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Value-added services part of package deal
Most things that sound too good to be true are. But take a look at Pennsylvania Hospital in Philadelphia, and you’ll find an idea that saves $1 million a year while improving efficiency, decreasing complaints, and letting someone else do all the work. It’s true, and it’s working for an increasing number of hospitals.
What’s the idea? Outsourcing laundry operations. According to the Textile Rental Services Association, 35% of hospitals nationwide are outsourcing their laundry. "Hospitals are outsourcing everything they can get their hands on," says Peter Corr, marketing manager of the Hallandale, FL-based association. "Hospitals want to focus more on making patients well. That’s the business they’re in — not laundry."
Steve Wanta, director of engineering services and materials management at Pennsylvania Hospital, would agree. A hospitalwide re-engineering project revealed rising costs in the laundry service, caused by aging equipment, inefficient processes, and the inconvenient location of the laundry 10 miles from the main hospital campus. Further study revealed that replacing the equipment would cost up to $1.1 million and would require additional space and personnel.
So the hospital checked with outside vendors to compare their cost per pound with the in-house cost. "It turned out that the outsourced cost would be less than our costs, even if we bought new equipment," he says. "If you outsource, you don’t need the capital outlay and you get the better cost. It was a no-brainer."
After a year using the linen rental services of Camden, NJ-based Penn Health Care, Pennsylvania Hospital saved $1 million in laundry costs, Wanta says. The hospital’s previous cost per pound of laundry using the in-house service was 81.5 cents, including the cost of replacement linens. Using the rental company, the hospital now pays 46 cents per pound. In a 505-bed hospital that processes more than two million pounds of laundry per year, that saving is not too shabby.
Saving money hasn’t been the only benefit of closing the in-house laundry, Wanta says. The hospital has enjoyed better inventory control, more efficient delivery times, and fewer complaints. That’s because the vendor’s experience with other hospitals brings a built-in benchmarking program. "If you partner with a vendor, they bring outside expertise and value-added services to the hospital," he says. "They can work with you on inventory control, assist you in starting up new systems, and work with you on improving linen utilization. They bring other ideas from other hospitals — almost a consulting type service into your hospital."
A vendor can help train nursing staff on the proper linen utilization and bed preparation and can offer data reporting capabilities, such as monthly reports on usage by patient unit, that help you manage costs, Wanta says. Penn Health Care has helped the hospital improve inventory control, dramatically reducing complaints about running out of linens. The hospital has also been able to standardize bed practices on different units and eliminate items such as underpads that aren’t needed on every floor.
The decision to outsource didn’t come lightly, Wanta says. "The problem with closing an in-house operation is there are a lot of people involved. If you outsource, you lay off all those people. But you have to look at whether you can get to be as efficient as an outside laundry by replacing your old equipment."
The hospital accepted bids from two rental companies and another hospital for outsourcing laundry. Wanta’s staff did site visits to hospitals served by the vendors and to the vendors themselves.
"We wanted to see how they keep their linens separated, to walk through each process from sorting to mending, to look at their emergency capability and their capacity," he explains. "We looked at the quality of the operation by observing how well the employees were treated, including their benefit packages. We wanted to make sure we weren’t getting a low-priced vendor with a lot of labor problems. We also wanted to see if we could trust their weighing system."
The Textile Rental Services Association recommends that hospitals make sure they’re taking into account the hidden costs of an in-house laundry, Corr says. Besides your obvious costs such as staff wages, supplies, and replacement linens, have you considered overhead costs such as utilities and personnel benefits, or depreciation and insurance on machinery, or in-house repairs and maintenance? (See sample worksheet, p. 42.)
"You also have to look at the opportunity cost of using that laundry space to set up a new department that might bring in money," he adds. "Could that space be better utilized for something else? Hospitals are becoming more bottom-line focused, so that issue has to be analyzed."
[For more information, contact:
Textile Rental Services Association, 1130 E. Beach Blvd., Suite B, Hallandale, FL 33009-4432. Telephone: (800) 868-8772. Web site: www.trsa.org. TRSA can give you information on vendors in your area as well as tips on choosing one.
Or contact: Steve Wanta, Director of Engineering Services and Materials Management, Pennsylvania Hospital, 800 Spruce St., Philadelphia, PA 19107-6192. Telephone: (215) 829-3335.]