Improving the Affordability and Access to Language Services

Improving the Affordability and Access to Language Services
Key Takeaways:

  • Hospitals are facing increased interpretive service costs due to rising demand for rare languages, increasing costs for ASL and on-site interpretation, and a growing LEP patient population, highlighting the need for modernized language access models.

  • Within the last year, Pathstone helped three hospitals achieve $1.4M, $1.3M, and $1.7M respectively in annual benefit through vendor consolidation, contract optimization, and telehealth integration.

  • Success was driven by early stakeholder engagement, hybrid service models, and tailoring solutions to each hospital’s unique needs.

In our recent work with multiple hospital clients, we focused on a common but often overlooked challenge: interpretation and translation services. While language access is essential to delivering safe, equitable care, many health systems struggle with outdated models, fragmented vendor relationships, and rapidly shifting patient needs. Despite different starting points, each organization shared a commitment to improving care for patients with Limited English Proficiency (LEP) or hearing impairments.

Let’s explore why interpretation services matter, the current industry landscape, and how hospitals can take practical steps to modernize and optimize their approach. We’ll draw from case studies across our client base to demonstrate meaningful results. Pathstone Partners helps hospital systems improve language services access and costs by reducing interpretation & translation service spend while improving, not sacrificing service quality and compliance through vendor consolidation, contract optimization, and performance monitoring.

Why Language Access Should Be a Priority

Hospitals are required by law to provide interpretation and translation services, including in-person interpretation, over-the-phone interpretation (OPI), video remote interpretation (VRI), and document translation. For patients who don’t speak English fluently or who rely on American Sign Language (ASL), clear communication is directly tied to safety, trust, and improved clinical outcomes. These services ensure patients with Limited English Proficiency (LEP) or those who are deaf or hard of hearing can understand and actively participate in their care, provide informed consent, and participate meaningfully in clinical decisions.

Interpretation services are particularly important as miscommunication in a medical setting can lead to medication errors, missed diagnoses, or avoidable readmissions. Effective language access programs enhance patient satisfaction, reduce liability, and support more informed clinical decision-making for physicians and patients. These services are not only a clinical asset, but also a strategic investment in risk management, compliance, and operational efficiency.

The Demand is Growing Rapidly

Interpretation needs vary significantly by hospital depending on patient demographic, service lines, and in-house capabilities. Many hospitals rely on multiple vendors, each with different pricing structures and service levels. This often leads to administrative burden, inconsistent quality, and limited visibility into performance.

Meanwhile, the US population is becoming increasingly linguistically diverse. According to the US Census Bureau, nearly 68 million Americans speak a language other than English at home, tripling since 1980. Over 8% (25 million Americans) are classified as having Limited English Proficiency. Notably, the growth in non-native English speakers who don’t speak English well has outpaced those who do, especially over the past four years, as shown below.

linguistically diverse

Source: Data compiled from 2024 US Census Bureau Tables American Community Survey (ACS) annual estimates from Table B16001 – “Language Spoken at Home by Ability to Speak English for the Population 5 Years and Older”

In January 2025, the US immigrant population reached an all-time high of 53 million, making up 15.8% of the total population. This surge reflects a broader trend, with 2023 seeing the largest annual increase in the foreign-born population since 2000. This isn’t just driving demand for commonly spoken languages like Spanish or Mandarin; hospitals are now experiencing increased needs for rarer languages such as Amharic, Tigrinya, Burmese, Nepali, Pashto, and Dari.

At the same time, industry trends like offshoring language services have introduced interpreters with limited knowledge of US healthcare, raising quality concerns. In-person ASL interpreters are becoming more difficult to source and more expensive. As local demographics evolve rapidly, hospitals often realize too late that their coverage no longer aligns with the communities they serve.

Without centralized oversight or strategic planning, it’s easy to overspend, miss coverage gaps, or lose sight of performance metrics. Hospitals committed to health equity, patient safety, and financial efficiency must reevaluate their language access strategy.

A Closer Look: Three Hospitals, Three Approaches

Across our client engagements, we have seen that while challenges may be similar, solutions must be tailored. Below, we share highlights from three hospitals in which we approached language financial improvement from different angles, and each has resulted in high-impact meaningful results.

  • Scroll Table
QualityClient 1Client 2Client 3
Baseline6 incumbent vendors, High use of in-person interpretation with certified interpreters, Administrative burden due to fragmented vendor landscape, Strict compliance with local interpreting laws4 incumbent vendors, Rising demand for language services with further increases projected, In-house interpreters primarily utilized for in-person services8 incumbent vendors, Rising demand of rare languages due to influx of immigrants locally, Team of internal interpreters primarily focused on in-person services covering 4 languages
Value Levers EmployedPrice, StandardizationPrice, StandardizationPrice, Standardization
Most Common Languages (Not including Spanish)Russian, Vietnamese, Arabic, ASLArabic, Dari, Amharic, ASLArabic, Dari, Amharic, ASL
Results$1.4M annual benefit, Successful transition to nationally recognized telehealth vendor as well as audio, video, in-person and written vendors, Maintained patient experience and quality standards$1.3M annual benefit, Consolidated audio and video services from 4 vendors to 1 offering comprehensive rates and coverage$1.7M benefit, Successful transition of audio, video, in-person, and written translation services, Consolidation of vendors from 8 to 3, Telehealth and Call Center integration at no additional cost
Unique AttributesLongstanding vendor relationships made transition politically and operationally sensitive, Client risk averse about offshoring and Artificial Intelligence2/3 service modalities were transitioned (audio and video); in-person services remained with incumbents, Telehealth and written translation not included in scope of engagementPrevious vendor standardization efforts were interrupted by COVID-19 which altered industry dynamics including suppliers’ reluctance to provide on-site interpretation citing inadequate compensation
Key TakeawaysEven systems with limited flexibility can achieve meaningful savings with strategic vendor negotiations, Quality and compliance do not need to be sacrificed when modernizing language services, Vendor billing dynamics (e.g., Coordinated Care Organization relationship) which managesClearly communicating vendor model benefits can shift client mindset, Clients value strategies that build early trust such as patient surveys that demonstrate user-centered planning, Clients can be receptive to primarily contractor-basedStandardizing language services can reduce administrative burden and improve efficiency system-wide, Vendor adaptability is important — choose a partner that aligns with your organization’s unique needs which change over time, Information Systems teams should be involved early in RFPs

What Drove Success

  1. Modernizing Doesn’t Mean Sacrificing Quality: Even with strict compliance requirements, the hospital improved service delivery and cost efficiency through better contracts and vendor alignment.

  2. Vendor Education Was Key: Initially skeptical executives embraced new models once they understood the operational gains and scalability.

  3. Trust-Building Early Helped Later: Staff buy-in was secured through early surveys and needs assessments, leading to smoother implementation.

  4. Balanced Vendor Models Outperformed: Combining in-house and vendor-based services allowed flexibility and optimized resource use.

  5. Future-Proofing for Demographics: Attention to rare language trends helped avoid gaps and enabled planning for future demand.

  6. Standardization Reduced Leakage: Clear vendor workflows and centralized oversight eliminated off-contract usage and improved compliance.

Looking Forward

The need for high-quality interpretation and translation services will only grow. Leading hospital systems are shifting from reactive, compliance-only language access models to proactive, strategic programs. These programs enhance patient safety, support health equity, and deliver measurable financial outcomes.

At Pathstone, we help hospitals build sustainable, data-driven language access strategies. Our work delivers cost savings while maintaining quality and compliance. Let’s discuss how your system can modernize language services and support every patient with the right care, in the right language.

Pharmacy Benefit Managers (PBMs): Why Hospitals Should Pay Attention

Pharmacy Benefit Manager

Pharmacy Benefit Managers (PBMs) play a complex role in healthcare, managing employee pharmacy benefits, while also impacting hospital-owned pharmacy revenue. For hospitals, this dual exposure makes transparency around PBM pricing, contracts, and performance essential. As scrutiny and regulation increase, hospitals must take a proactive approach to managing these relationships. Pathstone helps hospitals navigate this complexity through a vendor-agnostic, data-driven approach — bringing transparency to PBM selection, optimizing financial performance, and aligning benefit strategy with clinical and operational goals.

PBMs and the Hospital Landscape

Acting as intermediaries between insurers, pharmacies, and drug manufacturers, PBMs are responsible for administering formularies, negotiating drug prices, and managing prescription benefit programs for employers, health plans, and other third-party payers.

In the hospital setting, however, their role extends beyond employee benefit administration. PBMs directly affect both what the hospital pays for employee prescriptions and the reimbursement it earns when those prescriptions are filled internally through hospital-owned outpatient or retail pharmacies.

As a result of this unique dual exposure, transparency into PBM pricing, contract terms, and reimbursement structures is essential. For hospitals, these factors are not just administrative concerns; they are strategic levers that influence drug spend, care access, and the financial performance of the health system’s pharmacy operations.

PBMs Under Scrutiny

PBMs have come under increasing scrutiny in recent years from policymakers, media, and healthcare stakeholders due to concerns that their business practices are contributing to rising prescription drug costs. Central to the debate are claims of inflated pricing structures, rebates designed to influence drug usage, and a lack of transparency — all of which raise broader concerns about fairness, accountability, and market dynamics.

A primary concern is spread pricing, where PBMs charge health plans more than they reimburse pharmacies for the same drug. This lack of transparency makes it difficult for hospitals and other plan sponsors to fully understand their pharmacy spend or assess the value of PBM services.

Vertical integration is another issue drawing scrutiny, in which some PBMs are part of larger organizations that also own retail pharmacies. This structure allows a PBM to manage the drug benefit while directing prescriptions to its own pharmacies — effectively controlling both the pricing and the dispensing of medications. Lawmakers worry that this reduces competition and limits patient choice.

Across the country, state legislators are beginning to respond by pursuing new regulations, reflecting a broader movement toward promoting competition, transparency, and fairness in how PBMs operate.

  • Arkansas enacted a law in April 2025 prohibiting PBMs or their subsidiaries from owning or acquiring retail pharmacy permits, in an effort to reduce conflicts of interest and support market competition.
  • Indiana’s Senate Bill 140 requires PBMs to maintain accessible and adequate pharmacy networks, ensuring patients are not restricted by narrow formularies or limited pharmacy access.
  • Iowa’s Senate File 383 passed June 2025 limits PBMs’ ability to steer patients or profit through spread pricing, while establishing an appeals process to protect rural and independent pharmacies from below-cost reimbursements.

As regulatory momentum builds, hospitals should stay informed about PBM-related policies, as these changes may directly impact employee health plans, pharmacy reimbursement, and patient access to medications, as well as impact on 340B pricing.

Case Study: Selecting a Strategic PBM Partner

Pathstone Partners recently supported a health system facing increased challenges with their PBM, who provided limited transparency around current pricing structures, discount/rebate guarantees, and data access, creating a lack of visibility and accountability that prompted the need for change. Thus, we partnered to conduct a comprehensive RFP process to evaluate, identify, and select a long-term, strategic PBM partner offering competitive and transparent pricing.

To support a robust and objective evaluation, a cross-functional committee with representatives from Human Resources, Finance, Pharmacy, Revenue Cycle, IT, and Nursing was established. This diverse team ensured a comprehensive review of vendors, balancing financial goals with operational and clinical priorities.

Vendor Types Considered

Three distinct PBM models were included in the RFP process, each offering a different approach to managing pharmacy benefits:

  1. PBM Coalitions: Collective of employers, health plans, and other entities that jointly negotiate and manage pharmacy benefits to achieve better terms and pricing through scale.
  2. Pharmacy Benefit Optimizers (PBOs): Independent organizations working with benefit consultants to optimize pharmacy arrangements with a focus on tailoring clinical programs, direct member services, and more aggressive pricing structures.
  3. Traditional (Direct) PBMs: Full-service third-party administrators that manage prescription drug plans for self-funded employers, health plans, and other entities, providing end-to-end pharmacy benefit services.
Financial Evaluation Criteria

To ensure meaningful financial outcomes, Pathstone evaluated vendors using several key cost metrics:

  • Drug Discounts: The competitiveness of discount rates, often expressed as a percentage off the Average Wholesale Price, is a key determinant of projected pharmacy spend. These rates vary by drug class (specialty, retail, and generic) and reflect the PBM’s ability to negotiate favorable pricing on behalf of the health system.
  • Rebates: Rebate guarantees, negotiated between PBMs and drug manufacturers, directly reduce net drug costs. The size and structure of rebates, often varying by drug class, represent a significant portion of overall pharmacy benefit savings.
  • Formulary Flexibility: Flexibility within a PBM’s standard formulary can reduce administrative burden and cost. The ability to adjust brand and generic coverage without creating a fully custom formulary is particularly important for hospitals seeking to balance cost control with clinical appropriateness.
Value-Added Services Evaluated

Beyond core financial components, several program features were identified as opportunities to enhance value for the hospital and its employees:

  • Biosimilar Conversion Support: Strategic support for transitioning to biosimilars (lower-cost, clinically equivalent alternatives to specialty drugs) and driving adoption within the employee health plan due to the required clinical stakeholder buy-in.
  • Co-Pay Assistance Programs: Programs that reduce out-of-pocket costs for employees through manufacturer support or co-pay offset mechanisms can improve medication adherence and affordability.
  • Clinical Programs: Integrated clinical services, such as medication therapy management, adherence monitoring, and chronic disease support, contribute to better outcomes and long-term cost control.
  • Other Innovations: Additional offerings, such as utilization management tools, digital engagement platforms, or reporting dashboards, which can provide operational efficiencies and enhanced oversight.
How Pathstone Partners Can Help

At Pathstone, we take a vendor-agnostic approach to PBM evaluations, helping health systems navigate the complexities of PBM selection with a focus on transparency, long-term value, and strategic alignment.

Our services include:

  • Procurement Support: Facilitating a fair and methodical sourcing process to identify and assess PBM options through a fully vendor-agnostic lens.
  • Pharmacy Benefit Strategy: Providing guidance on long-term PBM and pharmaceutical health plan strategy, including recommendations for formulary design and biosimilar adoption to maximize value across the health plan.
  • Model Evaluation and Fit: Supporting a structured comparison of the full range of PBM models by outlining the benefits, drawbacks, and trade-offs of each to identify the model that best aligns with your organization’s current needs and long-term goals.

An Adaptable Approach Through the Covid-19 Pandemic

Pathstone Partners Chicago Health Care Consulting (11)
The supply chain leadership of a large $2B integrated health system identified the need to elevate its procurement function by establishing a strategic sourcing function that is critical in driving long-term value to the organization, then Covid-19 hit.

The supply chain leadership of a large $2B integrated health system identified the need to elevate its procurement function by establishing a strategic sourcing function that is critical in driving long-term value to the organization.

The client had limited strategic sourcing resources to serve its internal customers, partner with its supplier base, and address total non-labor expenditures of $1B.

Furthermore, the client was facing budget constraints that created challenges to secure resources to recruit, train and grow a team that is critical to its ability to achieve its goals.

As a result, the client engaged Pathstone to partner with the organization to embark on a journey to transform its procurement function to deliver and sustain value over the long-term.

Pathstone introduced its Balanced Partnership® approach, which offers a flexible support model that scales with each of the three phases of the client’s transformation journey.

Phase 1: Start-Up (Year 0-2)

  • Pathstone led support to identify and implement non-labor and strategic sourcing savings across all categories.
  • “Quick win” categories were identified and implemented such as translation services, records management, managed print, telecom.
  • After securing several wins, Pathstone worked with supply chain leadership to develop a business case to recruit and hire additional strategic sourcing FTEs to accelerate efforts.
  • The client was able to mitigate financial headwinds by achieving $2.5M+ in annual savings through Pathstone-led initiatives.

Phase 2a: Momentum (Years 2-3)

  • Pathstone worked with the newly formed sourcing function to plan for the next wave non-labor expense reduction initiatives.
  • Pathstone and the client allocated initiative responsibilities between both teams to maximize overall return on investment (ROI).
  • Complex categories such as Rx, lab and revenue cycle, purchased services were assigned to Pathstone.
  • Less complex categories such as clinical and non-clinical supplies were assigned to the client team.
  • Achievement of $7.5M in benefit through ongoing Increased non-labor spend addressed by the client supply chain team to impact cost.

Phase 2b Resilience (Year 4-5)

  • Emergence of the COVID-19 pandemic, leading to supply chain disruption, and significant financial challenges.
  • Pathstone worked with the client sourcing team to proactive source and secure PPE (gloves, gowns, sanitizers) needed by front-line staff.
  • Pathstone partnered with executive leadership to engage top spend and strategic suppliers to secure short-term concessions to mitigate financial impact.
  • Pathstone worked with IT leadership to evaluate and rationalize IT investments.
  • Quick implementation of $15M in non-labor expense savings within 9 months by engaging strategic suppliers.

Phase 3 Sustainability (Years 6+)

  • Pathstone provided ad-hoc implementation support on targeted complex categories in Rx, Lab and Biomed.
  • Pathstone also provided market intelligence, training and post-implementation reviews to augment the client’s ability to drive and sustain long-term value.
  • Achievement of $10M of benefit (combined team effort).

As a result of Pathstone’s Balanced Partnership® approach, the client was able to achieve the following results:

  • Achievement of $35M+ annual non-labor expense reduction: The client achieved over $35M+ in annual savings in all major non-labor spend categories, including clinical supplies, information technology, telecom, pharmacy, lab, support services and purchased services.
  • Enhanced credibility and relationships with internal stakeholders: Previously, the supply chain & sourcing team had limited resources to truly serve the needs of its customers and the organization. Over time, internal customers viewed supply chain as a strategic advisor that can make a meaningful contribution to their departments. The paradigm shift led to earlier integration of supply chain
  • Increased internal knowledge & expertise: Pathstone served as an extension of the client sourcing team, which enables the client to “learn by osmosis” by jointly participating in a full strategic sourcing lifecycle from start to finish. Furthermore, through Pathstone’s ad-hoc support model, the internal team gained access to formal training and knowledge sharing sessions that facilitated their growth over time.
  • Enhanced ROI over time: Through Pathstone’s flexible model and investment in the client team, overall return on investment on supply chain & Pathstone resources increased from 4x to 10x. This was largely driven by the supply chain team’s growing capabilities, which led to a higher number of spend addressed and impacted internally as opposed to relying on Pathstone’s resources over time.
  • Sustainability: With access to Pathstone’s ad-hoc support including market insights/leading practices, negotiation support and post-implementation support, the client significantly increased its ability to sustain benefit achieved over time. For instance, Pathstone conducted a post-implementation review of a translation services sourcing event, which revealed over $1M+ in value leakage over-time due to lack of contract pricing compliance. The client utilized Pathstone’s findings to address both pricing and utilization opportunities to drive costs down with its key suppliers.

Coordination Across Fragmented Hyperbaric Oxygen Programs

Health Care Financial Consultant Hyperbaric Oxygen
Pathstone affected $120K+ annual savings for the highest-cost program via management fee reduction and program director cost reduction.

A west coast health system engaged our firm to review Wound Care Hyperbaric Oxygen (HBOT) programs across their organization. Hyperbaric Oxygen programs represented a $9M spend category on a mix of outsource and insourced staff, equipment, software, and corresponding supplies. Each hospital that has a Hyperbaric Oxygen program is in a distinct geographical setting from each other, varies by program maturity, and relies on an outsourced vendor to provide treatments for their patients.

Pathstone was introduced to this spend category due to lack of visibility into program structure across the health system and an ongoing negotiation between one hospital with the primary outsourced vendor of the system. This health system did not have supply chain members that oversaw HBOT contracts, and the health system desired to work as one system to standardize operations and drive efficiencies from a financial and service-level perspective.

Each strategy is driven by data – in conjunction with financial leadership at each location, Pathstone formed a robust framework to collect and organize data regarding the financial and service–level performance of each program. Comparisons of revenue, reimbursement, cost, and staffing between each program were built to drive program stakeholders towards actionable insights (i.e., why does my program have less treatment volume, but more nurses? How is that program able to drive X% revenue more than my program? Why are our staffing costs higher than the other programs?).

A market roadshow with the clinical and operational teams followed with each hospital to understand key pain points, opportunities for improvement, and level of category expertise. We found there were significant differences across programs in two categories:

  • Overall outsourced costs: outsourced staffing of program directors was more expensive than insourced program directors
  • FTEs per case volume: two programs were more efficient than the other two programs.

We aligned with system and local leadership to issue a request for quote (RFQ) in efforts to reduce costs and set up system knowledge sharing to improve efficiency across each program. The RFQ was constructed for the primary incumbent supplier (75% of programs) intended to improve cost competitiveness, initiate knowledge sharing across the programs, and align program category expertise using mature programs and the primary outsourced vendor.

Pathstone affected $120K+ annual savings for the highest-cost program via management fee reduction and program director cost reduction, representing 33% of outsourced program spend. This program was mature in nature, yet still relied heavily on their outsourced provider. The goal will be to eventually insource the director of this program for additional cost savings.

More than cost-improvement, our client was interested in how other programs were able to manage volumes without as many outsourced staffing members. The RFQ focused on areas where the outsourced provider could provide synergies from a staffing perspective and outsourced management was removed from the agreement. The primary outsourced vendor will now provide semi-annual reviews to discuss reimbursement improvement, cost reduction, and service level improvement opportunities for all their programs in the system. Also, Pathstone helped initiate and create an internal engagement platform for best practice, knowledge sharing to drive utilization, revenue, cost, and service-level efficiencies through an online platform for program stakeholders to discuss and share data across the system.

Before our engagement, HBOT programs at this integrated delivery network were fragmented and costly. After, HBOT stakeholders across the organization can discuss best practices and share data, have an outsourced category expert provider leading semi-annual discussions geared towards improvement opportunities, and have achieved cost reduction at the target program.

Delivering Benefits Through Biosimilar Conversion

Health Care Financial Consultant Pharmacy Cost
Pathstone developed drove $767K in expected annual net margin enhancement.

A large 11-hospital health system in the southern region recognized a need for external support to identify and implement solutions to enhance net margin within their pharmacy operations. Upon analyzing initial core data, the pharmacy to convert several reference drugs to biosimilars, which are biological products that have no clinically meaningful differences in terms of safety, purity, and potency, to reference drugs. For example, the reference drug for Pegfilgrastim, an injection received after receiving chemotherapy to promote white blood cell development, is Neulasta, while approved biosimilars for Pegfilgrastim include Nyvepria, Fulphila, Udenyca, and Ziextenzo.

Initial opportunity was identified at ~$750K in annual net margin opportunity through converting Pegfilgrastim, Bevacizumab, and Trastuzumab to biosimilar products with higher net margins.

Pathstone’s pharmacy consultants began by segmenting purchases by reference drug category (e.g., Pegfilgrastim) and account type (e.g., 340B, GPO), and charges by account type and payor type (e.g., Medicare, Commercial). It was quickly determined that there was significant financial opportunity through converting biosimilar products for 340B Medicare.

Pathstone began the analysis focusing on Medicare given the reimbursement rates are publicly set by CMS through Healthcare Common Procedure Coding System (HCPCS). The highest net margin biosimilars for 340B Medicare were Nyvepria (Pegfilgrastim), Zirabev (Bevacizumab), and Ontruzand (Trastuzumab).

Pathstone subsequently investigated opportunity on the 340B Commercial side by examining fee schedules by payor for the top five commercial payors. The highest net margin biosimilars on the Commercial side were very similar to Medicare, with minor variance in the biosimilar with the highest net margin for a given reference drug. However, payors do not always reimburse for all biosimilars.

Over a ~six-month period of working with , biosimilar identification strategy that Pathstone developed drove $767K in expected annual net margin enhancement. As costs and reimbursement are subject to fluctuation, Pathstone developed methodology for tracking and monitoring realized net margin gains on a monthly basis to be able to pivot if and when other biosimilar products yield higher net margins.

Driving Value in Recurring Pharmacy Revenue

Health Care Financial Consultant Pharmacy
Over a 9-month period of working with our client, Pathstone was able to drive $5.56M in recurring revenue enhancements.

A large 4-campus health system in the southern region recognized the need for external support to identify and implement sustainable solutions to increase & maximize revenues within pharmacy. Pathstone was initially engaged to conduct a full-scale business case to identify opportunities within the pharmacy space, of which, 3 specific areas of pharmacy revenue cycle were moved to implementation.

Initial opportunity was identified at over $3.0M in recurring annual value through focusing on the following workstreams:

  • Rx Strategic Pricing: Restructuring pharmacy pricing methodology to be more transparent, more easily maintained and make up lost revenue during the client’s transition to charge on administration.
  • NDC Cost Update: Optimizing NDC cost updates through an evaluation and mapping of the current drug update processes and current technology capabilities.
    Rx Revenue Capture: Maximizing the revenue simultaneously improving on missed revenues

Pathstone formed a comprehensive team of stakeholders throughout the organization consisting of key leaders and operational owners within: Pharmacy, Revenue Cycle, Finance and Supply Chain. Recurring touchpoints with this team and other subcommittees generated the necessary momentum and buy-in to achieve maximum value and sustainable success.

Pathstone’s original business case gave excellent insight into the historical performance of this client, but ever-changing regulations and innovations made it necessary to garner new and refreshed data around billing & claims detail, charge master, drug database, revenue & usage, wholesaler catalog(s) and other policies and procedures.

Within each of the identified 3 workstreams the Pathstone pharmacy consulting team utilized a collaborative approach to tailor a solution that fit within the client’s department and organizational goals and objectives:

Rx Strategic Pricing

  • Meet net revenue goals by modifying markups and/or to include within annual increase in budgeted revenue
  • Mitigate lost net revenue during transition to charge on admin
  • Transition to charge on administration
  • Create strategy to modify markups to meet net revenue goals
  • Increase collaboration with Rx, care contract management and rev cycle
  • Simplify charges with increased transparency and defensibility

NDC Cost Update

  • Sustainability and maintenance of drug cost database
  • Streamline technology and database updates to optimize daily, weekly, monthly, quarterly and annual drug update processes
  • Evaluate other opportunities to optimize technology related to the drug database and revenue cycle

Rx Revenue Capture

  • Identify and recoup missed revenue on specific drugs
  • Complete full audit of pharmacy HCPCS code assignment, usage, correlating bills and collections

Key drivers of the significant value stream were concentrated on increasing the gross revenue by $195M, mitigating losses by transitioning to charge on administration, identification of over 165 ERX IDs without HCPCS codes.

Over a 9-month period of working with our client, Pathstone was able to drive $5.56M in recurring revenue enhancements.

Employee Health Plan Prescription Drug Revenue & Net Margin

Health Care Financial Consultant Lower Prescription Dug Cost
Pathstone worked to ensure CMM program met 340B Drug Pricing Program requirements and increased overall 340B capture rate.

A multi-hospital health system on the west coast partnered with Pathstone to evaluate Employee Health Plan pre-rebate prescription drug spend ($40M+ annually). The health system was interested in internalizing services where the quality of care could be improved, and financial value could also be achieved. Pathstone identified an opportunity to develop a Comprehensive Medication Management (CMM) program for health plan patients and achieve maximum system annual benefit of $8.2M by capturing 519 covered lives in the first and second phases of implementation.

CMM is defined as the standard of care that ensures each patient’s medication (i.e., prescription, nonprescription, alternative, traditional, vitamins, or nutritional supplements) are individually assessed to determine that each medication is appropriate for the patient, effective for the medical condition, safe given the comorbidities and other medications being taken, and able to be taken by the patient as intended. CMM includes an individualized care plan that achieves the intended goals of therapy with appropriate follow-up to determine actual patient outcomes. This all occurs because the patient understands, agrees with, and actively participates in the treatment regimen, thus optimizing each patient’s medication experience and clinical outcomes.

Pathstone reviewed claims data for the full scope of Employee Health Plan members (28,000+) to better understand the current prescription drug landscape. Our pharmacy consulting experts synthesized relevant information to identify the following:

  • Dispensing Pharmacy Landscape – prescription drug revenue varies based on dispensing pharmacy’s relation to health system (hospital-owned pharmacy, contracted pharmacy, other pharmacy).
  • 340B Capture Rate – prescription drug net margin varies based on account type (340B, GPO, WAC).

Upon review, Pathstone determined that only 10% of claims spend was being dispensed at a hospital-owned pharmacy and determined significant opportunity ($11M+) to increase 340B capture rate via qualification of the 340B Drug Pricing Program.

The 340B Drug Pricing Program is a federally based drug purchasing program that enables hospitals to save millions of dollars annually. As a requirement for their medications to be covered by Medicaid, manufacturers must agree to provide medications to certain covered entities at significantly reduced prices (i.e., 340B price). To participate in the program, covered entities must meet certain criteria and comply with program requirements (e.g., maintain OPAIS data, recertify eligibility, prevent diversion to ineligible patients, prepare for audits).

Pathstone formed a cross-functional team of C-Suite, Supply Chain, Pharmacy, and Health Plan stakeholders to develop a CMM service for a subset of targeted qualified members. The team worked closely to establish a comprehensive workflow including steps for patient identification and outreach, referral process, and prescription qualification measures for the program to achieve maximum value:

  • Increase Drug Revenue: Pathstone partnered with the pharmacy team to optimize the dispensing pharmacy landscape by routing the maximum number of prescriptions to either a hospital-owned pharmacy or contracted pharmacy
  • Increase Net Margin: Pathstone worked with the health system to ensure CMM program met 340B Drug Pricing Program requirements and increased overall 340B capture rate

Evaluating Outsourced Hospitalist Provider Relationships

Health Care Financial Consultant 02
Over a 6 month period of working with the client, Pathstone was able to drive $1.1M in fixed fee savings.

Pathstone partnered with a large 11 hospital health system in the southern region to evaluate the existing $11M relationship with their outsourced hospitalist provider. Two out of the eleven hospitals have an outsourced model, whereas the remainder of the health system relies on internal hospitalist resources. Given the recent leadership turnover, Pathstone worked collaboratively with the client by defining the current state, understanding previous system efforts, and future goals.

The incumbent hospitalist group dominates the rural local market and has been a long-term partner with the client for 10+ years. Given that many of the physicians have relocated and settled in the local area, additional consideration and sensitivity was needed given their livelihoods.

Given the variation in staffing models, Pathstone aligned on two simultaneous approaches to determine the best future state for the two hospitals:

  • Request for Proposal: Send out bids to national competitors to evaluate the current outsourced market
  • Insourcing: Hold internal discussions around feasibility of hiring internal resources given current labor market and health system priorities

Pathstone’s clinical purchased service consultants formed a comprehensive team of stakeholders throughout the organization consisting of key leaders and operational owners within: Operations, Supply Chain, Finance, and Revenue Cycle. Recurring touchpoints with this team and other subcommittees generated the necessary momentum and buy-in to achieve maximum value and sustainable success.

Pathstone’s original business case provided insight into the financial business relationship and the historical performance of the incumbent, including recurring missed SLA metric targets and lack of expectations.

Within each of the identified 2 approaches the Pathstone team utilized a collaborative approach to tailor a solution that fit within the client’s department and organizational goals and objectives:

Request for Proposal

  • Bids from national suppliers helped provided visibility that the fees associated with the current local incumbent was not market competitive
  • This provided leverage in incumbent negotiations and allowed the client to request realistic financial targets

Insourcing

  • A make / buy analysis provided insight into pros and cons of insourcing

Considerations included: labor market, geographic location, training resources, management resources, billing and collections, operational workflow.

Over a 6 month period of working with the client, Pathstone was able to drive $1.1M in fixed fee savings by staying with the incumbent. In addition, to help enhance service levels and meet the client’s expectations, the client and supplier agreed to a $800K incentive payment tied to meeting key service level metrics, paid quarterly. This incentivized the medical directors of the physician group to entice their providers to provide better quality services in exchange for a higher salary and bonus.

Leveraging Healthcare Coding Supplier Relationships

Health Care Financial Consultant Medical Coding
All suppliers reduced their rates for all service lines of coding that more closely aligned with expectations.

A large academic medical center in the Midwest utilizes 4 different outsourced coding suppliers across the health system that did not have co-terminus contract renewal dates. Fees also differ across these suppliers for the same services at the same hospital locations. Though select suppliers proactively decreased rates upon contract renewal, rates still did not reflect the market. It is understandable that rates increase when a new International Classification of Diseases (ICD) is released given the learning curve and increased complexity, but it is expected that rates decrease over the years as coders learn and become more acquainted to the new ICD version.

Upon partnering with our healthcare technology consultants, the health system’s goals included improving standardization of current services, lowering the cost of coding services across the full system, and improving quality of service. Incumbent negotiations were conducted with all 4 suppliers to allow them to address the system’s goals.

All suppliers recognized that there were other discussions being held with incumbents, so if they did not address the hospital’s goals, there was potential to lose the partnership. Multiple rounds of negotiations were conducted prior to selecting finalist(s) for the health system.

Conducting incumbent negotiations allowed for the health system to continue leveraging their historical relationship with each supplier. There are instances where coders have been with the health system for multiple years and developed a relationship with the providers.

All suppliers reduced their rates for all service lines of coding that more closely aligned with expectations, especially given that ICD-10 had been implemented for multiple years.

During COVID-19, there has been an extraordinary labor shortage for qualified coders. However, there was also less inpatient and outpatient volumes given the decreased non-necessary visits. Hospitals did see steady emergency department patient volumes, as many OP and IP coders shifted to ED coding.

Select suppliers also implemented tiered structures based on actual volumes. The higher the volume in the month reviewed, the lower the rate for services.

Minimizing Stakeholder Disruption in Office Supply Negotiations

Health Care Financial Consultant Office Supplies
The total financial impact in this category was $500K while maintaining variety for end users to be able to select items that meet their needs.

Pathstone partnered with a large healthcare system on the west coast to evaluate the full scope of Office Supplies & Related Product spend.  This process began with developing an understanding of the current state including vendor landscape, previous system efforts, and future goals.

This client had success selecting one primary vendor for most purchases and beginning to assess the types of purchases permitted through that vendor; however, we identified opportunity to revisit the items purchased to further negotiate pricing and refine the permitted purchase list.

Pathstone’s non-clinical purchased service consultants began identifying incremental opportunities by breaking spend into categories that may be purchased through an office supplies vendor: Ink & Toner, Paper, Office Supplies, and Other Related Products.

  • Ink & Toner: Ink & Toner may be covered under a relationship with a Managed Print Services provider, through a technology value added reseller, or a traditional office supplies vendor.  For Ink & Toner purchased through an office supplies vendor, we considered pursuing cost reduction on original equipment manufacturer (OEM) products, shifting volumes to remanufactured products, and shifting to high-capacity cartridges with higher page yields.
  • Paper: Paper also typically represents a large portion of spend in this category.  Pricing is typically influenced by external factors, such as the global supply chain.  Contracts may feature favorable fixed pricing on certain paper items, which presented standardization opportunities.
  • Office Supplies: The core of this category, health systems have a wide variety of office supply needs such as writing utensils, staplers, and binders. We evaluated average costs within each item type and set cost thresholds to eliminating the purchase of higher cost items while maintaining variety and choice for different end users.
  • Other Related Products: Other related products often available with office supplies vendors include furniture and breakroom supplies.  These categories were reviewed to determine if purchases are necessary or if other channels existed for more effective purchasing.

The total financial impact in this category was $500K. Qualitative benefits included enabling better control and visibility of purchases while maintaining variety for end users to be able to select items that meet their needs.

  • Ink & Toner: Achieved $200K value by shifting remanufactured ink to OEM to maintain increased discounts and moving eligible toners to high-capacity cartridges.
  • Paper: Achieved $30K value by shifting volumes to paper that was contracted at a flat, competitive rate.
  • Office Supplies: Developed a price capping methodology to drive $270K, or 13% value across all office supply purchases.
  • Other Related Products: Identified targeted categories to restrict purchasing within the client portal; further evaluation of alternative products available to quantify value.

Optimizing Clinical Equivalencies for Bone and Biologics

Health Care Financial Consultant Clinical Supplies
Through collaboration with physicians and the supply chain team, Pathstone achieved an estimated ~$630K in annual savings.

A ~700 bed hospital in the Southern U.S. was facing financial challenges and tasked Pathstone’s clinical purchased supplies consultants with examining areas of spend that had opportunity to drive benefit. Clinical supplies is typically one of the largest and broadest areas of spend, with items ranging from pennies to thousands of dollars.

For higher cost supplies, there is often opportunity to achieve high savings (e.g., .25% – 50%) through converting to a lower-cost product at another supplier. Bone and biologic items (e.g., allografts, tendons) typically cost in the $1,000s and were identified as having high potential for savings. However, the more complex the supply, the more challenging it may be to convince physicians of clinical equivalency.

To begin, Pathstone wanted to isolate spend on bone and biologic items. The team limited scope to tissues, surgical meshes, and allografts and issued pricing proposals to several suppliers asking them to provide matching products with pricing when applicable. In many cases, suppliers were proposing 50%+ in savings.

The next, and more complex, step was to perform research on product specifications and outcomes to determine clinical equivalency. Pathstone leveraged a clinical research tool that provides a bevy of information with the intent of supporting product and supplier selection.

While the team wanted to supply physicians with all relevant data points, it was important to develop a concise comparative analysis given their busy schedules. The team had the opportunity to present the opportunities to the Chief Medical Officer and the Head of Orthopedics. Pathstone developed a relatively standardized summary view for each of fifteen conversion opportunities, with more supporting data in an appendix to pull from when necessary.

The two physicians were supportive of the potential conversions but needed to hold conversations with end users that have more product specific expertise. At times, physicians can have strong preferences towards specific products for non-clinical reasons (e.g., supplier relationship). Thankfully, there was little concern with Pathstone’s proposed conversions, and any hesitations were addressed with further research.

While physician conversations occurred, the team worked with the supply chain and contracts team to ensure that current contractual arrangements would allow for conversions. Hospitals typically have a web of local contracts and GPO arrangements with high variability of terms, spend requirements, rebates, etc. For GPO contracts, hospitals often have a tiered rebate schedule in which the more the client purchases, the higher effective discount they receive. For suppliers in which the client transitioned away from, Pathstone needed to confirm that potential price increases did not outweigh savings opportunities from converting to a new supplier.

Through collaboration with physicians and the supply chain team, Pathstone achieved an estimated ~$630K in annual savings on ~$1.8M in annual spend. For suppliers in which Pathstone moved significant spend away from, there were negligible rebate implications. Moreover, the team helped the client establish a clear process for future high-cost clinical product conversions, such as orthopedic products. Some conversion opportunities were filed away for a Phase 2 that will be reevaluated after a year.

Optimizing Outpatient Physical Therapy

Health Care Financial Consultant Outpatient Physical Therapy
Staff turnover decreased resulting in $100k of wage savings.

Management at a local hospital was concerned with operations at an outpatient location providing Physical, Occupational, and Speech Therapy due to an increase in staff turnover and productivity issues, missed appointments, and a growing backlog of patients who needed appointments. Pathstone Partners was asked to assist as part of a broader engagement to develop detailed findings about the current state of operations, establish strategies to increase staff productivity, and reduce patient backlogs and the current 30% patient no-show rate.

Pathstone evaluated several different key areas to determine key strategies and anticipated benefit throughout the engagement.

First, management interviews and department walkthroughs were conducted to collect qualitative and quantitative information about the general management of the department and current pain points. The team learned that there is difficulty scheduling current resources with flexible start and end times, which has led to many FTEs falling short of their full-time status. The team also observed that patient scheduling tends to taper off in the early afternoon, with 1:00 – 3:00pm having the most open appointment times.

Staff schedule reviews and staffing to demand analyses were conducted to further evaluate operational challenges. Findings showed that staffing is not equally allocated throughout the week, PT/PTA ratios vary by day, lunches are scheduled at the same times, and a majority of first shift staff staff generally arrive 30 minutes prior to appointments on any given day. Assessment times are currently scheduled randomly throughout the day, and PTAs are not “first up” for non-assessment scheduling. Furthermore, busy days and non-busy days are currently staffed similarly, creating challenges.

The Pathstone team leveraged this information to make several recommendations to the hospital management team. First, we recommended expanding Saturday hours to both allow staff to work up to their full FTE status and to accommodate the current patient backlog that usually builds on Saturdays.

Additionally, patient scheduling adjustments, weekly (and daily) staffing to demand processes, and skill mix realignment has led to significant improvement for the outpatient facility.

By revising staffing schedules and developing assessment blocks where PTs are available, the facility increased throughput by 10%, and created 6 more appointment slots per week. Double scheduling patients during high no-show times (weekday mornings), adding a 24-hour auto-dialer to remind patients vs. the current 72-hour manual reminder process, and adding a $50 no-show penalty saw an additional 15 appointment slots created per week and reduced the vacancy rate from 30% down to 5%.

As the outpatient facility settles in with these new processes, staff turnover decreased resulting in $100k of wage savings, utilization (+10%), revenue (+10%), and productivity (+15%) all increased, and the hospital system achieved a total financial benefit of $350K.