Keeping costs down in the Healthcare EH&S Arena

When it’s time to get something done what is your typical method of making it happen if you can’t get it done internally? Whether you work for a living, purchase goods and services as a private consumer, own your own business, work for yourself, or work for someone else, when you need something you go out and research your best overall value; right? Maybe you go out and get a few “bids” so that you can accurately compare costs from multiple organizations. People do it when they buy homes, shoes, and when they purchase professional services.

There is a commercial floating around right now that speaks to cutting costs and there is a group of office folks sitting around a conference room table trying to figure what else to “cut” from their budgets. I know you have seen it. One of them has an epiphany and says to everyone. “What about all of this stuff?” Referring to paper, pens, folders, supplies, software, people, time, effort, etc. Then the finance guy says it could cost us millions. Millions?

The point that I am trying to make is when purchasing anything there are certain costs that we usually don’t track. These costs are typically referred to as soft costs. Soft costs can include:

• Your time spent: (Your time is valuable right? How much have you wasted so far?)
• The cost of doing your due diligence
• Hiring a consultant to help you make a decision
• Wasted office supplies
• Insurance on existing
• Benefits for existing employees
• Pulling existing resources away to make them do something else, at a lower quality
• Many, Many more

I recently was involved in bidding on a hazardous waste pharmaceutical program and then won the contract, and some of the individuals involved kept telling me that they were going to “do that internally”. They were referring to completing their own waste pickups, doing their own training, inspections, purchasing their own containers, etc. In the midst of the whole process I kept trying to inform them that the individuals who you will be tasking to complete these new jobs already have many tasks to do day to day, and I kept asking them - have you considered the cost (internally) to having these folks work the extra hours, etc. Of course they thought that they didn’t have to worry about those things because it wasn’t their job to. The largest cost to this particular institution was to complete their own training of about 1200 nurses. Now I don’t know about you but I’ve trained a lot of nursing staff over the past 5 years; and I don’t care what anyone says, it takes some time to get that done. If you plan on doing it yourself plan on making sure that you consider the internal “cost “ to your organization of about 150 hours of actual training time. That’s no small cost. And when you add in the fact that they have to be trained also it adds even further soft costs to the overall concept.

What is the kicker is that this person making the decisions wasn’t aware that an independent consultant was hired by senior management and was in the process to “dig in” to where the spending was occurring in their department. When they uncovered the internal costs to the organization for all the wasted time, untrained resources, lack of knowledge on the topic, and many other factors they came up with the department had actually costed internally $146,000 (These are actual numbers folks) dollars to this specific program in soft, internal costs. In my world that is a lot of money, and lo and behold guess what happened next? Yup – you guessed it. The individual that was responsible for this department was let go due to overspending, and not truly understanding what it was really costing them. (Now I guess getting rid of a position is a cost savings).

Senior management then asked me to provide what would have been the cost if we had completed all of the items that they wanted to do “internally”, and I was sad to say that the number came up to a measly $38,000 dollars when all was said and done. This means I am probably not charging enough. That’s a story for another day.

The overall and underlying point I am trying to get across is that there are many costs that we don’t think of as “hard costs”. The costs that don’t show up on the budget sheets in those senior management meetings, the ones that come up to organizations each and every day.  The really great organizations, which balance the budget sheets well, and can, stay in the black, are those that have all the facts, and make decisions that best fit their particular organizations. These need to be considered all the time, and especially when you hire a vendor, contractor, company who provides supplies, etc. We can usually provide a better, more customer intimate service that gets the job done for an overall less cost (both hard and soft) to an organization.

If you have any questions on how to manage and or define your soft costs please don’t hesitate to contact me.

Steve Todisco, HEM, CHMM Senior Healthcare Account Manager Triumvirate Environmental Inc. stodisco@triumvirate.com