Making the Decision to Outsource Linen and Laundry Service

Transcription

1 Making the Decision to Outsource Linen and Laundry Service Edward McCauley B.S., M.B.A. CEO, United Hospital Services

2 Topics to Cover Different Types of Healthcare Laundries Management Structure of Laundries Keep OPL vs. Outsource Computation Pound vs. Piece Pricing Causes of Linen Losses Products and Services Offered Linen Service Contract Language Linen Service Installation Evaluation of Linen Service Summary and Questions

3 Ways to Provide Linen and Laundry Service to Healthcare Facilities

4 Ways to Provide Linen and Laundry Service On-Premise Laundry (OPL) Laundry is on the campus of the hospital Typically only provide service to main hospital and some clinics COG Service (Customer Owned Goods) Hospital contracts with independent operator to wash the hospital s linens Usually on a per pound basis Constant push/pull concerning linen loss

5 Ways to Provide Linen and Laundry Service Continued Rental Service Hospital contracts with outside service to provide linen service Can be mom and pop business or national like Angelica or Crothall Central / Cooperative Hospital has some ownership position in the laundry Hospital members sit on the board of directors

6 Management Structure of Linen and Laundry Services

7 Management Structure Hospital Managed Managers can be full time laundry managers or have other responsibilities such as Environmental Services Contract Management For example Crothall, Sodexho, Aramark, etc Can run on-premise laundries, rental laundries, or cooperatives Will have dual reporting responsibilities

8 Management Structure Continued Proprietorship / Corporation Own and run their own laundry companies Examples would be Paris Healthcare, Unitex and Angelica Healthcare Independent Manager hired by cooperative to run the laundry Reports singularly to the board of directors Example would be United Hospital Services

9 Maintain OPL or Outsource

10 Reasons for Maintaining the OPL Keep control of size, type, availability and quality of linens Keep long term laundry employees employed Distribution of linens not subject to weather and natural disasters

11 Reasons for Outsourcing Space Hospitals can put existing space to use for revenue producing services Core Competency Administration does not want to spend time managing something they do not understand Capital Expense Avoidance Administration does not want to retool the laundry because of high capital expenditure Cost Outsourcing may be less costly than an OPL

12

13

14

15 What to Consider When Choosing Your Linen and Laundry Provider

16 Pricing Pound Pricing For example, everything costs $0.48 / lb Easy and simple however not accurate or flexible Problem is that if any improvements are made in the process for certain items or conversely other items processing cost increase, the pricing cannot be changed for just those items What s included and what s not included?

17 Example 1 The product mix of the hospital and thus the laundry could change which would shift the cost structure of the laundry Hospital switches from disposable OR program to reusable Hospital switches from 100% poly reusable Iso gowns to disposable Hospital switches from disposable adult pads to reusable

18 Piece Pricing More complicated Needs sophisticated software systems Extremely accurate and effective Can do costing and usage benchmarking down to the item Can adjust pricing on pieces that need adjusting

19 Piece Pricing Continued Every piece of linen sent to the hospital is accounted for by the laundry Weight will also be known for benchmarking purposes

20 Piece Pricing Example Item Items Delivered Piece Weight (in pounds) Total Item Weight (in pounds) Rental Price Per Item Total Sheet 18, ,360 $0.35 $6, Bath Towel 25, ,000 $0.15 $3, Thermal Blanket 10, ,800 $1.50 $15, Scrub Top 2, $.75 $1, Scrub Bottom 2, ,058 $.75 $1, Underpad 14, ,600 $0.65 $9, Wash Cloth 65, ,750 $0.05 $3, Insp. Surg Towel 8, ,600 $0.60 $4, Pillowcase 18, ,625 $0.15 $2, Total 101,783 $48,350.00

21 Life Cycle Cost Every piece of linen has a unique purchase price and life cycle, if any of these variables change the price for that item should change. In Service Item Rentals In Service UnitsDollars Purchase Price / Piece Cost Per Serving Servings Per Piece Sheets $ 100, $ 2.86 $ Bath Towels $ 90, $ 1.06 $ Blankets $ 75, $ 6.25 $ Gowns $ 150, $ 3.33 $ Diaper $ 5, $ 0.65 $

22 Processing Cost Considerations Every piece of linen has a unique processing cost Does the product need to be counted or sorted? Does product need light or heavy wash? Ironed or Folded? Fold by hand or Machine? Light Table Inspected or Uninspected? Packaged or non-packaged Hourly production rate

23 Linen Losses

24 Rule of thumb Roughly 25% of linen losses are due to the laundry ragging out linen and the remaining 75% is due to the hospitals losing and abusing linen

25 Causes of Linen Loss How do linen losses occur? Ambulance transfers from hospital to nursing homes Ambulance ER visits Misuse and abuse of linen by hospital personnel Theft of linen by employees, patients, and visitors Ragout by laundry

26 How the Laundry Bills for Losses How are linen losses billed back to the hospital? Option 1 - Losses are included in the rental price of linen Option 2 Losses are charged back to hospital separately Loss charge Methods Fixed charge Count linen in and out Formula based on Soiled Linen Weight

27 Example of Soiled Linen Weight Method Hospital Soil Clean Soil to Clean Variance Target Variance Loss Charge Amt Charge Cost Total Charge Hospital A 2,100,000 2,150, % 5% 7.38%$0.45 $71, Hospital B 1,000, , % 5% 0.00% $0.45 $ - Hospital C 750, , % 5% 0.00% $0.45 $ - Hospital D 14,000 15, % 5% 12.14%$0.45 $ Total 3,758,000 3,765, % 5% $0.45 $72,230.36

28 Value Added Products and Services

29 Value Added Products Scrubs and warm-ups Reusable isolation gowns Reusable OR linens and packs Dietary linens Pediatric linens Incontinent products Specialty linens VIP, OB/GYN, sleep lab, etc Mops and mats

30 Value Added Services Professional customer service representatives Clinics and other off site delivery service Exchange cart make up Computer based linen management tools such as Control Tex, Linen Helper, ABS, etc Linen room management Linen Cost / Usage benchmarking Cost per pound, adjusted patient day, specific linen item usage compared to national, regional, and local benchmarking

31 Pounds and Cost Benchmarking Facility Name Pounds Shipped Pounds Per Adj Patient Day Average Lbs/APD Cost Cost Cost Per Adj Benchmarking Patient Day Average Hospital A 210, $108, $ 8.68 $ 7.75 Hospital B 129, $ 81, $ 8.60 $ 7.75 Hospital C 134, $ 65, $ 5.33 $ 7.75 Hospital D 115, $ 62, $ 7.50 $ 7.75 Hospital E 75, $ 38, $ 9.14 $ 7.75

32 Linen Usage Benchmarking Item Hospital A Per Adjusted Patient Day Average System Per Adjusted Patient Day Bath Blanket Bath Towel Draw Sheet Bed Sheet Knit Contour Isolation Gown Pillow Case Thermal Spread Under Pad Washcloth Patient Gown IV Gown Scrub Shirts Scrub Pants Pounds Cost $ 8.21 $ 7.32

33 Value Added Services Continued Linen Awareness Day presentations Educates nursing and staff on the costs of abusing and misusing linens Create awareness of linen theft Discharge bed make up policy, proper linen usage Cost of having excess linens in rooms Interactive games and display

34 Linen Awareness Day

35 Linen Awareness Day

36 Contract Specifics

37 Contracts Contract Length Standard is three years, can do one year for COG Billing period / terms Benefit for paying early 2% 10; net 30 Penalty for late payment 1 to 1 ½% per month

38 Contracts Continued Guarantee not to exceed clause Agreeable out clause Most laundries will not give an unconditional out clause because of the significant capital investment in serving a new customer. Certainly should have an out clause for breach of contract All miscellaneous charges identified such as delivery costs, energy costs, specialty linen loss charges, cart rental, exchange cart makeup, etc Does contract clearly state how and when laundry can increase prices?

39 Intangibles

40 The Intangibles Par of linen that the laundry puts in service for new customers HLAC Accreditation or ISO 9001 Certification Does the laundry offer a buyout package for hospital linen and equipment

41 Tour of the Laundry Tour the laundry before committing to a contractor What to look for on the tour? General condition of the building tells a lot about how the service operates If dirty, cluttered, and disorganized then quality is likely to be substandard Boiler / Mechanical room should be neat and organized with all equipment working properly Soil operators should be following universal precautions Air flow in plant should be sufficient so that it is not overly hot even in the summer months

42 Tour of the Laundry Continued Lint buildup should not be visible anywhere. Ask to open a panel on a piece of equipment to see if lint is present Is there a Quality Control (QC) program in place to deal with stains and mends? Does the laundry properly segregate clean from soiled linens in the plant? On the trucks? Ask to see reciprocal agreement contracts and business insurance certificates Proximity to the plant? How close are you?

43 If Dealing with a Cooperative Can you become a member / owner? If so: Can you get a seat at the table? How does the cooperative handle excess cash and profits? Rebates? Will you earn equity in the laundry?

44 Setting up the Installation

45 Setting up the Installation Must be well planned days in advance so that linen, carts, and hamper stands can be ordered and received For example, a 300 bed hospital may require $150,000 in linen, $40,000 in carts, and $3,000 in hampers Installation team needs to get with hospital personnel to identify all types of linens and services to be used. If some products do not match, then alternatives need to found Laundry should purchase 7-10 par of general linens, par of OR and pediatric linens, and 3-5 par of delivery and/or exchange carts

46 Setting up the Installation Continued Schedule the installation and de-installation on the same day Both parties should go through the entire hospital pulling old linen out and putting new linen in May take 3-6 people to install depending on hospital size and time constraints Laundry must deliver 4-5 par of linen on the initial installation day

47 Placing Orders

48 Placing Orders COG vs Rental COG Process what is sorted or weighed in soil 24 or 48 hour processing % of total Stain and mending Rental Typically a standard order system that is set up for bulk delivery Standards are set up hospital wide for each item based on usage, not pars

49 Placing Orders Continued Standards are adjusted every 6-8 weeks to reflect more recent usage patterns Daily standards also reflect 5, 6, or 7 days a week delivery If less than 7 days of delivery, then standards include a buildup each day for the weekend Inventory quota sheet make adjustments twice a week

50 Example of Hospital Daily Standards Item Required Per Week Monday Tuesday Wednesday Thursday Friday Saturday Bath Blanket Bath Towel Draw Sheet Bed Sheet Knit Contour Isolation Gown Pillow Case Thermal Spread Under Pad Washcloth Patient Gown IV Gown Infant Gowns

51 Quota Sheet Example Hospital A Week of Shelf reserve 50% Current standar d Daily reserve from standar d Monday Mon count ADJ +/- Tuesday Tues count ADJ +/- Wed Wed count ADJ +/- Thursday Thurs count ADJ +/- Friday Fri count ADJ +/- Saturday 101 Isolation gownmicro , ,067 3,833 4,600 5,367 6,133 6, Patient Gown IV/Telemetry 103 Gown Pillowcase 1,150 2, ,533 1,917 2,300 2,683 3,067 3,450 Magna Patient 105 Gown Sheet 1,400 2, ,867 2,333 2,800 3,267 3,733 4, Contour Sheet ,000 1, Draw Sheet ,067 1, Bath Towel 800 1, ,067 1,333 1,600 1,867 2,133 2, Magna I.V. Gown 1,425 2, ,900 2,375 2,850 3,325 3,800 4, Washcloth Thermal Spread 4,750 9,500 1,583 6,333 7,917 9,500 11,083 12,667 14, Bath Blanket ,108 1,267 1,425

52 Placing Orders Continued If the laundry is packing exchange carts Typically just the floor units other ancillary units packed off the residual that comes back to the linen room Exchange carts turn into soil collection carts by moving the shelves Could have a system where all clean residual carts are sent back to the laundry for packing, then would have to separate clean and soiled carts

53 Measuring the Effectiveness of the Linen Program

54 How will you measure once you outsource? National benchmarks such as the TRSA Comparative Operation Revenues and Expense Profile for the Healthcare Maintenance Industry Database for OPL, Rental, cooperative and COG laundries for revenues, expenses, pounds and usages

55 Example of TRSA Benchmark

56 Benchmarking Plant Benchmarks On time delivery percentage Fill rates Cost per adjusted patient day Survey Ask about effectiveness of outsourced products and services and compare year over year results Who to ask? Hospital nursing Environmental and linen room staffs

57 Summary Different ways of Providing Linen and Laundry Service Management Structure of Laundries Keep or Outsource the OPL worksheet Linen Losses Considerations for Choosing a Linen Provider Value Added Products and Services Contract language Intangibles Installation Order Taking Process Effectiveness and Evaluation

58 Questions?