Dialing for dollars

By Dave Whitney

Advice on reducing a hospital's telecom spending

While all hospitals are susceptible to telecommunications expense errors, they are typically most prevalent in small or midsize organizations, where there is limited telecom expertise and the onus often falls on the facility

manager to analyze savings opportunities while juggling his or her various core responsibilities.

Hospitals often spend 10 percent to 35 percent more than they need because they pay for services or equipment they don't use, they are not on the cheapest rate plans or they are billed for hidden charges, fees and taxes that were not part of their contract.

Opportunities for savings exist in all areas of a hospital's telecom network--voice, data, Internet, pagers and cell phones--and facility managers who have telecom responsibilities should be aware of the options available to them to avoid unnecessary telecom costs.

Getting started

To get started, a team consisting of people who know the hospital's telecom technology and its telecom bills should be assembled. A project manager should also be assigned. Because this will be a part-time project for most members, it is important to have enough people to move the project along quickly.

Once the team is assembled, the data-gathering phase begins. During this stage, the following should be identified and made available to the team:

• Three months' worth of telecommunications invoices;
• Copies of all contracts;
• Network diagrams;
• Change management logs;
• PBX configurations and recent traffic reports;
• Any line and circuit inventories that may exist;
• Vendor contact lists;
• Any directory lists for phone extensions, pagers, cell phones and company-supplied home telephones;
• Site list for all locations included in the project; and
• Customer service records ordered from appropriate vendors.

Analysis phase

Once this information is obtained, the analysis phase can begin. During this, all information is reviewed, billing errors are identified and recommendations to optimize services and reduce costs are developed. It is typically the most time-consuming part of the project.

The analysis often requires expertise in telecom billing systems, telecom engineering and telecom taxation to achieve maximum results. The following areas should receive attention during the analysis:

• Cell phones. Cell phones are typically one of the areas with the most savings. Employees are often on the wrong rate plan and hospitals usually don't take full advantage of shared minute plans. The vendor may do some optimizing, but someone with a good understanding of different plan structures works much better. Savings in this area can typically be 10 percent to 50 percent.
• Pagers. With the increased use of cell phones, there are many pagers that go unused. Most vendors will provide a usage report if requested. Three months of usage reports should be requested and the reports reviewed for all pagers with no usage. Hospitals should look to eliminate any that have not been used in that period. Savings in this area can typically be 10 percent to 30 percent.
• Local service. "Slamming" and "cramming" are easily visible on the invoice. Look for local toll rates of 10 cents or higher. These can typically be moved to an existing long-distance contract or negotiated lower with the local carrier. Unused services, such as wire maintenance, unused voice mail boxes, remote call forwarding lines and directory advertising charges, can be eliminated or reduced. All local lines should be validated regarding their use and traffic reports should be reviewed for overcapacity. Changing analog trunks to ISDN PRI service can also produce savings. Savings here can be from 5 percent to 50 percent.
• Long distance. A benchmark of contract rates should be performed against current industry rates. Renegotiation of the contract may provide significant savings. The invoices should be examined for compliance with contracts, and consolidation should be done whenever possible. Volume commitments should be reviewed to reduce the possibility of any shortfall penalties. Savings in this area can typically be 5 percent to 25 percent.
• Data/Internet. Data circuits are particularly ripe for savings. Contract compliance is a big issue. For example, as an incentive, the vendor will offer free access charges. However, this will not always be reflected in the invoice. Other incentives indicated in the contract should also be validated. Mileage charges on circuits can typically be in error as well. Circuits can be canceled and not removed from billing. Savings in this area can typically be 5 percent to 30 percent.
• Maintenance contracts. Many telephone system maintenance vendors charge by the port for maintenance. Often, systems are at overcapacity in the number of ports they actually need. A review of the ports and consolidation can reduce the cost considerably. Savings in this area can typically be 10 percent to 20 percent.
• Tax issues. If a hospital is not-for-profit, every invoice should be validated to ensure it is being taxed appropriately. This may require some special expertise. Sometimes a call to the vendor's tax specialist will provide the information. Savings in this area can typically be 5 percent to 20 percent.

Implementing the plan

Once recommendations are developed and validated, the implementation phase begins. Often, this can be a time-consuming and tedious process. Working with vendors to receive credits on billing errors, change services or simply to get more information can take multiple phone calls and require persistent follow-up. Sometimes, good recommendations never get implemented because staff doesn't have the time or patience to overcome the barriers.

The time to complete a project of this type depends on the size of the organization and the ability of the team members to work on it. For one hospital, it can easily take 150 to 200 hours of time for an experienced team to do a telecom cost reduction project. Consequently, there are several companies that offer to outsource the responsibility of reviewing telecom bills. Most of these telecom spending reduction companies offer their services on a contingency basis, making money only if they are able to recover dollars. The industry standard fee is 50 percent of the credits recovered and estimated savings for the coming year.

Rules of thumb

While the process of analyzing telecom expenditures for errors and savings opportunities is an individualized procedure, there are some rules of thumb that can help hospitals decide if the process is required in the first place.

For instance, if a hospital's telecom environment (e.g., voice, data, Internet, pagers and cell phones) frequently changes, it should consider conducting a review of its costs. Likewise, it should consider conducting a review if there has been substantial turnover both within the hospital and at its telecom supplier, or if management receives a variety of bills from a multitude of suppliers.

Additionally, a review is recommended if a hospital answers "no" to two or more of the following questions:

• Does the hospital have a complete and accurate inventory of all telecom equipment and services?
• Is management certain that the hospital doesn't pay for any services or equipment that it does not use?
• Has a department within the hospital been assigned the task of overseeing internal telecom changes or purchases?
• Are all bills checked for accuracy?
• Has the potential of a rebate from existing telecom suppliers been fully investigated?
• Is the hospital certain that it has the best available rate plan based upon its actual usage?
• Can management identify and minimize fraud and call abuse?
• Does the hospital have a telecom review process or procedure in place that lets it keep a handle on telecommunications expenditures?
• Has the hospital conducted a telecom cost reduction project within the past six months?

Once the telecom cost reduction project is completed, many organizations outsource the ongoing monitoring responsibility to an outside telecom vendor. Others, usually large telecom users whose monthly bills are in excess of $15,000 per month, may find it beneficial to establish in-house departments and purchase software to meet this responsibility.

Most likely savings

Telecom expense monitoring can be a confusing job, especially when the professional put in charge of it is responsible for many other activities.

However, the advice above should provide a general guide for tackling it and finding the most likely savings.

Dave Whitney is managing director for ISI Telemanagement Solutions, Schaumburg, Ill. He has worked with many health care organizations, including HCA, Kaiser, Adventist, Kindred Healthcare and Provena. He can be reached at dwhitney@isi-info.com.

This article 1st appeared in the December 2004 issue of Health Facilities Management Magazine.