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Structural Misalignment in Healthcare GPOs

Executive Summary

Group Purchasing Organizations occupy a central and largely unquestioned position in the healthcare procurement ecosystem. Nearly every hospital in the United States participates in at least one GPO, and the strategy seems straightforward: aggregate purchasing volume, negotiate from scale, reduce sourcing overhead and secure pricing that standalone institutions cannot achieve on their own.

That value proposition seems obvious; GPOs provide contract access, pricing benchmarks, administrative efficiency and scale leverage that many organizations would struggle to replicate independently. The question is not whether they add value – the question is whether their economic structure is fully aligned with the financial objectives of the hospitals they serve.

It is not.

GPOs are funded primarily through administrative fees paid by vendors as a percentage of purchase volume, an arrangement permitted under federal safe harbor regulations. A GPO whose revenue scales directly with total spend cannot be perfectly aligned with aggressive enterprise-wide cost reduction objectives. Compliance frameworks limit the pursuit of lower-cost alternatives, local negotiating gains are often offset in part by GPO fee structures, and some of the most powerful cost levers, utilization management, standardization, make vs. buy, revenue enhancement and strategic partnerships fall largely outside GPO influence.

For a health system carrying $1 billion in annual non-labor spend, a one percent improvement in total economics represents $10 million in margin impact. At three percent, that figure rises to $30 million. For organizations operating on thin margins, those are not rounding errors, they are the difference between financial stability and uncertainty.

This paper examines where GPO incentives diverge from hospital interests, quantifies the financial stakes for executive leadership, and offers a framework for using GPO relationships strategically in a broader cost management strategy rather than relying on them to drive financial improvement goals.

The Historical Evolution of Group Purchasing Organizations

Group Purchasing Organizations began in the early twentieth century as cooperative buying arrangements among hospitals operating in fragmented markets. Individual institutions lacked scale and procurement sophistication, suppliers often dictated pricing, and administrative resources were limited. By pooling demand, hospitals gained leverage, reduced overhead, and secured better terms.

The modern GPO industry took shape in the 1980s when two forces converged. Reimbursement pressure intensified following Medicare’s shift to prospective payment systems, putting cost reduction at the top of every hospital CFO’s agenda. Simultaneously, Congress formalized the legal safe harbor permitting vendors to pay administrative fees to GPOs, a regulatory change that institutionalized a vendor-funded revenue model tied directly to purchasing volume and altered the economic foundation of the industry permanently.

Administrative fees provided scalable, predictable revenue that fueled consolidation. By the early 2000s, a small number of national organizations – Vizient, Premier, and HealthTrust Performance Group had emerged as dominant players overseeing hundreds of billions in annual purchasing volume. As health systems consolidated, GPOs expanded beyond basic contracting into physician preference items, capital equipment, analytics, purchased services, and advisory functions.

Today a hospital may simultaneously participate in a national GPO, a regional alliance, and an aggregator overlay, with pricing tiers and rebates dependent on compliance metrics across multiple portfolios. What began as cooperative purchasing has evolved into a complex, vendor-funded structure whose economics are not always transparent to the members it serves.

Where Misalignment Becomes Visible

Commodity and Medical-Surgical Categories

In commodity medical-surgical supplies, GPO pricing is structured around compliance. Diverting volume to a lower-cost alternative can jeopardize portfolio discounts across an entire category. The result is a structure in which hospitals are financially penalized for pursuing better economics outside the contract, not because the alternative is inferior, but because compliance thresholds protect fee revenue.

Physician Preference Items

National contracts in physician preference categories typically establish maximum pricing frameworks. Many organizations incorrectly treat these ceilings as the best available price. Local negotiations, particularly those supported by data and tailor-made strategies, frequently achieve significantly better terms. The gap between GPO contract pricing and locally achievable pricing in implants, cardiovascular devices, and other high-value categories can be significant and lead to multi-million-dollar savings potential.

Local Negotiations and Fee Capture

When hospitals do negotiate improved pricing independently, GPOs often prefer that those agreements remain on their contract paper, preserving administrative fee flows and compliance metrics. If pricing improvements originate from hospital-led effort but remain on GPO paper, administrative fees may still apply. The hospital captures some, but not all, of the value. The economics of the improvement are shared with the GPO even when the GPO contributed nothing towards achieving it.

Figure 1. GPO coverage territory relative to total non-labor spend. Categories in the blind spot zone — representing 70-75% of spend — receive no meaningful GPO contract leverage.

Beyond Price: The Levers That Matter Most

Price is one lever among several in a comprehensive margin improvement program, and often not the most powerful one. Utilization reduction, standardization and vendor consolidation, make-versus-buy analysis, and strategic partnerships frequently deliver greater financial impact. These strategies are also largely GPO-agnostic and can directly reduce purchasing volume, ultimately reducing administrative fee revenue. The structural incentive to expand these efforts does not exist within the GPO model.

Purchased services such as IT, revenue cycle, facilities management, and outsourced ancillary and support functions represent approximately 30% of non-labor spend for most health systems and fall almost entirely outside meaningful GPO influence. External spend for supplies, pharmacy, and purchased services makes up 30 to 40 percent of a typical health system’s total cost base, yet only a fraction of that spend benefits from GPO leverage. In organizations where purchased services constitute 30 to 40 percent of non-labor spend – this is not a minor gap.

Financial Implications for Executive Leadership

For CFOs, CEOs, and Chief Supply Chain Officers, the structural dynamics described above are not abstract; they have direct impact on margins.

GPO contracts provide genuine value as a pricing floor. In most categories, they protect hospitals from obvious overpayment and establish a benchmark against which local negotiations can be measured. That is not nothing. But pricing benchmarks do not guarantee optimized total economics, and the distinction matters enormously at scale.

If GPO contract pricing reflects negotiated averages rather than fully optimized outcomes, the opportunity cost compounds every year. A health system that consistently accepts contract pricing as the destination rather than the starting point leaves meaningful margin on the table recoverable through more assertive local negotiation, utilization management, and category strategies that go beyond price.

Figure 2. Five-year cumulative savings divergence. For a $1B non-labor spend health system, a 3% local negotiation improvement generates a $58M gap over four years compared to a GPO-only baseline.

The Administrative Fee Question

Vendor-funded administrative fees are embedded in the economic structure of GPO contracts. Many GPOs distribute a portion of these fees back to members as patronage dividends, rebates, or credits, and in large systems these distributions can reach seven figures or more annually. GPOs often cite these payments as evidence of aligned incentives.

However, administrative fees are paid by vendors and are ultimately embedded within the broader pricing structure of purchased goods and services. Member distributions represent a redistribution of GPO economics. Hospitals receive back a portion of the fee stream generated by their own purchasing activity. The question is whether the overall structure, including compliance constraints and category limitations optimizes total non-labor economics or merely returns a fraction of embedded costs.

If compliance requirements limit the pursuit of deeper savings, the net financial impact of distributions may be outweighed by missed optimization opportunities. A seven-figure distribution does not necessarily offset the cumulative cost of structural constraints across a billion-dollar spend portfolio.

The Economics of Local Negotiation

One of the most persistent misconceptions in GPO strategy is that moving spend off GPO contract paper creates unacceptable financial risk. In practice, the breakeven threshold is far lower than most organizations assume.

For a $10M category with a 2% admin fee rate and a 5% distribution rate on gross fees, the total fees-plus-distribution at risk when moving off GPO paper is approximately $210K representing a 2.1% pricing improvement needed simply to break even. Any local negotiation achieving better than a 2.1% price reduction creates net value for the hospital, with no floor on how much better that outcome can be.

Figure 4. Illustrative example assuming $500M covered spend, 2% admin fee, 80% distribution, 1% net GPO discount, and 4% local negotiation discount.

What Optimization Looks Like In Practice

Pathstone has observed this misalignment firsthand. Working alongside health systems ranging from small rural hospitals to large multi-facility IDNs, we have consistently found that a focused, implementation-led approach that combines the institutional knowledge of the organization with market intelligence that goes deeper than benchmark data unlocks margin that GPO relationships are unable or unwilling to deliver. Across non-labor spend categories, that effort has translated to improvements of 5% or more beyond what existing GPO contracts were providing.

For example, a large IDN operating both adult and children’s hospitals had a fragmented reference lab partnership model with multiple vendors relying on GPO pricing, or in some cases no contract at all, with no meaningful leverage from volume consolidation or test-level negotiation. Pathstone facilitated a competitive RFP process, supported by test-level utilization analysis and market pricing intelligence, which resulted in consolidation around two primary reference lab partners. This support went beyond just the RFP, but also addressed internal stakeholder concerns to pave the way for smooth adoption and implementation. The new local agreements ultimately delivered best-in-class pricing with no annual spend commitments, simplified vendor management, and generated more than $2M in annual savings, none of which the existing GPO relationship had surfaced or pursued.

In another instance, a regional health system was fully compliant on its GPO ortho/trauma surgical supplies contract, capturing the top tier discount and an annual distribution payment of approximately $180K. While this seemed optimized, Pathstone’s analysis went deeper, modeling the full potential cost reduction including pricing, fees, and utilization patterns rather than evaluating performance within the context of the existing GPO arrangement. That broader lens revealed significant variance between contracted rates and what a competitive market would return. A targeted RFI with a focused but intentionally reduced volume commitment leveraging best available pricing from multiple vendors (even though it dropped the organization out of its top compliance tier) produced a local agreement priced 15% below the GPO contract rate. The tier drop cost the organization its top-tier discount and some of its distribution, but even absorbing both, the net improvement was $660K annually.

A Path Forward for Executive Leadership

None of this argues for fully abandoning GPO relationships. The contract access, benchmark data and administrative infrastructure they provide are genuinely valuable, and most organizations would struggle to replicate them independently. The argument is for using GPO participation as one tool in a broader sourcing strategy rather than as a substitute for one.

Supply Chain and Finance leadership should be able to answer several foundational questions: What percentage of total non-labor spend is meaningfully influenced by GPO contracts? How are administrative fees structured, and what is their net impact on pricing economics? How frequently is GPO pricing independently benchmarked against market alternatives? How are locally negotiated agreements structured, and who captures the value of hospital-led improvements?

Figure 5. Executive diagnostic scorecard. Four questions to assess GPO optimization readiness. Organizations unable to answer “yes” to all four face material margin exposure.

Organizations that can answer these questions are in a position to use GPO relationships on their own terms, capturing the genuine benefits of contract aggregation while pursuing the deeper optimization that the GPO model is structurally constrained from delivering. Those that cannot are likely leaving margin on the table every year, compounding over time.

The most durable margin improvement programs in healthcare do not treat any single tool as a ceiling. They use GPO contracts as a floor, local negotiation as a standard practice, utilization management as a discipline, and standardization as a strategic requirement. That combination, not GPO participation alone is what fully optimizes non-labor economics.

Reach out to Pathstone Partners today to request a no-cost opportunity assessment and discover how we can help your organization plan for the future.

U.S. Government Accountability Office (2014). Group Purchasing Organizations: Funding Structure Has Potential Implications for Medicare Costs.

Wikipedia. Group Purchasing Organization — History and regulatory background.

Apenteng B.A. et al. (2024). Role of supply chain intermediaries in steering hospital product choice: Group Purchasing Organizations and biosimilars. PMC / NCBI.

Ott, J. / symplr (2024). The Overlooked Goldmine: Optimizing Purchased Services in Healthcare Supply Chains.

McKinsey & Company (2024). Optimizing healthcare supply costs — from the physician’s perspective.

McKinsey & Company (2022). Optimizing health system supply chain performance.

Definitive Healthcare (2020). How to control costs by balancing the supply chain.

Chief Healthcare Executive / symplr (2023). The 4 things supply chain managers wish healthcare executives understood.

Herrera, A. / Estudios de Economía Aplicada (2006). The Role of Group Purchasing Organizations (GPOs) in the U.S.

Physician Shortages Threaten U.S. Healthcare

Key Takeaways:

The U.S. faces a projected shortage of 86,000 physicians by 2036, with primary care experiencing deficits of up to 40,400 physicians, and surgical specialties facing shortages of up to 19,900 surgeons.
These shortages are driven by an aging population, rising chronic disease burden, and an undersupply of domestic medical school graduates relative to demand.
Rural and underserved communities have struggled to attract and retain physicians, making them disproportionately reliant on foreign-trained physicians – recent changes to immigration policy may further strain physician supply in the US.
Physician shortages may additionally drive locum tenens costs given projected limited physician demand, as well as increase uncompensated care and force service line reductions.
The Resident Physician Shortage Reduction Act (H.R. 3890) may help reduce reliance on foreign-trained physicians; however meaningful workforce relief will likely not materialize until the early 2030s.
Pathstone Partners specializes in helping healthcare organizations implement operational efficiencies that preserve care quality while controlling costs during workforce constraints.

The physician shortage confronting the United States threatens both the financial viability of healthcare organizations and the health of millions of Americans. According to the Association of American Medical Colleges, the US will face a shortage of between 13,500 and 86,000 physicians by 2036, with demand continuing to outpace supply under all scenarios. The shortage will also impact specialties disproportionately distribution, with primary care experiencing the most severe deficit, between 20,200 and 40,400 physicians by 2036, representing over 10% of the current 234,300 active primary care physicians nationwide. Surgical specialties will also face shortages of 10,100 to 19,900 surgeons, while psychiatry and mental health services are forecasted to see continued critical deficits as demand surges with a growing mental health crisis.

The Physician Bottleneck and an Aging Population

Multiple factors have created this physician labor crisis – the US population will grow by 8.4% through 2036, however the 65-and-older population will increase disproportionately by 34%, and those 75 and older increasing nearly 55%. Since older Americans utilize physician services at three to four times the rate of younger populations, demand growth also increases accordingly.

Meanwhile, the physician workforce itself is aging. Over 40% of currently active physicians will reach traditional retirement age within the next decade, threatening to remove more than a third of practicing physicians from the system. This retirement wave arrives precisely as demand for physicians accelerates, creating a compounding effect on healthcare systems and patients in need of care.

The pipeline for new physicians, however, remains constrained. Since 1997, CMS has maintained a cap on federally funded residency positions. While the Consolidated Appropriations Act of 2021 added 1,000 new positions, this falls far short of projected demand needed to account for both an aging physician workforce, and an aging general population. Even if medical school enrollment were expanded today, the 7- to 10- year training timeline means meaningful relief remains approximately a decade away. Geographic maldistribution further compounds this problem as physicians disproportionately concentrate in urban and suburban market, which leaves rural and low-income communities underserved regardless of national supply figures.

Both California and Congress have begun responding to a need to expand the physician pipeline, though the scale of the proposed solutions are still likely to remain short of the projected need. At the state level, California’s CalMedForce grant program has supported over 1,183 residency positions across 162 programs. Approximately 75% of residents trained in the state remain in California, making in-state training one of the most reliable tools for building a durable local workforce. At the federal level, bipartisan legislation has emerged to finally address the Medicare residency cap that has constrained supply since 1997.

The Resident Physician Shortage Reduction Act (H.R. 3890) would add 14,000 Medicare-funded residency positions over seven years, with 2,000 new slots annually from 2026 through 2032. The bill would also authorize $63.5 million in grant funding for rural hospitals seeking to launch new residency programs. However, if passed, the long training timeline means meaningful workforce relief would not materialize until the early 2030s at the earliest.

Immigration Policy and the Potential Impact on Vulnerable Communities

Recent immigration policy changes have also threatened to worsen the shortage where it hurts most. Analysis published in JAMA reveals that in fiscal year 2024, approximately 11,000 physicians, or nearly 1% of the national workforce, were sponsored for H-1B visas. Foreign-trained physicians fill critical gaps particularly in underserved communities – in US counties with the highest poverty levels, H-1B-sponsored physicians comprise 2% of the physician workforce, which is nearly four times higher than in low-poverty counties, and are also substantially more likely to enter specialties less attractive to US-trained physicians such as primary care and psychiatry.

Recent policy changes, including significant increases to visa-related fees, and in some states, administrative freezes on new applications, have raised some concerns for the future of hospitals which rely significantly on international physician recruitment – particularly those that are smaller or rural institutions that are already operating on thin margins.

Financial and Clinical Consequences

Physician shortages translate directly to financial pressure and compromised care. For example, research consistently shows that physician shortages correlate with worse chronic disease outcomes, lower cancer screening rates, and higher mortality. Additionally, capacity challenges also highlight the need to free cash to fund growth and meet patient demand.

Some examples of more immediate downstream effects for hospitals include:

Uncompensated care rising as communities lose primary care access, forcing patients to delay treatment until conditions require expensive emergency department visits or hospitalizations.
Service line reductions becoming inevitable when organizations cannot recruit or retain physicians in critical specialties.
Rural hospitals may face choosing between maintaining money-losing service lines with expensive contract labor or discontinuing services entirely.
Long-term increases in permanent physician compensation and locums tenens rates as organizations compete for limited talent.
Patient outcomes decreasing due to longer wait times, delayed diagnoses, and reduced access to preventive care.

Strategic Solutions to Maximize Value

As physician shortages continue to strain healthcare organizations, Pathstone Partners has worked with clients to implement strategic operational improvements that maximize value from existing resources.

Our engagements have included reviewing and optimizing virtual care models that allow specialists to serve multiple locations efficiently and enable primary care physicians to consult remotely, therefore gaining more capacity from an existing physician base. A key insight from this work is that telehealth implementation is not one-size-fits-all. Organizations can choose from a spectrum of staffing models depending on their goals, resources, and patient population. Helping clients evaluate and plan across these phases is an important part of building a durable virtual care strategy.

By appropriately diverting lower-acuity cases, physicians are freed to focus on higher-acuity patients where their expertise is most needed, which improves resource utilization, the quality of care patients are able to receive, and provides meaningful operational improvement particularly for organizations already grappling with physician recruitment challenges.

Beyond workforce strategy, Pathstone also works across a wide variety of operational initiatives designed to free up cash flow, fund critical priorities, and help organizations meet growing patient demand, including supply chain restructuring, cost reduction, or revenue cycle improvements to help health systems unlock capital that can then be redeployed.

While the physician shortage represents a significant challenge, forward-thinking organizations can differentiate themselves through operational excellence. Those implementing strategic measures now will be better positioned to maintain care quality and ensure long-term financial sustainability.

Reach out to Pathstone Partners today to request a no-cost opportunity assessment and discover how we can help your organization plan for the future.

Why Pediatric Hospitals Require a Different Playbook: Navigating Financial Pressures with Mission in Mind

Key Takeaways:

Pediatric hospitals face unique financial and operational pressures. Reliance on public reimbursement, specialized services, and complex family-centered care creates volatility and constraints that adult-focused strategies may fail to address.
Traditional cost-saving models aren’t enough. Pediatric systems require customized benchmarks and sourcing strategies tailored to increasingly high complexity portfolios, and approaches that reflect their mission-driven care philosophy.
A tailored strategy can protect mission and margin. By aligning cost and operational initiatives with patient experience, philanthropy, and peer-driven innovation, Pathstone Partners helps children’s hospitals achieve sustainable financial results without compromising quality of care.

It is often said in healthcare that children are not just small adults. While pediatric and adult hospitals share many foundational structures and challenges, the context in which pediatric hospitals operate introduces distinct strategic considerations that require a more tailored approach.

Projected shifts in Medicare and Medicaid reimbursement models, combined with growing uncertainty around federal research funding, are creating new financial pressures across the healthcare industry. But these pressures are felt most acutely in pediatric systems, where Medicaid covers roughly half of all patients treated at children’s hospitals. This disproportionate reliance on public reimbursement introduces significant financial volatility. At the same time, many children’s hospitals also serve as academic and research hubs, meaning reductions in grant or foundation funding can directly threaten their ability to advance groundbreaking therapies for rare and complex childhood diseases.

These realities demand a different playbook — one that balances mission-driven care for children and families with the operational discipline needed to thrive in an evolving reimbursement environment.

At Pathstone Partners, we have had the privilege of working closely with both adult and pediatric healthcare organizations. Through this breadth of work, we’ve learned how to adapt our strategies and methodologies to address the unique operational, clinical, and financial dynamics of pediatric hospitals — helping them navigate financial pressures without compromising their mission to provide compassionate, specialized care to children and families.

Understanding the Nuances: Pediatric vs Adult Hospital Operations

While pediatric and adult hospitals share many structural and operational similarities, the context, complexity, and strategic considerations behind their operations are often very different. Recognizing these distinctions is essential to designing cost-reduction strategies, vendor partnerships, and operational solutions that truly work, not just in theory, but in practice.

Peer Collaboration Drives Adoption in Pediatrics: Pediatric hospitals operate in a highly collaborative ecosystem. Peer organizations often share operational learnings and best practices, creating a strong sense of trust and alignment. While collaboration exists across all healthcare systems, pediatric networks tend to be smaller and more tightly connected, amplifying peer influence. If a solution works at one children’s hospital, other children’s hospitals are considerably more likely to adopt that solution.
- Strategic Implication: Leveraging peer networks is often the fastest path to implementation success in pediatric environments.

Benchmarking Requires Customization: Benchmarking is central to evaluating performance across both adult and pediatric systems. However, pediatric hospitals cannot simply import adult benchmarks without adjustment. Many pediatric hospitals rely on specialized suppliers with limited market alternatives, meaning they manage a broader range of SKUs and unique cost structures. Similarly, operational processes such as digital patient statements involve higher complexity due to guardian and family account linkages.
- Strategic Implication: Pediatric systems require purpose-built operational and financial benchmarks. Applying adult system benchmarks without adjustment can lead to unrealistic targets and missed opportunities.

Operational Complexity Impacts Scale and Strategy: Like adult hospitals, pediatric systems are under pressure to improve efficiency and control costs. Unlike many adult systems, pediatric hospitals often face constrained or declining volumes alongside increasing clinical complexity. This dynamic reduces scale leverage and limits standardization. Niche suppliers, highly specialized therapies, and regulatory requirements further constrain pricing flexibility. At the same time, digital and operational processes must support family-centered care models, introducing additional layers of complexity.
- Strategic Implication: Cost-reduction and operational improvement strategies must be designed specifically for pediatric environments rather than assumed to translate directly from adult health systems.

Philosophy and Expectations Differ in Pediatrics: Pediatric hospitals operate with a philosophy that places family involvement, emotional sensitivity, and mission-driven care at the center of every interaction. Operational areas, such as language services, are more complex, often involving sensitive conversations that extend beyond the patient to parents and caregivers. Similarly, decisions around employee care models may also introduce unique considerations, such as whether and how to support adult family members within pediatric-focused systems.
- Strategic Implication: Pediatric strategies must reflect the values and expectations of patients, families, and staff, not solely financial or operational metrics.

How Pathstone Partners Drives Impact in Pediatric Healthcare

Traditional consulting approaches often fall short in pediatric settings — not because adult-system strategies are ineffective, but because they require intentional adaptation. Children’s hospitals operate with distinct scale, clinical complexity, and mission-driven priorities that demand more than surface-level customization.

Pathstone Partners has intentionally partnered with pediatric organizations to apply a methodology that aligns cost and operational improvements with patient experience, philanthropic strategy, and peer-driven innovation.

Our approach delivers measurable financial and operational results while preserving the clinical sensitivity and family-centered care that define pediatric healthcare:

Redefining performance metrics to balance financial discipline with patient and family experience goals to ensure cost reduction does not come at the expense of mission.
Designing sourcing and operational strategies to address low-volume, high-complexity product portfolios, optimize supplier relationships, and streamline high-variability workflows.
Building pediatric-specific frameworks grounded in real market intelligence, supplier pricing insights, and operational best practices to set realistic, actionable targets.
Leveraging peer networks to accelerate decision-making and adoption of best practices and positioning hospitals as innovation leaders across the pediatric landscape.
Incorporating philanthropy and alternative funding streams into financial sustainability strategies to support access and impact.
Partnering directly with clinical and operational leaders to ensure solutions reflect on-the-ground realities, operational constraints, and patient needs.

Initiative	Annual Spend	Benefit Realized	Impact	Value Levers	Strategy	Pediatric-Tailored Approach
Interpretive Services	$6.0M	$1.2M	20% Cost Reduction	Pricing	Competitive sourcing and contract negotiation	Prioritized in-person and video interpretation for sensitive pediatric interactions, ensuring clear communication with young patients and families while improving service reliability and cost efficiency
Inhaled Nitric Oxide	$2.0M	$1.0M	50% Cost Reduction	Pricing	Competitive sourcing	Addressed high pediatric utilization by negotiating volume-based discounts and ensuring full ventilator and transport compatibility across neonatal and pediatric intensive care units
Bad Debt Collections	$950K	$2.2M	230% Revenue Increase	Revenue, Pricing	Competitive sourcing	Introduced patient-sensitive collection protocols that preserve hospital reputation and patient trust while improving yield and reducing uncompensated care

Partnering for the Future

As financial pressures intensify across the healthcare landscape, pediatric hospitals will need partners who understand both what they share with adult systems and what truly sets them apart. At Pathstone Partners, we bring experience across the full healthcare continuum and a proven ability to translate that experience into pediatric-specific strategies that drive results.

Reach out to Pathstone Partners today to request a no-cost opportunity assessment and understand how we can help drive financial efficiency for your organization.

Direct your Indirect: Insights from the AHRMM 2025 Conference & Exhibition

Key Takeaways:

Partner Joseph Jang joined Lisa Farmer, VP of Supply Chain at Baptist Health Arkansas, at the AHRMM25 Selects Summit to present “Direct Your Indirect: Drive & Scale Sustainable Margin Improvement in Your Organization”.
Successful margin improvement initiatives require early visibility and quick wins, executive sponsorship, a defined initiative lifecycle, multi-value lever strategies, and ongoing organizational alignment to sustain results.
Pathstone Partners applies these best practices to help clients achieve and sustain measurable financial and operational benefit.

At the AHRMM25 Selects Summit in August 2025, Partner Joseph Jang joined Lisa Farmer, Vice President of Supply Chain at Baptist Health Arkansas, to share insights and best practices for driving and scaling margin improvement through health system and consulting partnerships. The long-standing relationship between Pathstone Partners and Baptist Health was used during the talk to illustrate how these strategies can effectively create and sustain value across an organization.

Hospital Financial Challenges

Hospitals are facing unprecedented financial challenges in the post-COVID era. Increasing labor and non-labor costs combined with current and future policy changes continue to strain hospital finances. In July 2025, hospital operating margins across the United States averaged 2.6%, partially driven by a 9% year-over-year (YoY) increase in non-labor expenses. Looking ahead, policy shifts such as the One Big Beautiful Bill Act (OBBA) may further impact financials by tightening Medicaid eligibility and likely increasing the uninsured population by up to 11 million. Amid these pressures, hospitals are turning to trusted advisors like Pathstone Partners to identify sustainable strategies for margin improvement.

Key Steps to Drive & Scale Your Impact in Indirect Categories:

Joseph and Lisa outlined the best practices detailed below to deliver sustainable margin improvement within purchased services categories through strategic partnerships with firms such as Pathstone.

Create Visibility & Deliver Early Wins:

At the start of a consulting engagement, delivering savings early helps develop trust within the organization. These early successes bring project visibility across the health system, creating a smoother path to drive additional value. Hospital leaders who observe their peers collaborating successfully to drive financial benefit will be motivated to support savings efforts within their departments. Pathstone Partners typically helps our clients achieve quick wins by leveraging our category market and industry knowledge, and addressing long-term incumbent partnerships and upcoming contract expirations.

Secure Executive Sponsorship & Alignment:

The success of margin improvement efforts heavily depends on the organizational reporting, accountability, and decision-making structure. Hospital stakeholders and consulting partners should align on who will be involved in each cost-savings initiative, and the level of authority to make decisions in each area. Pathstone Partners typically establishes an Executive Steering Committee, Core Team, and Work Teams to report out on project progress and advance margin improvement efforts.

Establish Well-Defined Process:

In order for true financial benefit to be realized as part of a margin improvement efforts, a well-defined initiative lifecycle must be established. Without clear decision-making authority, even strong initiatives can stall. For Pathstone, the initiative lifecycle spans opportunity identification to savings implementation and close-out. The well-defined process ensures that Pathstone and the client stakeholders are clear on roles and timeline, and where to flag barriers to push margin improvement efforts forward.

Pursue a Multi-Value Lever Approach:

As previously detailed in Joseph’s Spring 2025 AHRMM Summit Presentation, health systems should employ a multi-value lever strategy in order to drive optimal value across supplier partnerships. While price is often the most visible lever, it represents less than half of the potential opportunity. Pathstone helps clients capture the remaining 55% through strategic initiatives beyond benchmarking by employing additional value levers.

To maximize financial benefit across a margin improvement engagement, Pathstone employs additional value levers (revenue, utilization, standardization, make/buy and strategic alliance). For example, contractual volumes of goods and services can be reduced to more closely match actual utilization. Multi-supplier categories can be reduced to a single supplier, leveraging the full book of business to reduce prices. Insourcing and outsourcing of clinical purchased services categories can be evaluated. The revenue share-back percentage on supplier contracts can be negotiated to increase the bottom-line revenue to the health system.

As part of margin improvement efforts, Pathstone works with our client partners to identify potential benefit in a category based on historic knowledge of expected applicable value levers. For example, in one recent engagement, combining utilization with supplier consolidation yielded 23% initiative savings on total spend, with price only representing 8% of total savings.

Scale & Sustain Impact through Influence & Addressing Friction Points:

To ensure that the implemented savings are realized and sustained for the long-term, supply chain leaders and consulting partners must address change management needs and organizational politics.

Addressing Friction Points: Margin improvement efforts often require change management; hospital stakeholders may be need to transition to a new vendor, adjust utilization habits, or insource a service in order for the health systems to realize the savings. These changes may yield negative emotions or team workload concerns. Additional pressure from hospital leadership does not automatically create organizational comfort with change. Instead, Pathstone works alongside our clients to identify and remove friction points that may be holding up cost savings efforts. Through the balanced partnership model, we partner directly with stakeholders to develop an organizationally-tailored path to value.
Leveraging the S-Curve: Based on Pathstone’s experience, the level of engagement across hospital stakeholders as an engagement progresses can be represented by an S-shaped curve. In the early phases of the engagement, only a small percentage of organizational leaders are typically on board with the need to drive savings. Pathstone works with our project sponsors to highlight the initial project wins and build organizational momentum to excite all leaders about cost savings. By adopting the “one-team, one-goal” mentality, we help create internal visibility of successes and facilitate partnership between departments to drive maximum financial benefit.

Ensuring Sustainable Margin Improvement Efforts with Pathstone Partners:

Pathstone Partners brings years of experience partnering with healthcare organizations to achieve sustainable margin improvement. By combining quick wins, long-term process alignment, and a deeply collaborative approach, we help our partners realize measurable financial benefit that lasts well beyond the engagement.

Contact us today for a no-cost opportunity assessment and discover how Pathstone Partners can help your organization achieve lasting financial impact.

Rural Healthcare at Risk: Navigating the One Big Beautiful Bill

Key Takeaways

The One Big Beautiful Bill Act (OBBBA), a $1 trillion federal spending and tax package signed into law on July 4, 2025, includes major healthcare provisions alongside broader budget measures.
The One Big Beautiful Bill includes the Rural Health Transformation Fund, providing $50 billion over five years to support rural hospitals, though unjust fund distribution and competition for rural designations may skew the financial benefit away from the intended hospital recipients.
Medicaid work requirements could create administrative challenges and potential coverage gaps, particularly in rural communities, impacting patient access and therefore hospital financial stability.
Rural hospitals face ongoing financial pressures, and Pathstone Partners is uniquely positioned to support rural hospitals in optimizing operations, managing costs, and improving resilience without impacting the quality of care.

Unpacking the OBBBA: How the Law Shapes Healthcare

H.R. 1, the One Big Beautiful Bill Act (OBBBA), a spending and tax law passed through the reconciliation process and signed into law on July 4, 2025, has prompted widespread discussion regarding potential impacts on healthcare programs, with the bill representing an overall $1.4 trillion reduction in federal spending. States are now required to implement health-related provisions, including changes to Medicaid coverage and rural healthcare funding.

The Congressional Budget Office (CBO) anticipates that 11.8 million people will lose health insurance over the next decade as a result of the OBBB, creating serious consequences for community health and straining healthcare providers. Uninsured individuals already face steep challenges: nearly half of uninsured adults go without provider visits, one in five skip needed treatment due to cost (vs 5-7% of insured adults), receive less preventative care, and are consequently more often hospitalized for avoidable conditions. These projected coverage losses highlight the urgent need for solutions to safeguard access and strengthen care delivery in underserved areas. One such solution authorized by the OBBBA is the Rural Health Transformation (RHT) Program to invest in rural healthcare delivery.

Facing Closure: The Growing Crisis in Rural Healthcare

Rural facilities have faced an alarming rate of closures, with over 100 closing in the last decade. Southern states are at particularly high risk; in Alabama, 23 rural hospitals – half of the state’s total – are at immediate risk of closure. Rural hospitals carry high fixed costs, including 24/7 staffing, facility maintenance, and fully equipped departments, yet service smaller populations, generating less revenue to offset expenses than their urban hospital counterparts. Without sufficient federal support, these hospitals must negotiate with private insurers from a weaker position, often accepting lower reimbursement rates due to smaller patient volumes and limited market leverage.

Number of At-Risk Rural Hospitals Across the US

Number of At-Risk Rural Hospitals across the US based upon hospitals classified in the top 10% Medicaid payer mix of rural hospitals across the country and experiencing three years or more of negative total margin.

Source: Cecil G. Sheps Center for Health Services Research, University of North Carolina

Funding the Future of Rural Hospitals: Lifeline or Limited Relief

While the OBBB seeks to reduce overall federal Medicaid spending by $1 trillion over the next decade, it establishes the $50 billion Rural Health Transformation Fund – a five-year program to support rural healthcare and mitigate disproportionate impacts on rural hospitals. Analysts caution that this temporary lifeline is insufficient to offset massive financial losses from Medicaid cuts, straining hospitals (particularly those with high Medicaid populations), and limiting investment in care coordination and critical resources. However, broad discretion by the Centers for Medicare and Medicaid Services (CMS) and individual states in allocating funds raises concerns that resources may not reach hospitals most in need.

Johns Hopkins and Brown University research shows 400 urban hospitals now claim “rural” status; over a quarter are for-profit, and at least five generate more than $4 billion in annual net patient revenue. These are so-called dual-classified hospitals (those designated as both rural and urban) are uniquely positioned to take advantage of the new Health Transformation program, potentially diverting funds away from smaller hospitals facing genuine financial distress, as outlined in the graphic below.

Source: Wang et al., 2025; Sharp Rise in urban hospitals with rural status in Medicare, 2017-23. Raw data retrieved from RAND Hospital Data, Medicare Cost Reports. Note the number of geographically urban hospitals remains stable between 2013 and 2023 (2,543 – 2,258 respectively).

Medicaid Reform: Consequences for Patient and Providers

The OBBBA also introduces Medicaid work requirements, intended to encourage able-bodied adults to contribute to their healthcare coverage. While designed to promote employment and reduce reliance on public programs, evidence suggests these requirements often cause coverage loss due to administrative and technological challenges rather than unwillingness to work. For example, in Arkansas, over 18,000 people lost coverage within five months of a work requirement pilot, with little measurable increase in employment. Many beneficiaries already had jobs, caregiving responsibilities, or health limitations that made obtaining documentation difficult, and for rural communities, these requirements are especially burdensome. Eligibility checks every six months, technology demands, and verification for seasonal or self-employed work, such as farming, create challenges for both patients and county offices.

Rural hospitals are expected to be further negatively impacted by the new Medicaid work requirements. Coverage loss even among working populations could increase gaps in care and increase uncompensated care for rural hospitals. This decline in Medicaid coverage may reduce reimbursement streams, strain hospital finances, and heighten the risk of service cutbacks and closures, particularly in already vulnerable rural areas. In 40 Medicaid expansion states, federal funding cuts could lead to an average of 19% decline in operating margins, and safety-net facilities could see an average reduction of 56%. Together, these pressures underscore how Medicaid work requirements, while intended to encourage employment, may ultimately destabilize rural healthcare systems and weaken community access to essential medical services.

Looking Forward: Operational and Patient Impacts of the OBBBA on Rural Hospitals

Operational Strain on Rural Hospitals: High fixed costs, limited patient volumes, and reliance on Medicaid make rural hospitals financially vulnerable to the new bill
Coverage Loss and Access Gaps: Medicaid work requirements may cause individuals, even those employed, to lose coverage, increasing gaps in care and uncompensated services
Funding Allocation Challenges: Broad discretion in Rural Health Transformation Fund and urban hospitals claiming rural status may divert resources away from truly at-risk facilities
Impact on Care Coordination and Resources: Reduced funding and coverage instability can limit hospitals’ ability to invest in technology, supply chain efficiency, and coordinated care programs
Patient & System Impacts: Loss of insurance and resulting delays or forgone care can lead to preventable negative health outcomes, increased emergency department use, and more intensive interventions, while ongoing financial and operational pressures may erode staff morale and weaken the stability of rural healthcare delivery

To navigate the evolving healthcare landscape, medical providers must take proactive steps to improve operational efficiency and financial stability. Hospitals are facing the challenge of doing more with less, as high pharmaceutical, labor, and administrative costs, coupled with looming Medicaid cuts, strain finances. In response, providers are adopting targeted strategies such as better controlling drug utilization, implementing new technologies, minimizing waste, and optimizing supply chain and procurement processes. With the urgency to reduce costs and operate more efficiently at an all-time high, these measures are critical for maintaining both quality of care and organizational resilience, while preparing for anticipated reimbursement reductions and declines in Medicaid enrollment.

Unlocking Savings and Resilience with Pathstone Partners

Pathstone offers rural hospitals cost-effective, hands-on support – bringing deep niche expertise, the agility to respond quickly to shifting challenges, and a partnership approach that tailors solutions to each hospital’s unique community and financial realities. Our boutique size and flexibility allow us to design customized strategies rather than using one-size-fits-all models, drawing on years of direct experience helping rural hospitals navigate financial pressures.

Reach out to Pathstone Partners today to request a no-cost opportunity assessment and understand how we can help drive financial efficiency for your organization.

Recognized on the 2025 Inc. 5000 List of Fastest-Growing Private Companies

Pathstone Partners, a Chicago-based healthcare consulting firm, has been honored with a spot on the 2025 Inc. 5000 list of Fastest Growing Private Companies in America, marking its second consecutive year on this prestigious ranking of America’s fastest-growing private companies. This recognition underscores Pathstone’s unwavering commitment to delivering impactful, operational solutions for healthcare organizations nationwide.

Strategic Growth Aligned with Changing Healthcare Needs

Pathstone Partners has achieved an impressive 92% revenue growth over the past 3-years, reflecting its success in partnering with healthcare providers to optimize costs while maintaining high-quality patient care. This milestone highlights the firm’s ability to adapt and thrive in a rapidly changing healthcare environment, where rising costs, staffing challenges, and evolving regulations are reshaping how hospitals and health systems operate.

Comprehensive Solutions for Healthcare Organizations

Pathstone Partners specializes in offering a range of services designed to enhance operational efficiency and financial performance:

Non-Labor Solutions: Streamlining laboratory and clinical supplies, purchased services, IT systems, and pharmaceuticals.
Labor Solutions: Optimizing workforce structures, reducing contract labor costs, managing overtime, and enhancing productivity.

By focusing on sustainable, data-driven strategies, Pathstone has continued to be a trusted partner for healthcare organizations navigating an increasingly complex and competitive landscape.

Proven Impact Across the Healthcare Sector

Pathstone Partners has collaborated with over 250 hospitals across the United States, generating more than $500 million in margin improvements. By leveraging a data-driven approach, the firm empowers healthcare leaders to make strategic, informed decisions that enhance operational performance while maintaining high-quality patient care.

Looking Ahead

As Pathstone Partners expands its impact amid a rapidly evolving healthcare landscape, the firm remains committed to transforming healthcare operations through innovative, data-driven solutions. Recognition on the 2025 Inc. 5000 list, along with 92% three-year revenue growth, underscores the dedication of the entire Pathstone team and reinforces its position as a trusted partner and leader in healthcare consulting.

Unlocking Hidden Value in Healthcare Supply Chain: Insights from AHRMM 2025 Spring Summit

Key Takeaways:

Move Beyond Price-Centric Thinking: Joseph Jang challenges the overreliance on price negotiation as the primary strategy for supply chain strategy.
The Multi-Lever Strategy Unlocks Greater Value: Pathstone’s framework enables organizations to apply multiple value levers (standardization, utilization, make vs buy, revenue, and strategic alliance) based on their specific market conditions, operational realities, and strategic priorities.
Dartboard Analogy Reframes Strategy: Rather than aiming for a single “bullseye” solution, organizations can coordinate multiple levers like darts on a board, with each targeting a different opportunity, to create a more resilient, financially optimized supply chain.
Strategy Starts with Context: Unlocking supply chain value begins with context-driven analysis to select the right combination of value levers, each with its own trade-offs, aligned to the organization’s goals, capabilities, and readiness for change.

Unlocking Opportunity at AHRMM: Rethinking Supply Chain Strategy

At the AHRMM 2025 Spring Summit, one of healthcare’s most influential forums for supply chain leaders, Pathstone Partner’s Joseph Jang delivered a powerful session titled Beyond the Surface: Unlocking Hidden Value with a Multi-Lever Strategy. His talk addressed a central challenge many healthcare organizations face: how to drive sustainable financial value without relying solely on pricing tactics.

Joseph challenged the historical approach of leaning on price negotiations as the go-to lever for reducing supply chain costs; in a healthcare environment shaped by constant change and margin pressures, organizations can do more than yield short-term gains without addressing root causes of system inefficiencies. Pathstone’s structured, multi-lever strategy empowers supply chain leaders to drive sustainable value and increase operational performance by using multiple tactics in tandem—not just price.

Going Beyond the Surface: The Dartboard Approach

The traditional view of cost reduction assumes that there is a singular “bullseye” solution—an ideal scenario where the lowest possible price is achieved through brute force negotiation. However, in reality, supply chains are far more dynamic. Joseph reframed this traditional thinking using the dartboard analogy: instead of chasing a single perfect shot, imagine evaluating the entire board—the full landscape of a category. When a multi-value lever strategy is employed, the more levers you have, the more darts you can throw. The goal shifts from hitting the bullseye once to scoring as many points as possible across the board. This approach allows supply chain teams to layer strategies, diversify efforts, and generate a greater cumulative impact—not from one perfect move, but from a well-executed series of targeted actions. In doing so, organizations “score higher” and build not just cost efficiency, but a more resilient and adaptable supply chain.

Why Value Levers Matter: A Framework for Action

Each organization faces unique constraints like budget, capacity, and stakeholder buy-in, and therefore requires flexibility in how it pursues cost savings and efficiency gains. Instead of a one-size-fits-all solution, the multi-lever framework allows teams to take a holistic view of their organization and match specific levers to their context, determine the most viable path forward, and recognize that multiple options may increase the likelihood of success.

To do so, organizations must begin with a thorough analysis of the external market environment by evaluating trends, supplier landscape and competition, pricing and volume history, and contractual shifts. Equally important is engaging with clinical and operational stakeholders through transparent conversations to validate how market data aligns with real-world utilization, pain points, and evolving needs. Then with this combined insight, organizations can identify and quantify opportunities across relevant levers by considering the appropriate market conditions. Strategy selection should reflect the organization’s financial goals, operational constraints, and internal capacity. Ultimately, success depends on structured analysis, stakeholder alignment, and a prioritized path to value that makes sense for your organization.

From One Lever to Many

Each value lever in Pathstone’s framework comes with trade-offs. Some levers are quick wins, while others require more time, alignment, or investment. Below is a simplified breakdown of how these levers work, when to use them, and what organizations should expect:

Value Lever	Typical % Impact	Typical Savings %	Appropriate Market Conditions	Advantages	Disadvantages
Price	50%	5-20%	Non-concentrated markets, Cost shifts, Misaligned pricing, New entrants to market	Fast results, Low disruption, Minimal resistance	Most supplier leverage, Short term impact
Standardization	20%	10-25%	Fragmented use of suppliers, Multiple similar suppliers/products, Expiring patents	Higher leverage, Operational efficiency	Customer pushback, Service disruption risk
Utilization	15%	10-30%	High or under-utilization, Cost tied to usage, Leadership buy-in to reduce utilization	High value, Resilient to supplier price hikes	Difficult to sustain, Behavior change required
Make vs Buy	15%	15-35%	Poor service quality, Internal capability growth, Service model shift	Transformative impact, Aligns with core strengths	High risk and high effort, Requires strong leadership
Revenue	5%	5-15%	Margin decline, Low visibility into revenue collection	Hidden opportunity, Possibility for quick wins	Requires financial alignment, Customers may be sensitive to changes
Strategic Alliance	5%	20-23%	Long-term partners, New services, High investment potential	Shared risk, Long-term value	High effort, Mutual commitment, Disruption risk

Pathstone works with clients to match these levers to their current state, determine which levers are most likely to deliver impact, and prioritize a path forward that reflects their financial goals, internal capabilities, and appetite for change.

Ready to Unlock More Value?

If you’re interested in how a multi-lever strategy could help your organization navigate uncertainty, improve supply chain resilience, and unlock hidden value, Pathstone can help. We offer a tailored evaluation to determine which levers are most appropriate for your organization, whether you need quick wins or are planning a multi-year transformation.

Joseph’s full AHRMM talk, Beyond the Surface: Unlocking Hidden Value with a Multi-Lever Strategy, is available for purchase through the AHRMM 2025 Spring Summit Site.

Watch Full Talk Here.

Why Healthcare Consultants are Valuable for Hospitals

In the intricate world of healthcare, hospitals face the constant challenge of balancing providing exceptional quality patient care, mitigating financial pressures, and matching the pace of medical innovation. Healthcare consultants offer vital support, providing expertise and strategies to navigate financial complexities. Let’s explore why the contributions of a healthcare consulting firm are so valuable to healthcare organizations.

Navigating the Complex Healthcare Landscape

The healthcare industry is dynamic and multifaceted, requiring a deep understanding of regulatory requirements and hospital financial structures. Healthcare consultants bring this specialized knowledge to help navigate these unique challenges. They offer expertise in areas such as:

Financial Management: They help hospitals manage costs effectively, freeing up funds to invest in enhanced patient care and innovation. A consultant might also identify an opportunity to increase revenue on a given service line through more appropriate billing and coding, or may point out an alternate supplier with reduced pricing for existing services.
Operational Efficiency: Consultants assess current clinical and non-clinical workflows and processes, identifying bottlenecks and inefficiencies that hinder productivity.
Technology Integration: Consultants can help hospitals integrate new technologies and optimize use of software modules already owned. They may identify areas to rationalize and eliminate duplicative technology purchases across campuses and departments.

The Imperative of Financial Oversight

Maintaining financial stability is crucial for hospital systems. Healthcare consultants play a key role in ensuring hospitals prevent runaway spend growth. To manage overall system finances, healthcare consultants can work to:

Improve Margins: Consultants work to enhance revenue and reduce expenses across categories, leading to improved financial margins. Margins can be improved through negotiating more favorable supplier contracts. Pathstone Partners has improved margins by over $500 million across the combined client portfolio.
Reduce Operational Costs: By streamlining processes and optimizing resource allocation, consultants identify areas where internal costs can be reduced. Pathstone Partners, for example, focuses on streamlining operations and lowering operational costs for healthcare providers.
Non-Labor Cost Reduction: Consultants also focus on the optimization of non-labor costs through negotiated price reductions with suppliers and reduced utilization of goods and services. Typical target areas for non-labor cost reduction include laboratory supplies, clinical supplies, clinical purchased services, information technology, and pharmacy.
Labor Cost Reduction: Consultants provide labor solutions that help with structure optimization, contract labor, premium pay reduction, and overtime reduction.
Data-Driven Insights: Consultants use data analysis to track spending, identify cost drivers, and provide actionable insights for financial improvement.

Fostering Innovation in Healthcare

Innovation is essential for healthcare to evolve and adapt to changing needs. Healthcare consultants play a role in driving innovation in the following ways:

Implementing New Technologies: Consultants help hospitals identify, select, and implement innovative technology solutions. Target new technologies may automate existing manual tasks and enhance data collection / revenue cycle management. These innovations can enable staff to focus on higher-level responsibilities and ensure clinicians practice at the top of their licensure.
Improving Processes: By redesigning workflows and implementing best practices, consultants enable healthcare providers to embrace innovative approaches to patient care and operational management.
Introducing New Models of Care: Consultants support the adoption of new models of care delivery that can lead to improved patient outcomes and efficiency.

Areas of Focus Consultants work with a variety of healthcare facilities including:

Acute Care Facilities
Academic Health Systems
Regional Health Systems
Pediatric Health Systems
Non-Acute Care Facilities
Community Health Systems

The Value of an Objective Perspective

Healthcare consultants offer an objective perspective that can be invaluable to executives making critical decisions. They can offer an unbiased opinion on:

- Process Analysis: They analyze workflows, identifying areas of improvement that might be overlooked by internal staff.

Supplier Relationships: Consultants can help hospitals challenge long-standing supplier partnerships and ensure they are receiving maximum value from current supplier contracts.
Strategy Development: Consultants work with hospital leadership to develop strategic plans that align with an organization’s goals and values. Their impartial strategic review can set an organization up for the best chance of success.

Learn How Pathstone Partners Can Make an Impact

Healthcare consultants are essential partners for hospital systems, helping them navigate the complexities of healthcare with expertise, objectivity, and a commitment to reducing costs while maintaining quality patient care. By partnering with a healthcare consultant like Pathstone Partners, hospitals can achieve operational excellence and financial stability, and position themselves for a successful future.

Pathstone Partners: Giving Back to Make a Difference in 2024

Our Giving Back Ideology

At Pathstone Partners, the commitment to improving lives goes beyond healthcare consulting. In 2024, the team embraced its Giving Back ideology through meaningful initiatives that supported vulnerable populations and made a positive impact in the community.

Supporting Global Healthcare with Project CURE

This year, Pathstone held its biannual service event with Project CURE in Chicago. The team came together to sort through medical supplies, prepare shipments, and load containers. As the world’s largest distributor of donated medical relief, Project CURE ensures these supplies reach underserved communities in need of quality healthcare. Pathstone’s efforts directly contributed to this vital mission, helping bridge gaps in global healthcare access.

Spreading Holiday Cheer with Little Brothers Friends of the Elderly

Pathstone partnered with Little Brothers Friends of the Elderly, an organization dedicated to reducing loneliness among older adults. The Pathstone team embraced the holiday spirit, spending hours decorating festive paper bags. These beautifully crafted bags will hold goodie items, delivering joy and companionship to seniors during the holiday season.

A Commitment to Community

Through initiatives like these, Pathstone Partners exemplifies its commitment to making a difference, not just in the healthcare industry but also in the broader community. By giving time and effort to meaningful causes, the team demonstrates how collective action can uplift lives and create lasting impact.

Pathstone Partners is proud to partner with organizations like Project CURE and Little Brothers Friends of the Elderly. These collaborations reflect the company’s dedication to creating a better world, one initiative at a time. Stay tuned for more updates on Pathstone’s community involvement in the coming year!

Pathstone @ Preeminent Healthcare Conferences in 2024

A Year Of Industry Leadership

In 2024, Pathstone Partners actively participated in several high-profile conferences and events, sharing insights and connecting with industry leaders. These events reinforced Pathstone’s role as a thought leader in healthcare consulting and showcased the team’s innovative approaches to cost savings and operational efficiency.

AHRMM SME Podcast: Elevating Organizational Change

Managing Partner Joseph Jang joined the AHRMM Subject Matter Expert Podcast to discuss strategies for driving organizational change through cost savings. His expertise illuminated actionable ways healthcare organizations can tackle financial challenges while maintaining high standards of patient care.

Health Connect Partners (HCP): Supply Chain Leadership in Dallas

In May, Senior Directors Dan Ehle and Andy Poorman attended the HCP Hospital Supply Chain Conference in Dallas, Texas. The event provided an excellent platform to exchange ideas with supply chain healthcare professionals, exploring cutting-edge solutions for optimizing supply chain operations.

Becker’s Healthcare National Conference: Insights from Chicago

Pathstone Partners played a key role at the Becker’s Healthcare National Conference in Chicago, Illinois, in March. Joseph Jang and Senior Director Colin King connected with healthcare professionals, sharing expertise on tackling challenges in cost management and operational improvements.

IDN Summit: Sharing Expertise in Orlando

At the IDN Summit & Reverse Expo in April, Joseph Jang presented Pathstone’s groundbreaking knowledge on driving hospital cost savings and improving margins. The event, held in Orlando, Florida, emphasized collaborative strategies for overcoming financial pressures in the healthcare sector.

AHRMM Spring Summit: Insights on Transformation Excellence

In April, Joseph Jang represented Pathstone Partners at the AHRMM Spring Summit on Transformation Excellence. He shared valuable insights on how supply chain teams can elevate cost management efforts, driving impactful results for healthcare organizations.

HCP Hospital Supply Chain: Fall Conference in Las Vegas

Capping off the year, Dan Ehle and Andy Poorman attended the HCP Hospital Supply Chain Conference in Las Vegas. The event offered an incredible opportunity to engage with healthcare supply chain leaders, exploring innovative ideas to tackle the industry’s most pressing challenges.

Showing Innovation In A Growing Field

Pathstone Partners’ active presence at these events underscores their dedication to staying at the forefront of healthcare innovation. By participating in discussions with industry leaders, the Pathstone team continues to refine and expand its solutions to meet the evolving needs of healthcare providers.

As Pathstone Partners reflects on the knowledge and connections gained in 2024, the team looks forward to continued collaboration with industry peers and clients. These conferences not only strengthen Pathstone’s commitment to excellence but also inspire new strategies for reducing costs and optimizing operations in healthcare

One of Inc. Magazine’s Fastest-Growing Private Companies in 2024

Driving Growth Through Dedication

Pathstone Partners, a healthcare consulting firm based in Chicago, Illinois, is proud to announce its recognition by Inc. Magazine as one of the Fastest-Growing Private Companies in the United States for 2024. With an impressive 3-year revenue growth rate of 84%, Pathstone has joined an elite group of organizations celebrated for innovation, impact, and a steadfast commitment to excellence.

Pathstone’s milestone reflects the remarkable achievements of its talented team, which has grown to over 35 professionals dedicated to streamlining operational costs and optimizing healthcare services nationwide. Collaborating with over 250 hospitals across the U.S., Pathstone has achieved more than $500 million in margin improvements, delivering measurable value to healthcare providers of all sizes, from academic health systems to community health organizations.

Transforming Healthcare Operations

Pathstone Partners has built its reputation by offering tailored solutions for both non-labor and labor-related operational challenges, including:

Non-labor services: Streamlining laboratory and clinical supplies, purchased services, IT systems, and pharmaceuticals.
Labor solutions: Optimizing workforce structures, reducing contract labor costs, managing overtime, and enhancing productivity.

By focusing on creating sustainable cost-saving strategies, Pathstone has become a trusted partner for organizations navigating the complexities of the healthcare industry.

A Commitment to Excellence

Earning a spot among the fastest-growing companies is not just a reflection of financial success—it is a recognition of Pathstone’s ability to adapt, innovate, and create meaningful change for its clients. As Pathstone continues to expand its footprint across the United States, its commitment to empowering healthcare providers remains stronger than ever.

Looking Ahead

Being recognized by Inc. Magazine is a significant accomplishment, but for Pathstone Partners, it’s just the beginning. The firm remains dedicated to its mission of helping healthcare organizations reduce costs, optimize operations, and improve patient outcomes.

As Pathstone continues to grow, the company looks forward to building on this momentum, leveraging its expertise to create even greater value for clients and the healthcare industry as a whole. Together, we are building a brighter future for healthcare, one success story at a time.

Identifying Revenue Leakage in Healthcare

What Is Revenue Leakage in Healthcare?

Revenue leakage happens when a healthcare practice gives care but does not receive payment for the services it provided. Leakage can occur in a few ways, such as forgotten accounts receivable or missed appeals deadlines for denied claims. It impacts the revenue cycle, preventing businesses from becoming financially viable.

Revenue leakage often goes unnoticed, but its impact can be detrimental to healthcare practices seeking to grow their business and maintain a high standard of care for their patients. The longer providers take to address points of leakage, the less likely they will be to receive any reimbursement for their services.

What Is the Impact of Revenue Leakage?

Healthcare providers must keep up with expenses to secure customer satisfaction and keep their practice in business. Revenue leakage can lead to lower earnings, putting providers at a disadvantage to their competitors.

A lack of revenue will significantly impact a healthcare facility’s ability to maintain several aspects of its organization, including:

Staff: Healthcare practices require proper resources to maintain a team with all the talents necessary to meet patient needs, ensure smooth processes and promote detailed organization. Revenue leakage can make hiring and retaining a highly skilled workforce challenging.
Quality care: If a provider is experiencing revenue leakage, they may add more services to compensate for the missing revenue. Extra services may decrease a provider’s ability to maintain high-quality care by increasing the likelihood of burnout.
Growth: Steady revenue enables organizations to grow their services and meet the needs of an expanding community. Healthcare practices that experience inconsistent income due to leakage may need help to keep up with growth demands.
Innovation: Cash flow powers innovation, helping providers maintain a competitive edge. A decrease in revenue will prevent businesses from matching a competitor’s offer, leading to a decline in patients.
Business goals: Revenue leakage can inhibit healthcare providers’ ability to meet business goals and objectives. Proper funding is necessary to achieve high standards and goals that drive the business forward.

What Are the Top Causes of Revenue Leakage in Healthcare?

Many forms of leakage are accidental and easy to correct, but they first must be identified. Revenue leakage can come from numerous sources, from issues with a provider’s processes to how patients or payors handle payments.

Some common causes of revenue leakage include:

Inaccurate information: Insufficient or incorrect registration data may result in a denied claim or errors in billing. Any changes in a patient’s personal information may also lead to revenue leakage.
Unverified insurance coverage: Without a proper review of insurance eligibility or approval, procedures and services may be given without adequate coverage. Inconsistencies with insurance coverage may also come from errors in payor-provider agreements, halting the revenue cycle.
Pricing issues: Inadequate pricing may lead to missed revenue opportunities. Prices set too low may undermine services for what they are worth, while prices set too high may drive patients to seek care elsewhere.
Unpaid accounts receivable: Sometimes outstanding bills remain unpaid for too long, going unnoticed or becoming lost. The longer an accounts receivable goes unpaid, the less likely providers are to recover any reimbursement.
Claims denials and underpayments: Inaccurate information can lead to claim denials and underpayments, slowing the revenue cycle for a healthcare provider. Any delay in addressing these issues with insurance companies can lead to missed appeals deadlines and less revenue for services already given.
Unbilled claims: Without a dedicated team to manage claims, practices may experience a variety of problems leading to revenue leakage. Claims require accuracy and consistent follow up ensure all claims are correctly billed.
Scheduling issues: Revenue leakage can also result from missed opportunities to receive revenue. These instances include referred patients who have yet to make an appointment or gaps in scheduling that could have been filled to maximize available time and resources.
Lost patients: Previous patients who seek another provider for care instead of returning are another form of revenue leakage. Healthcare providers miss out on revenue opportunities when patients feel their needs will be met better elsewhere.
Billing errors: Manual input of data may lead to various types of billing errors, decreasing the amount of revenue providers could and should be receiving. Accidental discounts or other inaccuracies in billing will halt the revenue cycle.
Unaccounted costs: Administrative costs can sometimes be miscalculated, resulting in underpayment from patients or payors. Incomplete logs of materials and equipment used during treatment or medical procedures performed may also lead to inaccuracies in how much patients or payors are charged.

These forms of leakage are common and usually unintentional, making it challenging to track and manage potential revenue opportunities. Healthcare practices need to ensure careful follow-up to protect vital revenue streams and prevent any leakage.

Revenue management is essential in the healthcare industry. Consistent cash flow enables providers to establish themselves as trustworthy professionals that provide the high-quality care patients seek. Revenue also allows organizations to experience growth and innovation that helps them keep up with competitors and maintain a talented workforce.

Healthcare practices need to ensure they have the funds to support their services and maintain patient satisfaction. Providers have a thin margin of error to work with, making revenue leakage an essential situation to address and resolve if healthcare practices wish to enjoy the benefits of consistent revenue.