#pathstonepartners

Name: Mehak Monga

Position: Intern

Where do you go to school and how did you decide your major?

I go to Northwestern University and am majoring in Economics with minors in Business Institutions and Global Health. I came into college with more of a business-centric mindset and wanted to study Economics to be able to not only grasp the concepts that encompass the way the world is changing, but also form my own opinions and judgements of those variables. The web of variables like politics and international affairs that coexist in the field is fascinating to me. At the micro level, I want to understand the internal mechanisms, organizational structures and catalysts that result in corporate success.

Why are you interested in healthcare consulting?

I’ve spent a huge part of the last few years discovering new ways of helping people. While having explored many different professional opportunities, the one common denominator for me was being able to create a positive impact in people’s lives, and healthcare does exactly that. Healthcare consulting exists precisely at the crossroads of my two passions – working with businesses to improve efficiency and making sure that those businesses are improving society in one way or another.

What stood out to you most about Pathstone during the interviewing process? What made you interested in doing an internship here?

Pathstone is unique in its values-driven approach to consulting. During both the interview process and in conversations with the team after onboarding, I’ve become aware of the importance the company places on always doing the right thing. The team here shares many of the values I have developed over the years and is passionate about helping others. Aside from the core values and integrity that resonate with me, the smaller company structure also provides unparalleled exposure, opportunities to work closely with both the team and clients, and develop professional skills that can be applied to any career. I am able to understand the implications of my work, see material results and go home each day with a sense of accomplishment.  

What are you hoping to get out of this internship?

By the end of these 10 weeks, I hope to have contributed to and gained from the team in equal amount. Aside from developing my technical skills and attention to detail, and learning about the healthcare and pharmaceutical spaces, I want to be able to think strategically and innovatively about potential new initiatives. I also hope to gain exposure to client-facing work and share my analyses and research with them to develop my communication and presentation skills. Lastly, I want to learn about client relationship management -- something that Pathstone prides itself on.

Now that you’ve completed your first week on the job, what is the most challenging adjustment from college to work life?

For one, the daily commute from Evanston can be quite taxing, and the rigidity in timings can be tough at times, but the office here is beautiful with a really encouraging, welcoming environment. Other than logistical hurdles, it can be tough to understand the terms that are used in meetings and client calls at first, but this is also not too difficult if you ask questions and Google basic jargon. It has been just a week, but I’m already starting to wrap my head around the industry mechanisms, the supply chain, various stakeholders and their relationships with one another, as well as innovative ways to create a lasting impact on clients.

What are you looking forward to doing most in Chicago this summer?

Northwestern’s campus is North of Chicago, in Evanston, which is a 30-40 minute drive away. Over the last 3 years of college, I’ve had the chance to explore the city and its incredible food scene. What I’m most looking forward to, however, is spending the summer in the city! I’ve never been around late enough in the school year to be able to experience the beautiful weather, go to the beaches and just make the most of how vibrant this city can (and is proving to) be when it’s not facing a polar vortex.

What is something you’re passionate about, and why?

I want to make a positive difference in the world both through my career and outside of it. I love helping people, giving back to society and making a difference in people’s lives. I hope to take full advantage of my privilege and resources to do exactly that moving forward.

What’s a fun fact about yourself that people might not know about you?

Name: Colin King Position: Manager

Where did you go to School and how did you decide your major?

I went to Notre Dame and majored in business consulting and theology – a balance of a practical skill set and something I enjoy.

You have a unique career path – can you tell me a little more about it?

I’ve had the opportunity to join Pathstone twice – first as a recent college graduate and second after seeing other work environments. I initially joined Pathstone because of the challenging interview process and the authenticity of the team and rejoined because of the strong team, work/life balance, and intriguing work.

Why healthcare consulting?

Our work is the right balance of strategy (critical, creative, out-of-the-box thinking) and implementation (driving outcomes from start-to-finish and building day-to-day relationships with clients). It’s rewarding to lead healthcare providers toward lightbulb moments regarding their processes and bottom line.

What’s something that happened that can only happen here at Pathstone?

The college football banter – Go Irish! – there’s a palpable sense of team spirit here. A couple years ago a coworker who was a Michigan alumnus brought a UM flag during white-elephant gift exchange, hoping I would choose it, and, as you can see in the picture above, I selected his gift.

What do you think makes a good manager?

Good managers put others first. They must be intentional about team members’ growth. Several managers at Pathstone have inspired me to grow as a leader – they have invested in my growth and success in self-giving manner.

What would you recommend to someone who is interested in consulting?

Talk to as many people in consulting and other jobs to learn what drives/motivates them and see if that aligns with your interests!

What is one thing you’re really proud of, but doesn’t really matter to anyone else?

I won an amateur boxing tournament in college! A close friend and mentor of mine told me that you really learn about your character/resiliency when you take a punch in a boxing ring, so I joined ND’s intramural boxing club, Bengal Bouts, and trained for 2 years. The club’s motto is “Strong bodies fight, that weak bodies may be nourished,” and raises $100K+ annually for Holy Cross missions in Bangladesh.

What would be your last meal on earth?

A cheeseburger or the duck fried rice at Duck Duck Goat – it’s a roll of the dice.

If you had a weekend in Chicago, what would you recommend to do?

Attend a street festival like Taste of Randolph, grab a beer at a local brewery like Half Acre, and eat at one of many of Chicago’s great restaurants (especially those by our office the West Loop!).

Follow Colin on Linkedin

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Co-Authored by Joanna Guziak and Joseph Jang

Pathstone Partners is a management consulting firm that collaborates with hospital providers to identify and implement sustainable non-labor financial benefit. In the past 5 years Pathstone has partnered with over 100+ hospitals across 32 states delivering $100M+ annual benefit for our clients.

At this point, Pathstone Partners has covered all the topics in our value lever series. In this last article we will round out the series and provide a framework to help health systems prioritize and select the appropriate value levers for any given category.

Pathstone believes taking a holistic approach will allow health systems to maximize and sustain value over the short and long-term. To achieve this, Pathstone recommends health systems take a three-prong approach (“Value Lever Prioritization”) to prioritize and select value levers for the given product or service category:

Step 1: Understand Organizational Factors

The initial step in prioritizing value levers is to understand and align with internal priorities and capabilities. Understanding your organization’s specific goals, urgencies, and skills will help determine the value levers you will prioritize. Below are key characteristics to review:

1)  Goals & Objectives: What is your organization striving to achieve?

Below are common goals with Pathstone clients:

a)  Improved profitability (Increased Revenue / Reduction in Costs b) Enhanced quality of products/services c) Standardization or reduction in variation

Many organizations may even have more specific, focused goals such as:

a)  Achieve X% profit margin b)  Reduce readmission rates from hospital acquired infections by X%

2)  Category Addressed: Which product or service category are you trying to impact? How does that category appear across the system?

Often, variation in the current state of a category across a hospital system can impact the value levers that can be explored. For example, let’s assume you are evaluating the make vs. buy value lever for dialysis services that are currently under a mix of in-house and outsourced models. You are analyzing the possibility of fully outsourcing or in-sourcing. Due to the comprehensive nature of the make vs. buy analysis, the ability exists to roll in evaluations of the pricing and standardization value levers within that same analysis. However, whether or not a “one size fits all” approach is appropriate will need to be closely considered in these circumstances due to the unique factors of each hospital.

3) Timeline: What timeline do you have to achieve these goals? Are there urgent deadlines in place, such as budgeting for a new fiscal year, that need to be kept in mind?

Allowing extra time for unforeseen circumstances should be considered because unexpected events often occur during the course of a project – a resource issue, a stakeholder request, a delay, etc.

4) Resources: What level of resources do you have available to support the initiative? Furthermore, what available knowledge and skill sets does your team possess to be successful?

It’s critical to try and understand if you have any resource gaps up front so that you can mitigate those impacts. Projects often require skills and additional resources that can be acquired via contract work or third-party consulting firms. Successfully incorporating these resources into projects can drive significant value worth the investment.

Step 2: Prioritize and Select Value Levers

The next step in prioritizing value levers is understanding the characteristics of each and alignment with the organizational priorities. The characteristics typically include:

Amount of Value Delivered

Level of Complexity

Timeline to Complete

Resources Required

Below is an exhibit that reflects the relative characteristics of each value lever. While each value lever’s characteristics may vary depending on the category addressed, the exhibit provides a general guideline of what to expect when prioritizing these levers.

In the illustration below, it’s important to note that as each value lever gets farther from the origin the more transformative in nature it is. This means that the benefit achieved from those transformation value levers often addresses the benefit associated with the value levers that come before it (i.e. Strategic Alliances often address the benefit associated with Pricing and/or Utilization).

Value Lever Characteristics

Step 3: Develop Initiative Proposals

Once you have evaluated the categories in terms of the value levers, it’s now time to synthesize the key information evaluated into an initiative proposal. Documenting the key elements of the initiative will help leadership swiftly approve and further prioritize initiatives across the organization.

Below are a few examples of information that are typically included in an initiative proposal:

Initiative Overview (including background and proposed strategy)

Estimated Savings Potential (including expense reductions, capital investments, revenue potential, etc.)

Implementation Milestones (including high-level steps that need to occur to realize savings)

Key Stakeholders (internal and/or external individuals that have a vested interest in the initiative)

Key Obstacles (including any issues we might anticipate that may hinder success)

Leadership teams will often look at the initiative proposals through the lens of “what are the current and future priorities of the organization”, and “do they align?” This is just one of the reasons why understanding the organizational goals and priorities at the start of the process is important, and will be further examined in our next series.

Value Lever Prioritization Summary

Evaluating all the value levers provides a comprehensive approach to cost savings. Furthermore, the results achieved through the value lever methodology promote sustainable benefit for your organization.

Below is a visualization outlining the three-pronged approach for “Value Lever Prioritization” and a high-level case study utilizing this approach with our client.

Value Lever Prioritization

Case Study

In our next series, we will look at the continuation of the framework which includes the prioritization of initiatives on an organizational level. The “Initiative Prioritization” approach will examine how to prioritize initiative proposals across various value levers and categories into a system-wide project plan.

Co-Authored by Joanna Guziak and Joseph Jang

Pathstone Partners is a management consulting firm that collaborates with hospital providers to identify and implement sustainable non-labor financial benefit. In the past five years Pathstone has partnered with over 100+ hospitals across 32 states delivering $100M+ annual benefit for our clients.

Previously, we discussed how our clients can tap into additional financial benefit by evaluating revenue opportunities. In this edition of the series, we will be diving into value that can be generated through strategic alliances.

What is a Strategic Alliance?

A strategic alliance can be defined as a form of mutually beneficial relationship or partnership between two parties focused on collaboration that achieves results for both organizations they wouldn’t be able to realize on their own. Strategic alliances are an increasing trend in the healthcare industry as a mechanism to achieve cost reduction and/or increased revenue. There is a broad spectrum of strategic alliances ranging from formal arrangements, such as joint ventures to more loosely affiliated collaborations.

Strategic alliances can offer the following benefits to an organization:

Incremental cost savings or revenue

Increased sustainability of long-term cost savings

Increased access to additional resources (knowledge, capital, etc.)

Expanded reach in the community through new partnerships

Key Opportunity Indicators:

1) Minimal Investment in Outpatient Services:  The healthcare industry is rapidly changing on a local level with competing hospitals establishing strategic relationships around the community, which can significantly increase competition for patients. With an on-going shift towards outpatient care in the market, hospitals continue to evaluate opportunities to increase outpatient offerings. Hospitals are often turning to suppliers for partnership opportunities to increase patient reach

Client Example:  Dialysis services is an example where we see hospitals partner with the external service providers in joint venture arrangements with a goal of expanding offerings in the local market. Becker’s Hospital Review released an article, Joint ventures and collaborations across healthcare services (August 2017), which reported hospitals are increasingly turning to dialysis services as an area with clear benefits to hospital and supplier strategic partnerships. Since managing costs and the complexity of care for dialysis patients is difficult on both an inpatient and outpatient basis, it’s not a surprise that we see the industry leaders like DaVita and Fresenius partnering with hospitals across the country in joint ventures to deliver care. Negotiating such arrangements with competitive rates for dialysis inpatient services while also delivering competitive revenue share for the hospital through the joint venture is very challenging.

2) Strong Existing Supplier Relationship: Many hospitals have been successful capitalizing on a history of strong relationships with their suppliers by taking the relationship to the next level through creative new partnerships that deliver greater value for both organizations.

Client Example: Pathstone has encountered hospitals that have formed joint ventures with air ambulance providers that have been long-time service providers for those hospitals. In a service category such as this, hospitals have limited supplier choices in the market due to significant supplier consolidation over the years. When the two parties embark on a joint venture, one common goal may be the expansion of medical services to under-served areas that either the hospital or air ambulance company is challenged to serve on their own. By partnering, both organizations benefit from expanded market reach.

3) Merger and Acquisition (M&A) is Not an Option: Although M&A activity in the healthcare industry is occurring at an increasing rate, some hospitals are seeking alternatives that can still deliver the financial and operational efficiencies necessary to survive in the current market. M&A transactions are often very long, complex ordeals that come with heavy scrutiny of potential competitive implications, which we believe is one reason there is an increase in strategic alliances.

Client Example: Regional or local Purchasing alliances are becoming more popular across the country as an enhancement to hospital centric or national GPO purchasing. This is one example of hospital collaborations that can be achieved without formal mergers or acquisitions.

Key Success Factors:

1)  Align Goals: Ensuring a “win-win” mindset for all parties involved in an alliance is no easy feat. At the outset, the alliance must agree on their mutual purpose to keep everyone committed on a common goal and consistently seeking out the synergies for both parties, while still pursuing their individual organization’s goals. Many alliances will develop a charter and detailed workplans to keep on track. Sharing institutional knowledge and best practices can be invaluable to help each party achieve their mutual and individual goals.

2) Manage Conflict of Interest: Although collaboration in the healthcare industry is commonplace today, limitations do exist regarding those that can collaborate and the degree to which they collaborate. This is especially true for physician-hospital relationships because of Stark Law, where potential conflicts of interests can carry the threat of litigation and hefty fines. What makes matters more complicated is that Stark Law does lack clarity which is why you should pay careful attention to any relationships that may involve physicians. For example, we sometimes encounter hospital employed nephrologists that enter into partnerships to open dialysis outpatient clinics in the same town. On top of this, the hospital that employs the nephrologist sometimes engages in a joint venture with the nephrologist partnership for the dialysis outpatient clinic. This is especially complex and needs to be managed appropriately because the situation runs the risk of having business interests interfere with patient recommendations for outpatient dialysis services.

3)      Maintain Effective Leadership:  The right leadership is a key success factor for strategic alliances. Without this the best designed and well-intentioned alliance will often fail. Collaborative leadership teams that effectively utilize Steering Committees to manage key decisions should be required to help work out any issues and review progress towards the mutual goals.

Pathstone has now covered all the value levers and will wrap up the series with our last article. In this final article, Pathstone will provide a framework to help health systems prioritize and select the appropriate value levers for any given category.

Co-Authored by Joanna Guziak and Joseph Jang

Pathstone Partners is a management consulting firm that collaborates with hospital providers to identify and implement sustainable non-labor financial benefit. In the past five years Pathstone has partnered with over 100+ hospitals across 32 states delivering $100M+ annual benefit for our clients.

In our previous article, Pathstone covered the significant value that can be uncovered by evaluating make vs. buy opportunities. In this edition of the series, Pathstone will discuss a value lever that is often overlooked in the supply chain realm, revenue.

What is Revenue?

This value lever can be defined as any revenue, rebate or reimbursement generated from a purchased product or service. Revenue is often overlooked by supply chain due to the department’s traditional focus on reducing costs. However, many products and services provided by suppliers can play a significant role in generating revenue, rebates or reimbursements for the health system.

Key benefits of this value lever include:

Financial benefits ranging 5-25% depending on the category

Increased revenue and reimbursement when cost reduction opportunities are limited

Enhanced supplier or contract rebates

Creation of funding to upgrade or expand products and services

Key Opportunity Indicators:

1) Limited Discussion on Any Supply Chain Driven Revenue Opportunities: If your organization is not recognizing revenue as a value lever within supply chain, this may be one of the first signs of opportunity. Once spend categories with potential revenue opportunities are identified, negotiations with suppliers in those categories should include conversations around incorporating revenue or rebates into new arrangements.

Client Example: Pathstone worked with a client that received a cost reduction proposal from its release of information (ROI) provider. Though the client was eager to accept the offer, Pathstone understood that the supplier was funding the client’s program with revenue associated with billable patient requests that were not visible to the client. By analyzing program revenues, Pathstone was able to help the client negotiate a revenue share agreement that generated 30% in additional financial benefit to the organization.

2) Lower Supplier Prices Charged Compared to Market Rates: If supplier prices charged for an outsourced service are lower than what the market typically commands, this is another indication of the potential for hidden revenue opportunities. If the organization’s prices are well below market averages, it may be a sign that the vendor is capturing significant revenue to offset costs of the program being delivered to the client. Further investigation may uncover opportunity for the client to at least share in that revenue. Auxiliary services such as parking and cafeteria are common candidates for these types of evaluations and opportunities.

3) Shrinking Revenue from Existing Programs: If volume for a revenue generating product or service is decreasing, this may signal the current program needs to be modified to align with the current environment. Decreasing volumes may be caused by unexpected factors such as changes in supplier pricing, evolving market forces impacting demand or new supplier/end-user resistance.

Client Example:  Pathstone evaluated a health system’s accounts payable commercial bank card program, which offers a quicker payment platform for the health system’s suppliers in exchange for a rebate paid by the supplier to the health system. Our analysis showed low levels of card adoption by suppliers, translating to lower rebates for the health system. A deeper dive into the data revealed most suppliers were already being paid quickly without the use of the card program. By reconfiguring standard payment terms to exceed the card program, the health system created an incentive for suppliers to adopt the card program and thereby increased card program participation and rebates by 10%.

Key Success Factors:

1) Understand Links Between Products/Services and Revenue Opportunities: Hospitals that proactively identify products and service categories that have a revenue implication are able to supplement cost savings with additional financial benefit. This requires deep understanding of product/service categories. External third parties that have significant experience working with hospitals all over the country in spend categories with revenue, rebate or reimbursement potential can provide valuable insights to organizations looking for category expertise to identify new avenues for value.

2) Monitor Revenue Generating Programs Continuously: Supply chain teams that strive to maintain visibility on current revenue generating programs will more quickly adapt as needed to market changes to ensure value for the organization is maintained or increased.

3) Hold Suppliers Accountable: Organizations that develop service level metrics to hold suppliers accountable for revenue performance are bound to deliver more value over the long-term. In the example of bad debt collection agencies, establishing service level metrics for agency collection rates that have penalties for non-compliance can ensure high collection rates for the organization.

Pathstone will be wrapping up this series by covering the last value lever, strategic alliances. After covering the last lever, we will review a framework that will help you identify and prioritize value levers for any given category.

Co-Authored by Joanna Guziak and Joseph Jang

Pathstone Partners is a management consulting firm that collaborates with hospital providers to identify and implement sustainable non-labor financial benefit. In the past five years Pathstone has partnered with over 100+ hospitals across 32 states delivering $100M+ annual benefit for our clients.

Previously, we discussed how standardization is a value lever that can complement outcomes of other value levers such as price and utilization. In this edition of our article series, we will be discussing a unique value lever, make vs. buy.

What is Make vs. Buy?

Make vs. buy can be defined as the extent to which hospitals choose to use in-sourced or out-sourced resources.  Many clients often do not pursue this lever because each evaluation is unique; it requires robust data analysis, deep operational knowledge, change management and a longer timeline to successfully implement. However, the benefits that come with the make vs. buy lever can be enormous to any healthcare organization:

Key Opportunity Indicators:

1)  Significant Change in Volumes: A significant change in volumes, regardless if products or services are outsourced or provided in-house, can be a good signal it is time to evaluate the make vs. buy value lever. As demand changes, hospitals need to determine if either a make or buy model is best suited to maintain costs and quality levels over the long-term. Often, an increase in volume can serve as a strong leverage point for negotiations with suppliers. Conversely, with a significant decrease in volumes, organizations need to evaluate if its service delivery model has a flexible cost structure that can match current demand or if it is heavily burdened by fixed costs.

Client Example: Pathstone recently worked with a large health system that was experiencing continuous growth in annual bed rental spend. Although renting beds provided benefits such as procurement flexibility and third-party maintenances services, our analysis showed the increase in volumes was large enough that an investment in purchasing hospital beds was more favorable to the organization. As a result of our recommendations, the health system was able to reduce rental costs by 20%.

2) Increasing Program Costs & Decreasing Quality: If annual costs related to a service are increasing while quality is decreasing, it may be worth evaluating make vs. buy opportunities. From a cost perspective, organizations need to understand the key drivers of increased costs. Is it price, volume or productivity? Furthermore, hospitals can partner with third parties (GPO, consultants, benchmarking service, etc.) to determine how costs compare to the market. From a quality perspective, performance on key service level agreements (SLA) and end-user feedback can be gathered to understand key drivers of decreasing quality levels. Is it bandwidth, staff capabilities or limited resources?  By understanding the current state, hospitals can then effectively evaluate the benefits of transitioning to a make or buy model.

3) Fragmented Service Delivery Models: If your organization has a different mix of service delivery models, it may indicate opportunities to generate value. Fragmented service delivery models lead to differing levels of productivity, cost and quality, potentially impacting patient care and operations. By selecting a standard make or buy model for a given product or service, an organization is essentially applying another form of the third value lever we’ve covered, standardization.

Client Example: Pathstone has encountered several clients that have fragmented models for courier services which led to differing levels of staffing, service quality and cost, all of which can also make daily operations challenging to manage. In several of those situations, a decision was made to outsource courier services by working closely with key stakeholders across the health system, leading to more consistent service delivery and lower costs.

Key Success Factors:

1) Develop Business Cases: Organizations that utilize a comprehensive business case to evaluate the pros and cons of an in-sourced or outsourced model will increase their chance of success. The business case is a fact-based tool that allows teams to have an open and objective dialogue when selecting the best strategy.  For complex categories, engaging third parties to develop business cases can provide market information and objective analysis necessary to make the best decision.

Client Example: Pathstone has a proven methodology for business case development that includes a comprehensive fact-based analysis to determine various options for a given product or service category. In addition, we engage key stakeholders throughout the business case process, ensuring necessary operational context is understood and support from decision makers is present, which is crucial during the implementation process.

2) Evaluate Program on an Ongoing Basis: Since costs, quality and performance of programs can change over time, organizations that continuously evaluate make vs. buy opportunities position themselves to generate more value over the long-term. Continuous self-assessment can uncover opportunities resulting from minor improvements in supplier relationships to complete transformations for an organization’s service delivery model. For example, one important question for an organization to ask about an insourced operation is: “What else can we do with these resources?” The opportunity cost of those resources can help identify alternatives that drive more value for the organization. Furthermore, alignment of the service with the organization’s overall mission should be evaluated.

3) Access to Market Intelligence and Best Practices: Hospitals that have conducted extensive market research are well positioned to evaluate existing outsourced or internal programs.  Market intelligence on leading practice cost metrics and performance indicators can be an effective barometer to measure financial, quality and operational performance. Partnering with third party providers that can provide insight on market benchmarks can help an organization set the right targets to measure the competitiveness of existing programs.

We are now past the halfway mark of Pathstone’s “Healthcare Supply Chain Value Lever Series”. In future articles we will cover more complex value levers. In the next article, Pathstone will discuss the value lever of revenue.

Co-Authored by Joanna Guziak and Joseph Jang

Pathstone Partners is a management consulting firm that collaborates with hospital providers to identify and implement sustainable non-labor financial benefit. In the past five years Pathstone has partnered with over 100+ hospitals across 32 states delivering $100M+ annual benefit for our clients.

Previously, we discussed how we can tap into additional savings by evaluating the utilization of products and services. In this edition of the series, we will be diving into value generated with a focus on standardization.

What is Standardization?

Standardization can be defined as the extent to which hospitals are making use of the same products, services and processes. Due to the sheer number of suppliers and products available in the market combined with a diverse array of end-user preferences, hospital leaders often find they have a variety of similar products and services being used across the organization.

Standardization delivers the following benefits to an organization:

Financial benefits ranging 15 - 30% depending on the category

Leveraging system purchasing power

Improved consistency of service levels across the organization

Improved patient care and access

Key Opportunity Indicators:

1) Supplier Fragmentation: The use of multiple suppliers providing similar products and services may be a strong indicator for standardization opportunities. A closer review may reveal differences in both pricing and quality amongst the suppliers.

Client Example: Pathstone worked with a large health system that used multiple suppliers for over the phone interpretive services. By consolidating its supplier base through a competitive bid process, the client was able to leverage the health system buying power to negotiate market competitive prices and save over 25% in annual costs.

2) Product Fragmentation: The use of multiple products or services that fulfill a similar need can be another indicator of potential standardization opportunities. Different end-user preferences are a key contributing factor to product fragmentation, which can lead to varying price points for similar products and services. A thorough review of purchase orders or supplier invoice data can be a good starting point to understand the degree of product fragmentation.

Client Example: Pathstone recently reviewed print services for a client and discovered over 40 different copier models being used across the organization, resulting in variable device leases and cost per page rates. A deeper analysis showed over half of the devices had similar functionality but were billed at different rates. By standardizing devices, the client was able to achieve significant savings.

3) Incomplete Category Definition:  An incomplete understanding of a total product or service category due to extensive fragmentation can lead to missed opportunities to take advantage of key supplier relationships. If there is a narrow view of a category and its scope, it can significantly restrict the hospital’s leverage in negotiating key supplier contracts.

Client Example: Revisiting our previous example, the key driver behind the client’s fragmented supplier base was its decision to allocate business based on the type of interpretive services, such as in-person, over the phone and video interpretation services. Pathstone worked collaboratively with the client to identify suppliers with capabilities for all types of services, thereby generating more leverage for negotiations with existing and new suppliers.

4) Varying Service Levels: Disparate service level expectations across departments or facilities may also suggest opportunities to achieve cost or service efficiencies. This is often an overlooked identifier but can drive more consistent service delivery at a lower cost overall.

Client Example: In the same example as mentioned above, Pathstone discovered varying break/fix Service Level Agreements (SLAs) for the copiers across departments, resulting in inconsistent service and higher staffing costs due to the vendor’s inability to implement standardized practices. By standardizing and aligning break/fix SLAs with actual needs, the client was able to not only reduce costs but also improve service levels by optimizing staff deployment based on the “density” of areas (the volume and devices at a certain location).

Key Success Factors:

1) Utilize a Data-Driven Process: High-performing organizations remain disciplined in utilizing data as a foundation to identify opportunities for change. Since standardization requires a change in end-user preferences for suppliers, products and services, data is crucial for an objective approach to arrive at the best solution. Without the use of data, organizations may resort to anecdotal information that will not drive optimal results.

2) Increase Knowledge of Complex Categories: Understanding the strengths and weaknesses of suppliers, products and services enables organizations to select the best solution that meets internal objectives. By conducting market due diligence, organizations can evaluate a wide range of options considered by their peers. Partnering with third party consultants such as Pathstone may be beneficial to access market intelligence and provide assistance in determining what change is truly best-in-class and beneficial to the organization.

3) Engage Key Stakeholders Early: Any standardization initiative that does not have support and buy-in from key stakeholders is bound to fail over the long-term. A strong leadership team that participates in initial decision making and ongoing management is essential to reduce costs and improve service levels. When working with clients on standardization initiatives, Pathstone proactively identifies champions that can engage end-users and hold them accountable. By doing so, initiative benefits can be sustained over the long term.

Next in our series, Pathstone will discuss make vs. buy, which is often an overlooked lever by hospitals.