In this episode of the HTM 24×7 podcast, PartsSource President and CEO Phil Settimi, MD, MSE, joins host Keri Stephens delve into the key challenges within healthcare technology management (HTM), particularly parts and service contracts. Dr. Settimi’s background as a physician and his experience in medical device businesses laid the foundation for his involvement with PartsSource, a company dedicated to enhancing clinical uptime and streamlining the healthcare supply chain.
PartsSource began by analyzing data on supplier performance and realized the potential to transform the healthcare supply chain by applying evidence-based decision-making and technology. Their initial focus was on parts and accessories procurement, and they introduced PartsSource Pro, a technology-enabled solution that streamlined procurement processes, reduced costs, and improved productivity for hospitals.
The podcast also delves into PartsSource’s study of service contracts within healthcare systems. They found that health systems manage a significant number of contracts, with varying costs and a lack of transparency. Many hospitals are challenged by the complexity of managing these contracts, leading to inefficiencies and potential overpayments. Furthermore, the absence of vendor performance monitoring and a lack of standardized data make it difficult for health systems to evaluate and optimize their service contracts effectively.
In the podcast, Dr. Settimi suggests several strategies for overcoming these challenges, including consolidation and rationalization of contracts, risk-based analysis for vendor selection, and the use of national benchmarks to determine fair pricing. The implementation of technology plays a crucial role in streamlining workflows, monitoring vendor performance, and achieving cost savings.
Finally, the podcast emphasizes the need for evidence-based, tech-enabled solutions in HTM to improve clinical uptime and support healthcare professionals in delivering safe and effective care.
Keri Stephens: Hi, welcome to the 24×7 Podcast. I’m your host, Keri Stephens. For this episode, I’m joined by Dr. Phil Settimi, PartsSource’s president and CEO Dr. Settimi thank you for joining me today.
Dr. Philip Settimi: Hey, it’s great to be here.
Keri Stephens: Yeah, we’re very excited to have you. And I really want to, just to start, can you tell us about your background and part source for listeners who may not be familiar with the company?
Dr. Philip Settimi: Sure, happy to. I started life as a physician and spent roughly a decade working for medical device businesses, largely developing integrated connectivity software for those devices. How do you help those devices share critical patient data with the EMR building EMRs and decision support systems for EMRs and got to PartsSource in 2014 and discovered a really interesting business that served a huge amount of the hospital and healthcare community out there. Had relationships with thousands of suppliers, was playing a really crucial role. And at the time, our hypothesis was they’ve got some interesting data.
Keri Stephens: Oh, really? What kind of data?
Dr. Philip Settimi: The company had 20 years of longitudinal data on supplier performance and as I mentioned, served many thousands of hospitals every year. I think the question we had at the time was, what if you took this data and applied a lot of the decision support concepts and algorithms that we were using in clinical medicine for operational performance in healthcare? And specifically, could you in fact improve clinical uptime around devices by leveraging a more resilient, more reliable supply chain, specifically by looking at data around whether they had particular items in stock, whether they shipped those on time, whether those products worked when they landed, whether they last their warranty period. And could quality and supply chain resiliency play a role in the future of this part of healthcare?
Ultimately, that’s the business that we push forward on moving this business that was largely a distributor of parts at the time and accessories into an enterprise technology partner that would help healthcare organizations drive the outcomes they were looking for, which is, can I spend less money doing this work lowering my total cost of service? Could I improve the productivity of my field staff and ultimately, could I use evidence-based outcome data to improve the supplier selection and supplier supply chain that, ultimately, we supported.
Keri Stephens: What did PartsSource do with those insights?
Dr. Philip Settimi: We had that view that suppliers and vendors perform differently. Our thought was we could turn that into something useful, a decision support tool for our customers. When we went out and spoke to customers about this, we observed not only could they use that, but they frankly just had a process that resulted in really slow procurement, which meant parts and accessories weren’t getting to end users and clinical engineers when they needed it. They really didn’t have the backup resources or support that they needed.
They really didn’t have any specific buying power. And so, we came back to the healthcare community with this concept of PartsSource Pro, a technology-enabled solution that would leverage buying power, would leverage real-time analytical insights, provide supplier performance metrics, digitize the existing workflow really to address the problems we observed on a turnkey basis. And that solution that we presented in 2015 initially became very popular with thousands of hospitals adopting it as a solution set, and, ultimately, we began focused on where else they were spending a lot of time, money, and effort to keep the clinical environment up and running.
In our initial work with parts, we took a really evidence-based approach to the problem, and we went out and did a survey of hundreds of hospitals. After speaking with dozens of them, began to do more quantitative surveying of those clients and ultimately discovered that many of those hospitals had the same issues. They were buying parts from hundreds of vendors at a time, but largely on one-off analog processes to do that.
They were typically spending 10% to 15% more than was required than what the benchmarks would tell you those parts could be acquired at. They really didn’t have any quality performance metrics for assessing the quality or resiliency of these supply partners, and they really didn’t have any common platform for doing this work. And that really, as I mentioned, led to the introduction of PartsSource Pro for parts initially back in the 2015 window where you could achieve quality outcomes, you could achieve cost outcomes, and you could achieve productivity outcomes that were unique to this market.
Keri Stephens: Great. Well, it sounds like you really resolved the problems related to parts. Is that what led you to study contracts?
Dr. Philip Settimi: Fast forward now a handful of years, and now with over 1500 enterprise clients across the US that have adopted PartsSource Pro, we began to look at this opportunity in the service contract space largely because it represents the largest pocket of spend for many of those organizations that we serve today.
It’s a 10 billion category nationwide, and we come at this problem from the point of view that our job is to help root out waste and inefficiency in an evidence-based approach on behalf of our clients. And very quickly we focused on the repair and service agreement space, which we refer to as RSA. And so, we began this evaluation a couple of years ago to look at small samples of contracts across our client base. And what we found was interesting.
So, hospitals on average were managing somewhere between 102 hundred contracts at one time. They were spending significant amount of time to manage, renew, and implement those contracts, and they were disproportionately lower dollar contracts with highly varied pricing. They also didn’t seem to have a lot of vendor performance management data that was helping them guide those vendor decisions. And we came away from that pilot data exercise with really this notion that we should explore this further. And so we took the opportunity to then do a much larger study.
Keri Stephens: Okay. Was this analysis comparable to the parts studies that you referenced?
Dr. Philip Settimi: Yeah, we took a very similar approach, hundreds of hospital data across 500,000 service events, over a hundred thousand contracts, and in total over 35 million proprietary data points that we evaluated. And we felt like we wanted to provide an independent nationwide survey that would help inform clients around what the state of the union in this area is and potentially share best practices to the extent that we discovered them in the course of the study.
Keri Stephens: Let’s walk through some of those findings because some were really eye-opening to me. How many contracts are systems managing?
Dr. Philip Settimi: We found that an average hospital is managing 146 contracts, and it really is a tale of classic 80/20 or in this case 75/25. And that is that while most of the dollar spend is in the 25% of contracts that are being managed, most of the work is sitting in the 75% of contracts where the value of the contract is under $50,000 per year, but they still consume a disproportionate amount of time and energy. And so, what we observed in our research was that each contract was consuming roughly 100 or just over 100 days of team time between negotiation management, contracting, deployment, follow-up and implementation and so on.
And so, therefore, four to six months to truly renew and activate these contracts. So significant amount of time spent on what is a really long tail of contracts that are required for health systems to manage. And so again, if you’re spending all that time and you’re getting a lot of value out of it, that can be meaningful. But what we observed was actually pretty interesting when it came to pricing.
Keri Stephens: Okay. So that gives me an idea of how much time systems are spending, but did you find the same issues with contract costs as you did on parts?
Philip Settimi: Yeah, we identified a really interesting range of pricing for really the very same equipment. And so take a really common medical device here in the us, an O E C 9,800 C-arm, we found 519 unique prices in service contracts in our dataset. And it’s not unusual to see the very different prices for the exact same model within the exact same health system either. Again, consistent with what we found in the parts universe.
What’s interesting is that the range, in addition to being different and unique prices, the range was dramatic 57% priced range from the least to the most expensive across this basket. And so the question really is we’re spending all this time on it, how do we know that we’re actually getting great pricing if there really isn’t price transparency? And as a result, health systems are vulnerable to overpaying here.
Keri Stephens: No, that makes sense. Okay, so this lack of data seems to be a theme. Where else are systems suffering from a lack of evidence?
Dr. Philip Settimi: What we observed was a couple of areas. I think perhaps most important is vendor performance monitoring. 90 plus percent of the health systems we spoke with did not have a vendor performance management system or tool or methodology. And so you may have a set of entitlements within your contract, but how do you know if you’re actually achieving those entitlements and getting what you paid for?
Because there’s very little structured or quantitative data shared back with the health system, it’s difficult for those groups to assess not just any one contract, but again, we’re talking about a huge number across potentially dozens or hundreds of vendors. The systems, the data, the processes that people just are not set up to effectively survey and monitor and manage that vendor base. I would say the second comes down to we observe wide variation in service strategy selection within the modality or category, and that is to say within lab or within patient monitoring or within CT, we saw a huge variation in the kinds of service strategies deployed by health system to health system, and each were achieving various successful outcomes.
The question is, which is the right approach for the kinds of capabilities in those health systems? And it would tell you from the diversity of what we observed is that there’s a lot of ways to solve these problems. There wasn’t necessarily an obvious best practice because folks didn’t have the outcome data to evaluate their relative strategies. As a result, I think on the last piece is if you really don’t have a good sense for supplier performance metrics or uptime metrics and necessarily financial metrics, it’s pretty difficult to put together a comprehensive enterprise-wide cost to service assessment that ultimately informs your service strategy. So, lots of areas here where health systems would have the opportunity to improve if they had better structured and integrated data to work from.
Keri Stephens: Definitely. Okay, so based on these findings and the financial pressure systems are under now more than ever, it really seems like a new approach to service contract management is overdue. So how can systems overcome these challenges?
Dr. Philip Settimi: We observed the best health systems had taken a couple of really thoughtful approaches that we believed were more widely adoptable across the industry. One, they really had worked to consolidate and rationalize this long tail of service contracts. Two, they were finding ways to take evidence-based approaches on vendor selection, on contract selection, and they were increasingly using risk-based analysis to determine what they could be doing in-house versus where they need to bring partners in to help perform service.
We observed that the best were achieving cost savings of upwards of 50% from their existing contract costs when they evolve their service strategy. And the best were really adept at managing asset level service costs and performance metrics to evaluate contract performance, but also evaluate their overall service strategy. And they were leveraging national benchmarks on these contracts in the first place to determine whether they had good pricing.
These individual capabilities, I would say weren’t found at any one health system, and I would say any of these capabilities were found in a small minority of health systems. So, the opportunity here is how do we take these observable best practices and help a broader set of clients across the U.S. take advantage of those kinds of features.
For us, we observe that in the parts world, if you could consolidate the workflow related to a broad set of issues for teams today, like vendor engagement or service dispatch requests, like documentation for field service events like payments, like in the area of collecting data, having a single enterprise workflow tool is a really powerful way to improve the productivity of teams and improve the speed with which you can deploy these service strategies, which today, although perhaps made centrally, are often difficult to deploy locally in a short period of time and have the necessary impact.
Two, we believe that community buying power can be a powerful lever here. Aggregating demand across health systems, leveraging benchmark data to determine what the right expense point should be for these service contracts is a really powerful capability and one that we believe we can help clients with. Third, how do we use the same evidence-based approach that we took in parts and apply that same logic into service vendor management in the service contract space so that we’re leveraging the concept of formularies or enterprise preferences where you can actually select the highest quality performing vendors in any particular geography, both OEMs and third parties alike.
The way you do that is by having true nationally benchmarked vendor performance data. And so those insights and KPIs, peer reviews on vendor performance ratings, first time fixed rates, et cetera, all of that is used to drive not only the management of individual vendors, but increasingly where we want to allocate more of our service dollars through vendor preferences and formulary selection in particular geographies or particular modalities around the country to help reinforce high quality cost-effective solutions in a tech enabled manner.
And that tech piece plays such a powerful role in weaving together all these capabilities from workflow to real-time updates about the status of your service technician to outcome data related to the performance of your vendors to handling digital documentation payments. And so collectively, this digital transformation of the work serves to both eliminated a huge amount of time from the negotiation deployment of a contract, the engagement of that vendor community, and ultimately the productivity, perhaps the scarcest resource, which are our clinical engineering teams across the country these days with an increasing number of folks retiring or coming out of the field.
We really need to focus as we have in the rest of medicine on improving the top of licensed work that nursing professionals and physician professionals can deliver to other folks involved in clinical operations like clinical engineering, facilities management, and so on.
Keri Stephens: Great. Well, as a final question, is there anything we didn’t cover and how can listeners find out more?
Dr. Philip Settimi: Well, there’s so much around this space in clinical engineering that we at PartsSource are excited to help promote and enable. I think we wake up every day thinking about how to bring evidence-based tech-enabled solutions to clinical engineering programs around the country in support of their mission of driving high clinical uptime, which ultimately delivers caregivers the ability to have well-functioning safe and effective care. They can deliver patients every day.
And those are the kind of problems that we really love to spend time on. We’ve taken this model of PartsSource Pro, a tech enabled managed service initially for parts now for service and service contracts, and we’ll continue to innovate in that direction. We’re always looking for, I think, innovative folks that are excited to help transform this industry and this profession. And folks can, of course, always learn [email protected] at our corporate site or connect with any of the account folks that are no doubt calling on them with regularity to engage on these kinds of issues. But we appreciate the time to share our perspective, and thanks for your time today.
Keri Stephens: Well, thank you so much, Dr. Settimi. This has been very informative, and I know our listeners will agree. And to our listeners, be sure to check out 24x7mag.com for the latest news and insights impacting the healthcare technology management field. Take care.