Building Supplier Partnerships for Sustainable Margin Improvement

Given mounting financial pressures and ongoing policy changes, healthcare supply chain leaders remain focused on driving cost savings and margin improvement. In our last article, we explored why benchmarking alone won’t deliver sustainable margin improvement in purchased services. While benchmarking has its place and can highlight immediate opportunities, real and substantial financial benefit requires a broader strategy. The broader strategy should be one that considers standardization, utilization, make-versus-buy decisions, and, most critically, stronger supplier partnerships.

Here, we dive deeper into the last strategy from the toolkit: why developing true supplier and provider partnerships is essential for both accountable margin improvement and service quality.

We’ve seen this approach deliver meaningful results. In a recent engagement, applying the same partnership strategies discussed here, Pathstone helped a client negotiate with two incumbent vendors, generating $1.2M and $700K in savings across separate categories, without damaging relationships or disrupting service. Those outcomes were possible because the focus wasn’t solely on price, but on transparency, shared incentives, and aligned goals.

Transactional vs. Partnership Models

Too often, healthcare purchased services are managed through transactional contracts. The focus is on price, terms are rigid, and transparency is limited. While transactional supplier negotiations can yield quick savings, it rarely lasts and it often creates an adversarial relationship that discourages collaboration.

Strategic partnerships, by contrast, emphasize collaboration, transparency, and mutual accountability. They enable hospitals and suppliers to align incentives, solve problems together, and continuously improve performance.

Below are key differentiators between “traditional” transactional contracting and “forward-thinking” strategic partnership contracting:

The Four Pillars of Effective Partnerships

Building meaningful partnerships takes structure and intentionality. In our experience, the most successful hospital – supplier relationships are anchored by four pillars:

Why Partnerships Drive Sustainable Outcomes

When these elements are in place, health systems achieve stronger, more sustainable outcomes. Partnerships reduce waste, improve predictability, and create incentives for suppliers to bring new ideas forward. They also build resilience by sharing risk and addressing issues collaboratively. The result: consistent margin improvement alongside better service quality for clinicians and patients.

Avoiding Pitfalls

Even partnerships once thought strong can fail if mismanaged. Common challenges include:

One-sided agreements that erode trust.
Contracts too rigid to adapt as service needs change.
Governance structures without accountability or follow-through (at minimum, quarterly business reviews are key).
Using “partnership” as a label without backing it up with action.

Avoiding these mistakes requires commitment from both suppliers and providers to openness, fairness, and accountability.

Looking Forward

Partnerships are not quick fixes: they require investment, time, and trust, but for health systems determined to achieve sustainable margin improvement without sacrificing quality, “Partnership” should be at the forefront of any contract negotiation.

By combining benchmarking insights with true partnerships, health systems can lay the groundwork for a sustainable, accountable future.

Pathstone Partners has extensive experience driving healthcare margin improvement initiatives while allowing clients to maintain strong supplier partnership. We ensure incumbent suppliers are treated fairly during the RFP process, and look for ways in which existing supplier partnerships can be expanded or improved to drive additional value.

Does this approach resonate with your organization?

Keeping in mind the theme of this article, Pathstone prides itself on collaboration and open communication with our partners. As we shape the next part of this series, we see governance and execution as natural next steps, but every organization’s journey is different. What areas would you find most valuable for us to explore next?

Let’s discuss & collaborate!

Rethinking Purchased Services: Why Benchmarking Alone Won’t Deliver Sustainable Margin Improvement

In healthcare supply chain, benchmarking is often treated as the default starting point for purchased services cost reduction: compare your rates to a national dataset, flag the categories where you’re paying more, and then push vendors to match “market pricing.” On paper, this seems logical, but in practice, benchmarking alone often falls short, especially when it comes to the complexity and variability of purchased services.

Why Benchmarking Isn’t Enough

Purchased services are rarely “apples to apples” in any industry, and this is especially true in healthcare. Factors such as regional supplier availability, organizational size and scale, and the quality standards or service levels that leadership expects can all significantly influence pricing. A rate that looks “high” compared to a benchmark might actually be completely reasonable once these, and other, variables are factored in.

We see this challenge play out frequently with our clients. For example, a system that requires quick response times from its clinical engineering services partner, or expanded coverage for rural hospitals, may pay more than peers – and for good reason. These higher costs often reflect intentional leadership choices to protect service quality or operational flexibility. Benchmarking alone doesn’t capture these nuances, and when organizations chase a lower “market rate” without that context, they risk eroding performance or compromising patient care.

In this same example, clinical engineering spend could be evaluated more holistically. While benchmarking offers a snapshot of the market, a stronger approach might involve optimizing service coverage levels, analyzing technician dispatch patterns, or exploring regional partnerships with other rural entities to preserve quality while improving efficiency.

The Problem with a Price-First Mindset

When benchmarking becomes the sole driver of negotiation, the conversation quickly narrows to cost, often at the expense of value. This price-first mindset can obscure bigger opportunities, such as aligning service volumes with actual demand, consolidating fragmented vendors, or updating outdated scopes of work.

In many of our engagements, we’ve seen previous benchmarking efforts deliver short-term “wins” that erode over time, or worse, create downstream effects that impact clinical outcomes and vendor relationships. These downstream effects can take many forms. For instance, locking in a lower maintenance rate without updating scope can lead to costly repairs for newer equipment. Similarly, reducing linen service frequency to save on fees can cause shortages, emergency deliveries, and staff frustration. Ultimately, focusing solely on price can sacrifice long-term value and operational stability for the illusion of quick savings.

A Broader Approach to Unlock Value

Purchased services optimization requires a broader, more strategic approach—one that moves beyond comparing rates to national averages. At Pathstone, we help organizations evaluate a wider set of levers to unlock both financial and operational value. These levers include:

Standardization – Aligning vendors, terms and scopes across facilities to reduce variation and strengthen organizational negotiating leverage within the vendor relationship.
Utilization Management – Identifying overuse or inefficiencies by reviewing actual utilization of goods and services.
Make vs. Buy Decisions – Evaluating when in-house delivery or outsourcing services produce better value and clinical outcomes.
Revenue Opportunities – Identifying services that can be billed or reimbursed, or areas where revenue potential exists.
Strategic Supplier Partnerships – Building relationships that foster innovation and long-term value creation.

Each lever has trade-offs and requires alignment across stakeholders, but when applied strategically and thoughtfully, they can deliver far greater, and more sustainable, results than benchmarking alone. For a deeper look at when and how to deploy these value levers, see Unlocking Hidden Value in Healthcare Supply Chain: Insights from AHRMM 2025 Spring Summit.

Putting Context Before Comparison

Every health system is different. What works for a large academic center may not be right for a community hospital or rural network. That’s why we begin each engagement by understanding of organizational goals and operational realities:

What service levels are truly non-negotiable?
Where are there redundancies or inefficiencies?
Are current suppliers structured to scale with future needs?

By pairing operational insight with data analysis, we build a custom roadmap that reflects not just “what others are paying,” but what makes sense for your organization.

Final Thoughts

Benchmarking is a helpful reference point, but it’s not a strategy. In purchased services, context and alignment matter just as much as cost.

At Pathstone, we help healthcare organizations identify the right mix of improvement levers, whether that means quick wins or long-term transformation. If benchmarking is the only tool being used, your organization may be overlooking more meaningful and sustainable value.

Let’s connect to discuss what this could look like for your organization.

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.

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.

Quality	Client 1	Client 2	Client 3
Baseline	6 incumbent vendors, High use of in-person interpretation with certified interpreters, Administrative burden due to fragmented vendor landscape, Strict compliance with local interpreting laws	4 incumbent vendors, Rising demand for language services with further increases projected, In-house interpreters primarily utilized for in-person services	8 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 Employed	Price, Standardization	Price, Standardization	Price, Standardization
Most Common Languages (Not including Spanish)	Russian, Vietnamese, Arabic, ASL	Arabic, Dari, Amharic, ASL	Arabic, 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 Attributes	Longstanding vendor relationships made transition politically and operationally sensitive, Client risk averse about offshoring and Artificial Intelligence	2/3 service modalities were transitioned (audio and video); in-person services remained with incumbents, Telehealth and written translation not included in scope of engagement	Previous vendor standardization efforts were interrupted by COVID-19 which altered industry dynamics including suppliers’ reluctance to provide on-site interpretation citing inadequate compensation
Key Takeaways	Even 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 manages	Clearly 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-based	Standardizing 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

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.
Vendor Education Was Key: Initially skeptical executives embraced new models once they understood the operational gains and scalability.
Trust-Building Early Helped Later: Staff buy-in was secured through early surveys and needs assessments, leading to smoother implementation.
Balanced Vendor Models Outperformed: Combining in-house and vendor-based services allowed flexibility and optimized resource use.
Future-Proofing for Demographics: Attention to rare language trends helped avoid gaps and enabled planning for future demand.
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.

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.

Importance of Environmental Services (EVS) in Healthcare

Health Care Financial Consultant Environmental Services in Healthcare

What Are Environmental Services in Healthcare?

A key challenge that health systems face involves healing patients in an environment in which many illnesses are highly transmissible. Environmental services (EVS), which is defined as all cleaning services that take place in healthcare settings, performs the vital service of protecting patients, visitors, and staff from infectious pathogens. While proper cleaning of clinical spaces has a direct impact on patient health outcomes, the perception of clean in non-clinical areas significantly influences patient satisfaction scores.

Why Are Environmental Services Important in Hospitals?

Patient outcomes are directly influenced by the performance of EVS while in the hospital. Hospital-acquired infections (HAIs) affect roughly 1 in 31 hospital patients and 1 in 43 nursing home residents in the United States, their impact becoming more pronounced with the rise of antibiotic-resistant bacteria.

Further, HAIs represent a significant expense to hospitals at over $9.8B annually. HAIs represent a considerable challenge to EVS systems, as not all pathogens can be eliminated using the same cleaners and methods. C. diff, a common hospital-acquired bacterium, forms spores on surfaces and cannot be sterilized with bleach alone. In order for EVS to minimize the impact of HAIs on the health system, EVS staff must understand the nuances of cleaning patient care areas relative to non-hospital janitorial work.

Environmental services personnel are integral to the success of the health systems they serve because of the effect their work has on patient satisfaction. The Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) survey is issued to recent hospital patients nationwide as a means to evaluate and compare hospital performance across systems. Included in HCAHPS are questions related to the quality of the hospital environment, which includes how patients perceive the cleanliness of the hospital. As a result, EVS must ensure that both clinical and non-clinical areas are pathogen free to prevent HAI transmission and appear clean to the naked eye to bolster HCAHPS scores.

What is the Role of EVS Staff in Hospitals?

Efficiency and employee education are key factors that influence the success of an EVS department. EVS staff must be efficient in cleaning rooms post discharge to make room for new admissions, but too much emphasis placed on turnaround time may result in insufficient disinfection.

Further, employees must understand their role in combating HAIs not only for the benefit of patient outcomes and satisfaction, but also to mitigate their financial impact on the system. A successful EVS department is an essential component of a successful health system, as EVS plays a key role in helping hospitals achieve their primary objective of treating patients and preventing infection.

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.

Reducing Bulk Oxygen Spend Through Consolidation

Health Care Financial Consultant Bulk Oxygen

Pathstone was able to reduce the overall annual cost of bulk oxygen by nearly 25%.

A three-hospital Academic Medical Center experiencing financial difficulties identified current agreements that were coming up for expiration. Through this search, it was found that there were multiple agreements for bulk oxygen across each individual hospital location. One of these agreements was up for renewal offering an opportunity to address both contract consolidation and pricing.

Bulk oxygen is unique as it has a facilities function managing the physical storage and delivery of gas and a clinical function involving respiratory therapy. Collaboration between these groups would be necessary for the decision-making process. Through discussion with health system leadership, a cross-functional team was developed to address current and future bulk oxygen strategies. After aligning on the pros and cons of request for proposal (RFP) or price negotiation strategies, it was decided to issue a request for quote (RFQ) to several vendors operating in the region including the incumbent.

After receiving price proposals, each was evaluated, and a new vendor had proposed more competitive pricing than the incumbent by nearly 25%. Typically, this would be an easy change for other product types, however, the storage tanks for this type of gas were owned by the incumbent supplier and attempting to make a change would involve removal of current tanks, installation of new tanks, and other activities which would cause some level of disruption and an overall complex implementation process. The team sought to seek price relief with the current supplier rather than engage in a replacement initiative.

Leveraging the more competitive pricing proposal, Pathstone conducted outreach to the incumbent supplier requesting the pricing per cubic foot to be reduced to the more competitive rate. In addition, Pathstone requested that environmental fees and delivery fees be further reduced in kind. This was incentivized through the competitive process and by allowing the vendor to consolidate three separate agreements with various termination dates under one new 5-year contract.

Through consolidation and pricing reductions, the team was able to reduce the overall annual cost of bulk oxygen by nearly 25% while avoiding the painful process of changing suppliers and all the physical implementation steps that route would entail. Also, by locking in rates for the next 5 years, the organization can be assured they will receive the best available price for the foreseeable future. Additionally, through the contracting process, Pathstone was able to negotiate a 60-day termination clause for the health system allowing for flexibility to renegotiate rates if the macro conditions around the bulk oxygen price would indicate lower prices may be achieved in the future.

Overall, the client was extremely pleased with the result of this initiative as it addressed multiple concerns by utilizing several value levers with little to no disruption to the day-to-day operations.

Reducing Total Courier Spend for Health Systems

Health Care Financial Consultant Courier Service

The final configuration of internal and external resources and scheduled routes versus on-demand services resulted in a 22% overall reduction in cost.

An academic medical center and health system had a fragmented current state of Courier Services, with a mix of multiple external providers and internal staff. Pathstone partnered with the organization with a goal to reduce total courier spend through pricing and utilization while maintaining high quality services.

Pathstone set out with 4 primary guiding questions:

How much is the client currently spending annually on courier services?
Is current outsourced route and STAT/On-Demand pricing market competitive?
Is current internal route and STAT/On-Demand pricing market competitive?
Are there opportunities for increased efficiencies by consolidated all courier services to one supplier?

To answer these questions, Pathstone’s non-clinical purchase service consultants collected data from both the external suppliers and internal teams to develop a comprehensive picture of the current state. External data included detailed route information, on-demand call volumes, and associated costs. Internal data components included labor costs (salary and benefits/overhead) and non-labor costs (e.g. vehicles, maintenance, fuel).

Pathstone found the internal couriers did not have the infrastructure, such as GPS tracking, to be as effective as external providers and capital holds limited ability to acquire new vehicles, resulting in running through to end of life.

Ultimately, the team decided to move forward with a competitive request for proposal (RFP) process for all courier services activities. Development of the RFP required understanding the materials being transported to ensure vendors have the appropriate qualifications. For example, Department of Transportation certification is needed if couriers are used to transfer hazardous materials.

Supplier RFP responses were evaluated based on vendor qualifications, compliance with bid requirements, service level agreement (SLA) proposals, and financial proposals/route configurations.

The supplier proposals led to strategic discussions around the optimal mix of STAT/On-Demand calls versus scheduled routes to manage end user needs and appropriate expectations for the services offered by the courier program.

One incumbent external supplier presented the strongest overall proposal and end users confirmed their satisfaction with their services in the past. This supplier was selected to serve as the primary supplier, with all other external business and a portion of internal business to be transitioned under their support.

Pathstone also learned this was an area in which end users were leveraging courier services for an enhanced scope of activities, such as running to the local grocery store to pick up cakes for employee birthdays. While this may not be traditional, it was deemed important to the client team for the initial transition phase and kept within scope to maintain that supportive culture. The client opted to retain a subset of internal resources to complete these more niche on-demand activities. The remaining internal resources were able to be reassigned to other internal operational activities.

The final configuration of internal and external resources and scheduled routes versus on-demand services resulted in a 22% overall reduction in cost while maintaining high-service levels.

Service Models to Improve Lithotripsy Contracts

Health Care Financial Consultant Lithotripsy

A large health system on the West Coast spends $1M annually on outsourced lithotripsy and laser services.

A large health system on the West Coast spends $1M annually on outsourced lithotripsy and laser services. Ten unique suppliers are utilized to serve 11 different markets and six of the markets leverage multiple vendors. The contracts in place with lithotripsy and laser providers have a variety of pricing and service models. Fully outsourced model with usage-based pricing structure and equipment lease service model with tiered pricing structure and volume commitments.

The health system was experiencing three major challenges sourcing lithotripsy services:

Physician-Ownership: Urologists have ties to local lithotripsy services providers, which may result in significant sensitivities and increased pushback from clinical stakeholders.
Remote Locations: Many of the client’s hospitals are located in remote areas making access to labor and standardization efforts more challenging
Laser Services: Some lithotripsy vendors bundle laser services into lithotripsy contracts and others do not; this can complicate true conversion opportunities

Pathstone launched initiative efforts by reaching out and holding meetings with the health system’s Chief Nursing Officers and Chief Finance Officers to identify the appropriate stakeholders to join the lithotripsy services project work team.

After meeting with work teams to confirm our understanding of lithotripsy services at each hospital, Pathstone issued a detailed data request to all lithotripsy and laser vendors servicing the health system. The pricing and utilization data collected was then analyzed to generate meaningful insights and to build a business case highlighting significant discrepancies across the health system.

The project work team selected to issue a competitive request for proposal (RFP) to all incumbent providers to test the market and to ensure all hospitals were receiving best-in-class pricing and service levels. Pathstone reviewed and consolidated supplier proposals into a presentation that empowered stakeholders to make data-driven decisions on the future state of lithotripsy services at his or her facility.

Pathstone’s clinical purchased service consultants achieved value for the health system in two ways. First, negotiating with incumbent providers to achieve more competitive pricing and increased service levels. Second, transitioning low-volume hospitals from contracts where pricing was contingent on volume commitments to contracts with usage-based pricing models.

Due to geographic location, supplier proposals revealed that standardization and consolidation efforts would not yield significant financial value for the health system.

Standardizing Language Services Across a Large Health System

female asian translator working working with smiling businesswoman

Enhancements in service quality, the selected supplier was projected to drive a 36% reduction in annual spend.

The two financial components to a remote language or interpretations services program are the services and the hardware used for remote interpretation. Services are typically billed on a per minute basis while hardware can be provided by the interpretation services provider or purchased outright by the hospital. Our client had multiple providers across the health system with various financial models in place. One supplier was providing hardware in exchange for a commitment to a monthly minimum amount of interpretation minutes, which was typically higher than the actual volumes needed by the system resulting in significantly increased costs

Our clinical purchased service consultants formed a system-wide, cross functional evaluation committee including representation from end users, risk, IT, finance, and supply chain to participate in a competitive request for proposal process. Suppliers providing services across the system were evaluated for organizational capability, interpretation quality, service delivery, and financial model.

The evaluation committee selected the supplier that offered the most competitive comprehensive proposal. In addition to enhancements in service quality, the selected supplier was projected to drive a 36% reduction in annual spend by eliminating monthly minimums and reducing service rates.

Supply Chain’s Role in Compliance with IONM Services

Health Care Financial Consultant Neuromonitoring

The team achieved increased insurance limits and implemented $150K or 15% cost savings.

A multi-hospital health system did not have visibility into system Intraoperative Neuromonitoring (IONM) Services. Our cursory look identified the following:

Multiple vendors providing similar services
Delivery models outside recommended clinical scope of practice
Several contentious legal cases on vendor billing practices occurring at a national level

Pathstone’s clinical supplies consultants spearheaded a deep-dive review of supplier relationships, delivery models, and industry best practices. The team synthesized all relevant information into three primary opportunities:

Compliance: all IONM cases must include a monitoring technologist (IONM-T) and supervising professional (IONM-P) with appropriate hospital credentialing
Quality: IONM suppliers must carry appropriate general and products liability given litigation risk
Cost: IONM suppliers must provide equitable pricing given hospital geography and case load

Pathstone formed a cross-functional team of C-Suite, Physician, Supply Chain, and Credentialing stakeholders to triage opportunities in an appropriate manner:

Pathstone partnered with a physician team to develop a system standard delivery model in compliance with The American Society of Neurophysiological Monitoring. Pathstone then worked closely with Medical Staff Services to operationalize the delivery model and credential all vendor IONM-Ps at relevant hospitals
Pathstone simultaneously conducted an RFP process to address quality and price variation and strengthen contractual terms around fair patient billing. The team achieved increased insurance limits and implemented $150K or 15% cost savings.

Quality and Cost in Dialysis Services

Pathstone formed a system-wide, cross-functional evaluation committee including representation from all executives on the premise.

A large and growing west coast IDN utilizes seven (7) vendors with eleven (11) separate agreements across eleven (11) hospitals.

Vendor relationships vary from small and local players to market giants DaVita and Fresenius and vendor satisfaction from high (joint venture) to low (exploring insourcing). There is a desire to work as one health system and standardize operations but no visibility into service quality and cost competitiveness at the market level.

Pathstone formed a system-wide, cross-functional evaluation committee including representation from executives (Nursing, Medicine, Finance, and Operations) and RN leadership on the premise that Pathstone’s clinical supplies consulting team would review market competitiveness and the team would drive all decision-making. The Pathstone team built a business case highlighting significant service-level and pricing discrepancies and the team decided to conduct a competitive Request for Proposal (RFP) process. Incumbent suppliers were evaluated for organizational capability, service quality, staffing model, and financial benefit.

Pathstone was able to secure market-competitive rates, eliminate an outlier contract penalty, and navigate a vendor change to achieve $1.2M in recurring annual cost savings. Hospitals then leveraged the savings to buy capital equipment.

The evaluation committee selected a supplier mix that offered the best combination of service quality and cost. A key outcome included formalizing a detailed set of service level metrics for vendors to track and report on a quarterly basis.