In an era hungry for hospital cost-containment and lean management, innovative approaches to supply chain management in hospitals are key. These problems typically arise when searching through multiple product vendors or multiple procurement access points. Minnesota-based healthcare startup CorCardia has attempted to address this problem by developing a cloud based purchasing system, InnovaCor. InnovaCor is a supply chain platform that seeks to eliminate unnecessary sales and marketing expense while passing those savings on to hospitals. CorCardia states that by using InnovaCor, hospitals can save up to 22% on expenses unrelated to patient care. In addition, hospitals have access to real-time utilization data which helps eradicate expired products.
With upcoming changes in America’s healthcare system stemming from the Affordable Care Act, CorCardia is seeking to work with any hospital looking to lower their supply chain expenses and access real-time data on utilization rates. We had a chance to speak with Co-founder Sam Awad about InnovaCor and its innovative solution.
Ravi Parikh, Medgadget: First off, could you give us a sense of your company’s background and how the idea for InnovaCor formed?
Sam Awad, CorCardia: Ken Morris, JD (Founder/CEO) is a former executive from Guidant/Boston Scientific where he created the critically acclaimed Close the Gap initiative designed to improve cardiovascular outcomes for various population groups, this in turn led to significant revenue enhancement and customer retention. The out of control sales expenses in industry was something Ken continuously questioned while in industry, especially as many of these therapies became commoditized. After numerous attempts to solve this issue within industry, he left to take an innovative approach at solving the problem and formed CorCardia Group. We were really formed for one reason: to remove all costs unassociated with patient care from healthcare.
My background is in technology leadership and entrepreneurship. I have led several technology and communication based organizations over the last 12 years. Because of my extensive retail and electronic background, particularly with commoditization, it was a great fit to apply this exercise to the healthcare space where it is clearly needed. Running my own multi-million dollar organization with multiple sites, I learned to keep track of high end products and devices meticulously and to apply technology solutions to make the process seamless. You will see many of these functionalities today in our InnovaCor solution. My passion to reduce cost, eliminate waste and help improve quality in healthcare has led us to have some very productive conversations with many hospitals across the nation. It has also enabled us to build our solution to suit the current pains hospitals and hospital systems are facing today and will continue to face over the upcoming years with ACA.
Medgadget: Tell us about the problem of non-patient care expenses that hospitals face.
Awad: It’s important to first highlight the current climate for hospitals and what they are facing in terms of cost pressures. First, reimbursement rates are shrinking rapidly. This will only continue to accelerate when the model is changed from the current cost plus environment to a more value based outcome model. Additionally, we know manufacturers are dealing with extremely high SG&A expenses that obviously are worked into their prices. Lets take implantable devices as an example – we spend $90 billion dollars annually on implantable devices (pace makers, knees, hips, etc.) Of that $90 billion spend, as much 40% of that is sales related expenses.
For example, a clinical or field tech has an expense between $100-$150k per year to the manufacturer whereas a sales rep can cost between $300k-$500k in many cases. With that said, they both really accomplish the same thing. They scrub in, do educational sessions, etc. At the end of the day, all these expenses are worked into the price of the product and we are hearing from many providers that this sales expense adds little to no value to the patients and/or physicians. Furthermore, procurement and inventory management efficiencies must be improved by hospitals when it comes to loss/expired products, aggregation of systems and inventory turn. There have been countless centers where you will find a nurse checking for expirations, counting inventory, etc. They really are better suited working at the top of their licensure and caring for patients. There were even a handful of places we visited where they were doing inventory manually on a note pad or in Microsoft Excel. Supply chain practices must be tightened up in today’s climate and technology can really play a big role in doing so. Lastly, we found many hospitals and systems that struggle to keep track of their contracting in an effective and real-time matter. Typically, they won’t find out they missed their contract commitment until it was too late and many times they will just make the assumption they will be receiving a rebate. One of the hospitals was only receiving a rebate an average of one or two times in a five-year period.
Medgadget: What features of InnovaCor help hospitals solve this problem?
Awad: With CorCardia’s InnovaCor solution, we empower hospitals to remove those expenses unassociated to patient care with a process we call Lean Acquisition. A cloud based, open market that allows the best therapy for that patient with the best price to be delivered. Our solution allows for procurement from multiple vendors, contracts, and physician preference items- combining those purchases in one place making procurement a breeze. Our system also allows for self-aggregation in a virtual manner for the sake of pricing, this allows hospitals and hospital systems to come together for the sake of pricing with literally the click of a button. InnovaCor also allows for real-time product inventory management across a network, which allows purchasing to now see what’s on the shelf at a facility and system-wide. We also identify and reduce unneeded supply chain expenses and can drill down by procedure type. We provide real-time access to contract compliance by hospital, procedure or even physician. Our intuitive dashboards allow hospitals to see clinical utilization and financial benchmarking down to the procedure level. Essentially, we are able to follow that therapy or product from the time it is ordered all the way through to the time it is delivered to the patient. Because we are cloud based, we require no additional hardware or IT expenses to implement. We capture lot/serial numbers along with expiration dates which makes a recall or managing expirations much less time consuming. Our solution provides better traceability, better data, real-time access to that data, one open marketplace, and most importantly, the ability to remove expenses unrelated to patient care.
Medgadget: Tell us a little about the interface and accessibility of the service. How easy is it for hospitals and suppliers to use?
Awad: Our procurement interface has often times been compared with Amazon.com, so it’s really that easy especially because everything is in one place. We make it very easy to search, sort and compare products, vendors and pricing which has historically been a challenge for those in supply chain. Our dashboards can be customizable and are simple, drilling down to the hospital or physician level is what all of our hospitals and systems are excited about. Because it’s so easy to use, I often times just allow the person we are meeting with to just go in and put products into the shopping cart, navigate the site and I’ve never had a single complaint on accessibility or ease of use. We pride ourselves on keeping a very complex process simple.
Medgadget: I understand that you have been providing demos. Who have been using InnovaCor so far, and what have they been saying?
Awad: Everyone we are working with really gives us the “wow” factor, it’s just one of those solutions that hasn’t existed and now that it does many are in amazement- So much so that I find myself reminding them it is not vaporware or a concept but this really does exist! We are working with several large systems as well as many smaller/rural hospitals. Because our platform is free of charge to hospitals and because we are a true open market (not locking any therapies out), we have had the best reception from Providers. They just can’t believe there’s no cost tied to using our system. But the really powerful tool that has them most interested is the real-time dashboards and insights we can provide into their daily operations. A large hospital or hospital system likes our contract compliance dashboard whereas a rural hospital really likes how we allow for self-aggregation and how we can provide financial benchmarking. Because we have the ability to be so flexible with our platform and because we will not lock ourselves into any manufacturer exclusivity, it allows us to really adapt to the needs of Providers.
Medgadget: What are next steps in getting this out to the broader population? Any major changes planned for InnovaCor that we can look forward to?
Awad: Getting to the broader population is really a matter of us taking a phased approach to onboarding hospitals and vendors. We’ve had several say “can you do this too?” Or, they’ll say “we want to do everything from implantable devices to trash bags.” For us it is not trying to take it all on so to speak, which is why we decided to start where we can provide the most impact initially, with implantable devices. From there, we are currently working with the individual systems to determine what direction is best for us to target next. Long term, we plan to implement RFID technology that will eliminate any human intervention outside of what you would normally do. This would allow us to track that therapy from when it leaves the inventory/storage room until the moment it is implanted.
Website: CorCardia Group…
Product Page: InnovaCor…