superior client service, and offer other services delivering cost-efficient solutions resulted in a strong working relationship between Faith Regional and CHC Supply Trust. “I feel that what we do matters to CHC. It’s a really good partnership,” Morfeld said.

FAITH REGIONAL RECEIVES ADDED VALUE FOR PURCHASED SERVICES

In addition to working with Faith Regional on its supply spend, CHC Supply Trust assists the hospital in reviewing and negotiating vendor contracts, often resulting in lower costs or additional benefits for the facility’s purchased services.

When reviewing contracts, the hospital’s supply procurement team works closely with CHC Supply to ensure vendor price quotes match the terms of the HealthTrust contracts or offer other options. If a hospital department chooses to keep services that it’s currently using, CHC Supply Trust still reviews contracts to ensure the best terms and identify potential areas for savings.

For example, CHC Supply Trust helped the hospital negotiate contracts with energy providers. Collaborating with the hospital’s in-house facilities team, CHC Supply Trust contacted various natural gas providers and reviewed their contract terms to find a provider that best suited Faith Regional’s needs.

CHC Supply Trust’s role in the talks “took a huge weight off our shoulders,” David Morfeld, the hospital’s director of materials & contract management, said. “They remove our stress by assuming some of the workload and helping with the discussions. As a result, we don’t miss out on potential opportunities or savings.”

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