Dov Klein Senior Director, PwC

1. Innovation in Procurement: A Framework for Creating Value and Mobilizing Supply Chain Transformation Dov Klein Senior Director, PwC Lauren BellSenior Manager, Innovation & Strategic Partnerships, Plexxus

2. Agenda • Introduction to Plexxus • Essential innovation and value-based procurement challenges facing Ontario/Canadian hospitals • Developing our Plexxus’ innovation and value-based procurement decision making approach • Overcoming procurement challenges: Project spotlights • Ingredients for success: Lessons learned to date

3. Who is Plexxus? • Began operating in April 2006 • Recognized as a leader in Canadian health care supply chain services, enabled by a target operating model that enables functional excellence • Not for Profit Organization with 10 Member and 10 Customer hospitals • Our services are provided across 40+ hospital sites • We manage spend across non-wage categories including products (excluding pharmacy) services and capital equipment • Our transparent financial model is based on fees to recover costs with all savings flowing directly to hospitals • We have achieved $350 million in cumulative savings since our inception

4. End-to-End Supply Chain Services Plexxus has developed key service streams that cover the full supply chain lifecycle to relentlessly deliver value to our Members and Customers through service excellence. • Key Services: • Purchase order management • Distribution • In-Hospital Logistics • Accounts Payable • Product Support • Key Services: • Spend Management • Sourcing • Contract Management • Supplier Management • Innovation & Strategic Partnerships • Key Services: • Information Technology • Data Governance & Management • Customer Relationship Management • Corporate (HR, Finance) • Customer Support

5. Evolving Challenges Facing Ontario Hospitals Several years of flat funding, coupled with an aging & increasingly complex patient population has placed tremendous strain on Ontario hospitals. A focus on integration has emerged to improve the system. Funding/cost pressures will continue to grow • Focus on integration without investment will be challenging to implement • Funding growth will continue to be largely flat • New ways of identifying efficiencies required Funding reform will continue to change operating assumptions • Government as purchaser rather than funder • Services and capabilities need to be reorganized to optimize performance across integrated systems • Procuring value/ outcomes as opposed to inputs increasingly critical Patient and infrastructure needs are changing • Acute vs. inpatient care setting questions will continue to evolve • New business and procurement models required to decrease risk and improve affordability of capital assets • Sound financial and operational information required Source: National Health Expenditure Database, 1975-2015, CIHI f: Forecast Drugs category does not include those dispensed at Hospitals or other institutions

6. Essential Innovation Challenges Many innovative solutions & technologies require hospital investment, but with benefits being realized outside its walls. More integrated systems have the potential to improve this equation. System Benefits/ Savings Financial Benefits Realized by the Broader Healthcare System Growing Infrastructure Needs High Cost Care Structure Serving Low Acuity Conditions Siloed Care Model Costs of Acquiring Innovative Solutions or Products Flat MOHLTC funding and potential for shrinking HBAM share Hospital Financial Benefits Realized Directly High Number of ALC Patients Hospital Benefits/ Savings

7. Medical Device Industry Evolution Established companies are evolving their offerings to better support hospitals within bundled funding mechanisms. This is still evolving in the Ontario market. Companies are increasingly choosing to expand beyond their products to service based offerings The Health Research Institute (PwC) analyzed the top ten medical device companies by 2014 revenues. These top players are broadening the scope of their product offerings and moving toward solutions.

8. Focus on Patient Value Value-based healthcare is enabled by integrated models of care that are able to follow the patient across their episode or experience of care. How this is implemented will be critical. Source: Porter/Kaplan Value Measurement for Healthcare - Harvard Business School

9. 1: Innovation in Procurement Integrate best practices Enable optimal engagement of clinical stakeholders and patients Integrate new & emerging technologies/ solutions, & health system changes Innovation & Strategic Partnerships Platform • 2: Procurement of Innovation • Measure value beyond price throughout the patient journey (e.g. TCO). • Enable value/outcomes based healthcare through procuring patient outcomes • Work with the vendor community to decrease risk/ improve cost structure (e.g. going at risk). • 4: Revenue Cycle Maximization • Identify opportunities within the sector to support new or untapped revenue sources • Develop opportunities to procure in ways that address HBAM funding methodology challenges (e.g. minimizing impact on BFE performance). 3: Strategic Partnerships • Connect opportunities within the healthcare innovation ecosystem • Support hospitals in the development of strategic partnerships

10. Decision Making Criteria

11. Ensuring Integrated Processes

12. Embedding Value-Based Health Care and Innovation into Procurement Plexxus has invested in embedding innovation & value-based procurement across our sourcing function to develop a replicable and sustainable model for innovation. 1: Innovation in Procurement • Integrate best practices • Engage clinical stakeholders and patients • Integrate new & emerging technologies/ solutions, & health system changes Pillars of Innovation and Strategic Partnerships Embedding into Sourcing Select Outcomes and Successes Embedded into RFP processes through formalized decision-making matrix and process activities to achieve maximum impact Working closely with Sourcing team to support and/or lead RFPs Sharing lessons learned from ICDs throughout the organization Building on existing partnerships to facilitate connections between Sourcing and relevant stakeholders • Conducted provincial procurement for ICDs across 12 ICD Implanting Centres. • Working closely with Sourcing to support the following initiatives: nurse agency, patient monitoring, digital wayfinding et al • Conducted innovative procurement of CT scanners to drive financial value and patient outcomes. • Developed bundled care solution for hips/knees. • Supported Sourcing in strategic procurement of neurocoils. • 2: Procurement of Innovation • Measure value beyond price throughout the patient journey (e.g. TCO). • Enable value/outcomes based healthcare through procuring patient outcomes • Work with vendors to decrease risk 3: Strategic Partnerships • Connect opportunities within the healthcare innovation ecosystem • Support hospitals in the development of strategic partnerships • 4: Revenue Cycle Maximization • Identify opportunities within the sector to support new / untapped revenue sources • Develop opportunities to procure in ways that address HBAM funding challenges DELIVERING VALUE BY WORKING TOGETHER

13. Project Spotlights Hip and Knee Bundled Care Solution • Solicitation of a provider to support seamless transition of hospital to home using allied health and nursing supports using competitive dialogue and BAFO. • Iterative co-design between hospital, physicians & vendor to continuously refine process based on stakeholder and patient feedback. • Risk/gain sharing enabled to allow for shared savings where direct impact is realised, and penalties if cost per case exceeds budget. • Flexibility in final solution that can be leveraged by all Plexxus affiliated hospitals. • Strategic Procurement of Neurocoils • Costly, and strategic category of spend identified, with desire for cost savings and increased value through stakeholder discussions. • Vendor community increasingly expressing desire to provide value added offerings and go at risk for key financial and patient quality outcomes. • A go-to-market approach was created with a traditional cost based offering, as well as an alternative strategic proposal, addressing a range of hospital operational and patient quality needs. 2 1 3 Innovative Procurement of CT Scanners • Large Trauma Centre requires overhaul of CT Scanner fleet and seeks innovative approaches. • Taken to market through examination of alternative proposals in addition to quantifying impacts of technology on related budgets and model of care (e.g. contrast media reduction guarantees). • Significant vendor engagement throughout including in design of final solution, which included guarantees on related budgets, governance around strategic partnerships and other investments in patient care. • Enabling Disruptive SaaS Technologies • HRIS SaaS based offerings are the standard for many Canadian high reliability organizations, but have only recently been implemented in the Ontario healthcare sector. • Many of our hospitals require a new HRIS in the near term but have challenges with affording a leading class single platform cloud based offering. • Plexxus is working with the vendor community to develop a model where our hospitals gain the customizability of cloud but with scale pricing. A working group to lead this initiative is presently being constructed. 4

14. Spotlight: Ontario ICD/CRT Landscape The ICD/CRT category provided a unique opportunity for MOHLTC, CorHealth Ontario, hospitals & procurement to work together in a value-based way to benefit patients and solve significant system challenges. Geographical Distribution of Patients with an ICD and Sites in Ontario - 2011 to 2016 ICD/CRT Volume Distribution by Centre FY 16/17 Source: CorHealth

15. ICD/CRT Replacement Volumes Within the growth trajectory projected for Ontario, it should be noted that replacements are becoming an increasingly larger part of the implantation volume. The chart below illustrates data taken from the CorHealth Ontario provincial registry for replacement procedures between fiscal years 2010/11 and 2016/17.

16. Collaboration through Patient Engagement As the project lead, Plexxus wanted to ensure that the project was rooted in the lived experiences of patients who have ICD and CRT devices. • Properly understanding the patient perspective is critical to creating requirements for the procurement that reflect actual patient needs and that are properly weighted in the pursuit of maximizing value. • Specifically, Plexxus felt it was important to speak to patients in order to: • Better understand what its like to live with a device, including the impact on the patient, their family and their personal life • Understand where there are gaps in supporting patients living with a device • Define elements of care and support that are most important, through examining patient preferences and values • Ensure that the RFP is creating an opportunity for Suppliers to respond to those needs identified by patients, and in the right way • Build a stronger knowledge base to assist the Working Group in evaluating proposals when the time comes

17. Methods & Key Questions Supported by CorHealth and CANet, we undertook qualitative interviews in order to increase direct patient engagement and promote the sharing of personal experiences and stories. Outreach Process • With the help of CorHealth Ontario and CANet, we identified patients who would be willing to participate in 1 hour interviews. Focus was on developing key themes for validation by the clinicians of the provincial working group, not a statistically significant sample size. Inclusion Criteria • A recent ICD or CRT implant procedure • A replacement procedure • Have experienced a device malfunction of some kind • Have experienced remote monitoring of their device • Travel a long distance to their implant centre for ongoing monitoring and treatment • Have experienced a shock from their device • Have received treatment at both non-academic and academic centres Key Questions • We worked with CorHealth Ontario to validate our questions and make them “patient-focused” vs. “procurement-focused” e.g. how important is having a longer lasting device versus having the device with the latest technology? Would you be willing to have another procedure to get the device with the newest technology?

18. Patient Story: Meet “Patricia” The struggles faced by patients living with an ICD are complex and multi-faceted and remind us that there are long-term effects to living with a device. Background • Received her first ICD device after a sudden cardiac arrest at 39 years of age [2002] • 3 children, works in nursing Feedback • Felt she was not given much information prior to her implant procedure, nor was any education done with her family/caregivers; this raised questions about what would happen at end of life • Observed notable impacts to daily activities that were not detailed prior e.g. showering, driving, sleeping were all impacted, particularly due to unanticipated size of device • Had to travel over one hour to implanting centre and take a day off work every few months for an appointment; huge impact to family life • Would have loved to benefit from remote monitoring, provided there was an opportunity to connect with a provider • Noted the impact of repeat procedures through her sister having one, detailing how much more painful these often are due to scar tissue • In accessing care outside of the implanting centre, it was noted how much a device patient had to advocate for themselves as they moved throughout the cardiac system. “When replacing the battery, are we replacing the whole unit? As a patient I always thought it was a simple swap out” “I never had remote monitoring but I would expect to speak to someone; there is more to monitoring than the transmission of information”

19. Linking Patient Input to a Provincial Strategy Supported by CANet and CorHealth, Patient interviews ensured that the right elements of patient value were being emphasized. 5 key themes ‘achieved’ sufficient saturation and were validated by CorHealth and CANet. Consideration of Device Characteristics: Patients noted the importance of a longer lasting device, the impact of device size on physical experience, the importance of technological enhancements, such as remote monitoring capabilities, and the need for MRI compatibility. Education & Awareness: Patients need to understand not only the characteristics of their device, but how the choice to proceed with an implant may impact their activities of daily living and the lives of their families. Patient Experience: The psychosocial implications of living with an ICD or CRT device are not to be underestimated. Patients discussed increased pain for replacement procedures and the notable physical toll for having a device implanted. Clinician Contact & Support: Patients noted the importance of maintaining an ongoing relationship with their provider/care team post-implantation. Device Assurance: Beyond standard expectations that ensure inappropriate shocks and risks of lead failure are minimized, patients also expressed an interest in ensuring access to new technology [at a minimum, understanding their options], having greater access to remote device monitoring, and as part of this, ensuring the security of their personal information.

20. Project Governance & Support A governance structure with strong executive support and a broad working group brought together business, clinical and technical perspectives to build consensus on how to best support patients. Procurement Executive Governance Project Enablement Provincial Sponsors (PS) MOHLTC ADMs and CorHealth Plexxus (observer status) Hospital Procurement Working Group (WG) Clinical and Business Representative from each Centre, Plexxus. MOHLTC/ MGCS, CorHealth, (observer status) • The WG is mostly comprised of representatives from each of the ICD sites. Each site will have equal representation. WG representatives are charged with communicating outcomes at their home facilities. • Ensure their hospital’s unique business, technical and clinical needs are captured/represented. Highlight provincial funding/operational issues. • Review and approve RFP before posting to market. Score rated criteria within the RFP. • Engage directly with vendors in vendor dialogue sessions around submissions. • Advise on provincial components of sourcing strategy. • Address participation mandate and any unrealized challenges to purchasing as a province. • Support in addressing any unanticipated issues that can’t be resolved through the WG. • Take feedback from the WG into account in setting future strategy / policy. Project Support Group (SG) Plexxus, MOHLTC, MGCS, CorHealth, External 3rd Party Support • The SG provides, project management, communication, policy and analytical support in executing against the mandate of the project. The SG is also responsible for ongoing evaluation, during and after the project is complete. • Plexxus oversees the execution of the sourcing strategy, requirements gathering, project management and the sourcing/contract implementation process. Plexxus has hired a Healthcare Economist and Fairness Commissioner to support the project. • MOHLTC and CorHealth provide support in the form of project resources (e.g. data/analytics) and expertise.

21. Project Scope Summary Working with stakeholders across the system, we developed a scope that aimed to improve patient outcomes and cost across the full cycle of patient care. Device & Leads: Devices and leads will be purchased on the basis of a ‘system level’ commitment of 50%, on a hospital by hospital basis. Other consumables and capital related to the implantation and ongoing management of patient care will be purchased on a menu basis. • Value Add Solutions: Vendors are increasingly offering ‘solutions’ to support hospitals in meeting their patient care and financial goals. Proposals will be reviewed for optional implementation by hospital(s). Challenge statementshave been used to describe notable patient, system and hospital level ‘problems’ that Proponents may be able to help solve. Proposals can take the form of the following: • Additional Warranties • Risk Share Structures • Programs & Services • Other Technologies • Pricing, where applicable, should apply equally to all hospitals. It is recognized that some solutions will require additional phases of (competitive) dialogue directly between the hospital(s) and the proponent. • Service: The base service expectations have been established as a mandatory requirement. All service above this baseline will be defined & priced on a menu basis. This includes: • Support in the EP lab • Support in a clinic setting Remote Device Monitoring: Hospitals across the province are at different stages in their ‘remote monitoring’ journey. Providing choice & transparency is required to meet diverse needs. All patient and hospital costs related to the hardware and software for monitoring the patient/device will be included on a per device basis.

22. Evaluation Stages Phase 2 & 3: Hospital Perspective Phase 1: Provincial Perspective Every Proponent provides pricing for the device, leads and other requested items. Standard service and support is applied to all vendors as a mandatory requirement. Each hospital undertakes their own evaluation and scoring of the common clinical/business criteria and relevant requirements. ‘Price’ weighting scoring will be common across hospitals. A 2 Device longevity is analyzed using multiple sources and registry data to assign a future patient impact/cost profile. CorHealth & Healthcare Economist will validate results. B The individual hospital scoring will set a ranking and the basis for a preferred Proponent (at a minimum of 50% commitment). Hospitals can subsequently choose to negotiate additional value & scope as well as the proposed solutions outlined in the Challenge Statements but will need to build it into their own evaluation process. All qualified Proponents must have access to bid as part of this additional process. 3 Provincial ‘cost of care’ price range set so every vendor moves to Phase 2, unless their total weighted portfolio cost is 15% greater than the average cost of all Proponents. A contract will be established with each qualified Proponent. C • Ensures competitive pricing vs. ‘the lowest cost’, & a minimum standard of service/warranty that can be used across the province. • Allows for patient care differences between vendors to be recognized in their ‘Price’. • Each hospital is able to recognize differences in clinical practice. • Provides flexibility to leverage the offerings of as many vendors as deemed clinically necessary. • Allows for value to be negotiated by each hospital individually. Rationale Rationale Rationale

23. ICDs/CRTs: Looking at Value from Multiple Perspectives

24. ICDs/CRTs: Understanding Total Cost of Care 3 2 1 x = Number of devices needed Cost of Care Vendor Portfolio Cost How long each type of device lasts Cost of device, leads, remote monitoring etc. + + How long each patient lives in Ontario by device type Cost of implant surgery & subsequent devices

25. Delivering Value for Ontario To date, this initiative has created tangible improvements, not only for hospitals but for patients, providers and the broader health system. • Enabled the consistent use of MRI compatible devices and device/lead matching at the provincial level • Device Warranty and related service now more clearly attached to the patient vs. the hospital to ensure a consistent standard of seamless care no matter where a patient seeks out care • Support enablement of remote device monitoring for all 12 centre with clear picture of costs over a patient’s entire lifespan, not just budget cycle • Established consistent and equitable service and support across hospitals regardless of geography. • Full transparency in inputs across device, remote monitoring and service/support • Ensured vendor specific physical interrogation technology exists at all implanting sites • Developed 10 system level problems that allowed Suppliers to support system wide challenges to the delivery of cardiac care in Ontario • Common Form of Agreement can be leveraged for the future. • Ensured that all 5 vendors will retain access to the Ontario market, reducing supply chain risk. • Provided opportunity for Suppliers to become more engrained in the episode of care.

26. Ingredients for Success: Lessons Learned to Date in Ontario Deep physician engagement required. It’s got to be about more than costs today. Engage meaningfully with the market. Leadership alignment essential. Talk to patients! Partner at all levels. Draft for Discussion Purposes – Please Do Not Distribute

27. CONTACT & QUESTIONS Dov KleinSenior Director, PwC dov.k.klein@pwc.com Lauren BellSeniorManager, Innovation & Strategic Partnerships, Plexxus lauren.bell@plexxus.ca