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.