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$8.6M in CapEx Savings: A Case Study on

Sharing Medical Equipment

Session 23, February 12th, 2019

Ronald Loo, M.D., Physician Co-Lead, Health Innovation Team, Kaiser Permanente

Todd Rothenhaus, M.D., Chief Executive Officer, Cohealo

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Ronald Loo, M.D.

Has no real or apparent conflicts of interest to report.

Conflict of Interest

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Todd Rothenhaus, M.D.

Has no real or apparent conflicts of interest to report.

Conflict of Interest

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Introductions

Ronald Loo, M.D.

Physician Co-Lead, Health

Innovation Team

Kaiser Permanente, SCPMG

Todd Rothenhaus, M.D.

Chief Executive Officer

Cohealo, Inc.

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• Learning objectives

• The imperative to share

• Equipment sharing at Kaiser Permanente

• Overcoming objections to equipment sharing

• The return on investment from sharing

Introducing the sharing economy

to healthcare

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• Discuss the supply chain challenges that Kaiser Permanente faced

around equipment management, budgeting and access and how they

were inspired by companies like Uber and Airbnb to solve those

challenges by sharing medical equipment between facilities

• Identify the internal resources needed for a health system to implement

an equipment sharing pilot, including the criteria for selecting the service

lines, equipment and facilities for participation

• Analyze the ROI model developed by Kaiser Permanente and Cohealo

on the value of sharing equipment, including how financial outcomes

such as rental reduction and capital expense avoidance from

sharing/collective purchasing can be factored into calculations

Learning Objectives

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The growing sharing economy

In the past decade, the sharing economy has exploded:

Share your car Share your home Share your office

Uber Airbnb WeWork

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A massive imperative to share

Surgical

procedures

moving outside

the hospital

Reimbursement

is decreasing,

but fixed costs

remain

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A massive imperative to share

Surgical

procedures

moving outside

the hospital

Reimbursement

is decreasing,

but fixed costs

remain

Hospitals must

improve utilization of

space, equipment, and

personnel

Mobilizing idle equipment improves operating margin

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About Kaiser Permanente (KP) SoCal

• 15 hospitals

• 231 medical

offices

• 7,421 physicians

• 70 years of

innovation

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Why equipment sharing at KP?

Value for the Facility

• KP as good steward of

members’ funds

• Improve asset utilization

• Data-driven investments

• Expand service lines

independent of inventory

location

Value for the OR

• More efficient than renting

• More requests than budget

• Newest equipment =

happy surgeons

• Non-payroll savings

• Not rentable? Maybe

shareable

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The path to “Dark Green Money”

Savings or revenue that is

immediately quantifiable

$ $$ $$$

Sharing

instead of

renting or

buying

Collaborative

purchases

Prevent

equipment-

related case

delays

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It all began with “Loo Haul”

Started with a Shockwave Lithotripsy Machine – a $450K

purchase shared between 5 hospitals

Prove sharing is

feasible

Reframe equipment as

network resource

Eliminate rentals

Net payback – 1 year

Program Goals

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Grassroots innovation to scaled pilot program

5Facilities

5Facilities

1Service

Lines

1Service

Lines

UrologyUrology

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9Facilities

9Facilities

4Service

Lines

4Service

Lines

Head & Neck

General Surgery

Orthopedics

Head & Neck

General Surgery

Orthopedics

Scaled pilot program to a sharing ecosystem

UrologyUrology

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9Facilities

9Facilities

9Service

Lines

9Service

Lines

Gynecology

Ophthalmology

Plastics

Podiatry

Vascular

Gynecology

Ophthalmology

Plastics

Podiatry

Vascular

Growing the sharing ecosystem across KP SoCal

Head & Neck

General Surgery

Orthopedics

Head & Neck

General Surgery

OrthopedicsUrologyUrology

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Year 1 KP Exchange results

Facilities &

service linesDecrease

in rental volumeIdentified

network savings

2/3

Scaling Efficiency Savings Growth

9 49% $4.2MIdentified

capital requests

for sharing

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Overcoming resistance to sharing

“Sharing will be a lot of work.”

“I might have to cancel a case.”

“What if equipment is damaged?”

“Will my equipment be constantly moving?”

“Patient will be negatively impacted.”

“Equipment won’t be available when

I need it.”

“Equipment won’t be returned to

my operating room.”

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Basic human values at work

Trust

Willingness to Share

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KP leveraged automation to make sharing easy.

Sharing requires minimal work

Phase I: “Loo

Haul”

Phase II:

Milk RoutePhase III:

On-demand

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How sharing works

Scheduling platform

Adopted by KP biomed and OR directors

Equipment analytics Moving Logistics

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20% of equipment = 80% of value

Maximum value

with minimal

moves

Cases covered

per move

Expensive

equipment

$90K

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Proper planning reduces risk

• Insurance of $1M+

• Movability risk analysis

• Identify non-sharable assets

• Systematic moving process

Risk Factors Plan for Success

• Damaged equipment

• Sharing highly risky assets

• Efficiently tracking & returning

equipment

Outcomes In 3 years, only two damages

Repair costs covered

No cases cancelled or delayed

KP’s Outcomes

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2017 2018 2019

Requests (%) Requests Met by Sharing (%)

24%

76%91%

82%

The KP Exchange today

Identified Savings

$11M

9%

18%

22Facilities

4,875 Equipment

in platform

10Service lines

$4.4M

$4.2M

91%

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Collaborative purchases

AcuPulse Duo VersaPulse 100W

$1M invested with 3-5X in returns

EuroNav

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The next frontier of savings

Specialty bed management Radiology equipment

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Continued areas for growth

New

regions

New care

venues

New

equipment

types &

service lines

ASCs, Medical Office

Buildings, etc.

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Questions?

Ronald Loo, M.D.

ronald.k.loo@kp.org

Todd Rothenhaus, M.D.

todd.rothenhaus@cohealo.com

kaiserpermanente.org

@kpshare

cohealo.com

@cohealo