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Published: December 3, 2022

Five reasons why outsourcing your margin improvement beats DIY

When it comes to reducing expenses or improving your margin, you have probably tried to do it yourself. You might think, “we’ve got people who can do that.” And you have the best intentions to follow through. But somehow it never makes it to the top of your to-do list. And suddenly you realize you’ve been saying “I’ll get to it” for years. In the meantime, your expenses have gone up, you’ve spent more money than you needed to, and you’re not even sure where to start.

This is the story for too many people that we talk to. They are looking to save money by bringing the process in-house, but it doesn’t pan out the way they think. Their team isn’t as successful at negotiating contracts or staying on top of the process and despite hundreds or thousands of hours spent, there isn’t much cost-savings to show for it.

There is a better way. It’s not magic, we’re not trying to make bogus promises that we can’t follow through on. But we’ve seen our process work repeatedly for clients and believe that it’s always worth exploring.

Here are five reasons why outsourcing your margin improvement efforts can help save you both time and money.

Reason #1: Lack of Expertise

Over the past few years, we’ve seen one of the toughest times in staffing – especially in the healthcare field. Your teams are stretched thin, and often asked to do more with less. You hired them to be clinical experts, not experts in negotiation or cost reduction.

These skills are outside their scope of expertise – and outside their scope of work. Asking them to participate in a comprehensive margin improvement project is beyond what you have hired them to do.

Reason #2: Lack of Time

Even if your team does have the expertise, they likely don’t have the time. There are so many other demands on their schedules, that it is hard to carve out the space to do such a comprehensive project.

We see this time and again when we work with clients. We have talked with people who are eager to do a project, but never actually get around to it. Everyone wants to save money. We don’t have to convince them that saving money is a good idea. It’s finding the dedicated time to make it happen that is so difficult. Too often the initiative is put on the back burner and never sees the light of day.

Reason #3: Supplier/Provider Relationships with your employees

Few people are wired to be negotiators or to have difficult conversations. Most employees that we speak with don’t feel comfortable negotiating with people they are working shoulder-to-shoulder with. With the strong emphasis on relationships and mission in the nonprofit space, it can feel cold and ruthless to focus on the money. 

Additionally, there is a strong bias towards current vendors or suppliers. Trying to negotiate with them can make people feel less comfortable working with them in a collegial manner. Plus, your team is accustomed to certain products and the quality of those products. There is a fear that changing might mean having to work with unfamiliar or inferior products or solutions.We never ask our clients to skimp on quality. In fact, they have final say over all decisions – even if there isn’t a cost-savings. Additionally, HMS doesn’t have these biases or the emotional ties to specific vendors or suppliers. Some of our clients feel more comfortable using us as a “scapegoat” to preserve their relationships. They might tell the vendor, “HMS is handling this project and you’ll have to talk to them as they have been hired to that.” This gets them off the hook and lets them concentrate on the job they have been hired to do. We’ve had client employees tell us they are relieved that we were brought in to do this work.

Reason #4: Lack of Industry-Wide Pricing Knowledge

As an individual, you only have so much insight to pricing. Everything is compared to what you have been paying. But you don’t have the insights to what others are paying.

HMS has the advantage of seeing pricing data from across the industry. This is a sizeable advantage when it comes to negotiating. For instance, in pharmacy, we have access to pricing that no individual would ever have access to. We see what only the industry insiders like long-term care pharmacies can see.

Example: Let’s say a client is paying $400,000 a year in Med A pharmacy costs. An internal resource might be able to ask the incumbent for a break and might get a 5% improvement. With our knowledge, data, and processes, we may get a 30% improvement which is not unusual with pharmacy. That’s $100K difference per year.

Reason #5: Lack of Singular Focus

When you use internal resources, people are pulled in many directions. But when you bring in an outside partner like HMS, your success and your savings is our top priority. This is what we do. We are partners with you and exist to improve your margins and make you more sustainable. 

We operate on a gain-sharing model, meaning we only get paid when you save. Since we’ll save you more than your internal resources can and the project will be done faster, you’ll come out in a much better position than if you hadn’t brought us in at all. Plus, you get to enjoy the savings for years to come. 

Because of these advantages, HMS is much more likely than internal resources to be successful in improving margin and improving it more substantially. Moreover, we’ll do it quickly. Most clients start seeing savings within the first 8 to 12 weeks of the project. 

Another reason that we see people try to accomplish this all in-house is out of a fear of outside consultants. Will an outside team make you look bad? Will they make you seem replaceable? We understand that fear. We never want to make you look bad. After all, you were the one who took the initiative to bring us in and deserve the credit for the results achieved. When you go to your board or your boss and report how much margin was improved because of our partnership, you will receive deserved accolades for that accomplishment.

To learn more, visit our website at hmspecialists.com. You can also send us an email at getstarted@hmspecialists.com.

WE ONLY MAKE MONEY WHEN YOU SAVE MONEY
HMS works with long-term senior care organizations to review and negotiate expenses to lower costs, increase purchasing power, monitor continued savings, and improve margins. The result? Peace of mind and more cash on hand to invest in your residents.
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