In this episode, Dan Crittenden, Chief Executive Officer at RevMed, discusses overlooked savings that can be found in the supply chain and on stockroom shelves.
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Learn how to listen to The Hospital Finance Podcast® on your mobile device.Highlights of this episode include:
- About RevMed
- Problems in the supply chain
- Why it is difficult for hospitals to track and take action on excess inventory before it expires
- RevMed marketplace
- Feedback received from health systems
- Labor challenges right now
- Future of RevMed
Kelly Wisness: Hi, this is Kelly Wisness. Welcome back to the award-winning Hospital Finance Podcast. We’re pleased to welcome Dan Crittenden. Dan has a diverse educational background, including a BS in computer science from McGill University, followed by the Chartered Financial Analyst designation. He did a brief stint in software development, programming video games before working in capital markets at investment bank Canaccord Genuity for a decade. After that, he was recruited to a family office in Miami where he worked briefly before jumping into the deep end on early-stage investments. Prior to RevMed, Dan was CFO at one of the family office investments, taking it from seed stage to over 140 employees, 30 million in revenue run rate and cash flow positive in under three years. Dan has a passion for turning ideas into reality and is excited to prove this out with RevMed. In this episode, we’re discussing Overlooked Savings Can Be Found in the Supply Chain and On Stockroom Shelves. Welcome and thank you for joining us today, Dan.
Dan Crittenden: Thanks so much for having me, Kelly. I’m excited.
Kelly: Yeah, excited to have you here. Well, let’s go ahead and jump in. So first off, what is RevMed?
Dan: Yeah, so RevMed is a software company. We were created to try and optimize supply chain processes within healthcare. We have grand aspirations for the future, but our current product in the marketplace is a peer-to-peer online marketplace that effectively enables healthcare facilities within the U.S. to buy and sell excess surgical devices or unused capital equipment directly with one another. RevMed acts as both the marketplace and the broker on the transactions. So, hospitals get the ability to virtually transact with other facilities all over the country, but officially, they only need to deal with RevMed. So, it helps kind of reduce the red tape.
Kelly: That is always a good thing. So, what problem in the supply chain are you addressing?
Dan: Yeah, thanks for asking. So yeah, primarily we think there’s a massively overlooked problem of overstock inventory and stranded equipment within U.S. healthcare. If you look at typical P&L, obviously there’s a lot of public companies in this space. You can see that supply spend is typically anywhere from 15-20% of overall costs, and obviously a major number percentage wise. Due to how many moving parts there are within a hospital or a healthcare system, inventory and/or equipment gets stranded all the time. Common situations why that happened would be physician preference change or a physician departure. And then sometimes with these larger healthcare systems, you’ll even have a corporate conversion where somebody at HQ does a deal with a certain manufacturer, another one gets boxed out. At the facility level, you have a materials manager that is stuck with a significant amount of excess. And so before we launched RevMed, there wasn’t a great amount of solutions of what to do with that. The kind of, I would say, market for excess is inadequately serviced. There’s the traditional auctioneer model. But obviously, the problem with an auction is if people don’t show up, the proceeds you get are usually de minimis. And then there’s a whole host of resellers that will buy things, usually for pennies on the dollar, and then try and resell them. With RevMed, we’re trying to take a more collaborative approach to solve this problem. And basically, we facilitated a marketplace where you can sell directly to your peers and get 85% of the proceeds, rather than pennies, if you will.
Kelly: Wow. Love this idea. That’s awesome. So yeah, why is it so difficult for hospitals to track and take action on excess inventory before it expires? And do we know how much?
Dan: Great question. So, I’ll start that with an anecdote. I live in Dallas, Texas now. I moved here to launch RevMed. Before we started, I kind of did my diligence and met with numerous folks down to the facility level at both small ASCs and large hospitals, as well as corporate supply chain folks. Almost everyone said there was a problem, but the one that stands out the most for me is there was one naysayer who was the materials manager of a large hospital, and he told me that they had no issue with excess inventory. So, he didn’t believe that RevMed was a good idea. So, then I asked him how much he spends per year on supplies. He told me that the number is $200 million a year, and he has a 3% loss ratio. So, I was like, “Okay, so that means you lose $6 million a year on waste.” In the context of overall spend at this hospital, that’s not a massive number, but if you look at the underlying profitability of hospitals, it’s a very big number.
And so I think the reason that this problem isn’t well addressed is– due to the fact that healthcare chains have been operational for a long time, there is a bit of– the inventory management systems are not super sophisticated to track live inventory, and there’s also just a lot of moving pieces. So, you have folks in materials management whose job is stocking cases to provide patient care, and they often just get stuck with excess or outside of their control. And so the way RevMed is trying to fix that is we are trying to be proactive with customer service to help our clients make it easier to repurpose excess and just giving them bang for their buck. It is shocking to me that with these healthcare systems, part of the reason they don’t take action is just because there haven’t been great options before. They’re just of the view that they’ll get pennies on the dollar, and so they don’t even bother doing anything about it, which is sad when you look at the underlying profitability in this industry.
Kelly: Yeah. I completely agree with you there. How did the idea for the RevMed marketplace come about?
Dan: Yeah. So, it actually started with two of our other cofounders, one of which is an orthopedic surgeon. He was actually doing his fellowship in New York City, and the other cofounder was actually one of his reps at the time. So, selling orthopedic devices. And the physician who was in his fellowship wanted to kind of hone his skills on a couple different surgical procedures. And his rep effectively said, “Here, let me give you these expired devices.” The doc was like, “Well, what do these things cost?” And obviously, the number was a pretty big one, in the thousands of dollars. And then they sort of had a light bulb went off and realized that there’s probably too many of these items that are expiring unused, and there could be a problem that should be solved. So that was sort of it in a nutshell. That was about five years ago. And then those two folks are both friends of mine, so I got lured in to be the CEO and get the idea, turn it into a real thing.
Kelly: That’s very cool. So, what feedback have you received from health systems using the marketplace?
Dan: Yeah. So, it’s interesting, obviously, because many healthcare systems are struggling financially. Oftentimes they struggle to have enough staff. There’s been labor shortages in just about every industry. Oftentimes the initial feedback is, “Ooh, I don’t know about the ability to sell things ourselves. That sounds like too much work.” And there’s definitely some reticence. But I’m pretty sure the audience for this podcast is finance folks. And for me, that’s what my retort to that comment is, is just the dollar value of the items that get stranded. For example, if you look at a typical surgery center, mid-sized surgery center probably spends $5 million a year on surgical supplies. The buyer that is purchasing that stuff is a salaried employee that probably makes less than $100,000 per year, maybe considerably less. So, if you think about those two numbers, optimizing that $5 million spend by 10%, 5%, it moves the needle significantly.
So initial feedback is reticence to do work. But then what’s been kind of rewarding to me is– down even at the facility level, we’ve had materials managers of hospitals and some of our larger clients that, again, were like, “Oh, this is going to be extra work.” And then once they kind of work with the RevMed team and realize how much we’ve thought through how to kind of simplify the items, it just becomes part of their behavior, and they’re actually like, “This isn’t bad at all.” We’ve taken a lot of thought to try and take the extra work, but the last thing we want to do is create a make work project for these healthcare systems that are already overworked. So yeah, I’d say the main feedback is, originally, they’re reticent of that, and then we try and kind of work with them to show that it’s not as much work as one might think.
Kelly: Yeah. That sounds perfect for that situation. And there are quite a few labor challenges right now, so.
Dan: For sure.
Kelly: Yeah. So, what is the ultimate goal in reducing supply costs for hospitals?
Dan: Yeah. So really, just for me, just philosophically, I find it truly scary. When you look at the U.S. healthcare landscape, I would say the way that profitability is skewed is tragic. So, providers, especially when you’re looking at a lot of regional, not for profit healthcare systems within the country, many of those providers are underwater, and that is literally losing money. And so the ultimate goal for us is because supply costs are such a significant component, we firmly believe that a reduction in those costs should see a far higher percentage increase in profitability and ultimately result in better patient care for the ultimate health of the country. So, our goal is to save money with the noble goal of trying to make it better for providers to provide patient care, because that’s their day-to-day job.
Kelly: Yeah. Love that. That’s awesome. So, Dan, what does the future of RevMed look like?
Dan: Great question. So, one of your previous questions was asking why is it so difficult for hospitals to track and take action? And I did mention one of, I’d say, the missing pieces is that many of these healthcare systems don’t have great day-to-day inventory tracking tools. That is one thing that RevMed does not do that I could see us doing in the future. It is very much interrelated because many of these people just don’t have proactive technology systems to tell them, “Hey, you have too much of this item.” But again, these folks are buying thousands of items, and it’s not their fault that sometimes the power level might shift, and they can’t track it. So, I would say that for RevMed, pivoting either by a partnership or doing it ourselves into some more day-to-day inventory management systems, I think would be useful. And then also we have aspirations of taking this international. Actually, our colleague cofounder did a Harvard business school case study on RevMed two years ago, and in his class he had numerous inbounds from countries all over the world, like Brazil, Kenya, all over. And we realized that this kind of problem of excess inventory is not unique to the U.S. So, for us in the future, it’s truly building this into a global brand and then maybe even figuring out ways to enhance health equity across the world, where maybe even facilities in the U.S. sell overseas. Obviously, there’s a lot more legal complexities to doing that, but that is kind of our long-term aspiration.
Kelly: Those sound like great long-term aspirations and sounds like something to really strive for.
Dan: Thank you.
Kelly: Yeah. So, thank you so much for joining us today, Dan, and for sharing your insights on Overlooked Savings Can Be Found in the Supply Chain and On Stockroom Shelves. We really appreciate all of your insights.
Dan: Oh, thank you. Thanks for having me.
Kelly: And if a listener wants to learn more or contact you to discuss this topic further, how best can they do that?
Dan: Yeah. They can either go find us on LinkedIn, myself, Daniel Crittenden. Feel free to connect with me and say you heard me on the BESLER podcast. We also have our website, revmedconnect.com. You can go check it out. There’s a contact us button there in a few different spots. Or you can always email our generic email address, which is info@revmedconnect.com.
Kelly: Great. Thank you for providing that. And thank you all for joining us for this episode of The Hospital Finance podcast. Until next time…
[music] This concludes today’s episode of the Hospital Finance Podcast. For show notes and additional resources to help you protect and enhance revenue at your hospital, visit besler.com/podcasts. The Hospital Finance Podcast is a production of BESLER | SMART ABOUT REVENUE, TENACIOUS ABOUT RESULTS.
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