Blog | Mobile Aspects

Hoarding In The OR Is Costing Your Hospital Real Money

October 17, 2018Sri Mandava Cost Reduction Hospital Finance Hospital Management Operating Rooms Operational Efficiency Supply Chain The Business of Surgery

The hospital supply chain is increasingly being looked at as a way for hospitals to eliminate unnecessary spend. As hospitals continue on their journey from volume to value, the profit per procedure needs to improve in order for hospitals to remain profitable.

As the place where most hospitals make and spend 50% of their dollars, the procedural areas, including the Operating Rooms and Cath Labs, are a smart place to start looking for inefficiencies in the supply chain. Hoarding in these areas can often be a concern as they try to strike a balance between operational efficiency and conflicting demands from physicians and nurses. As this article from Christopher Cheney at HealthLeaders Media reports:

“In addition to cutting costs, efficient product management also limits hoarding of supplies, [Theodore] Pappas says.

“When it comes to waste and product on the shelf, you talk about hoarding and hiding things in drawers and other types of activities that caregivers are accustomed to in certain circumstances. In many cases, we are failing as a supply chain if we allow that to happen—we are not putting the right things in the right place at the right time so it’s easily attainable for caregivers,” he says.

Clinician hoarding often leads to waste of perishable products, Pappas says.

“If a supply is readily available for them, they are not going to have to hoard it the next time. We also need to teach them why that’s important and the implications of hoarding. You need to share the cost of expired product expense,” he says.

Changing behaviors

Waste management often requires changing behaviors among clinical care teams.

Altering the behavior of staff members should be a collaborative process, [Stephen] Downey says.

“You help everybody understand what the organization is up against and why you’re working on change. You’re trying to help care teams do their job better. Together, you look at waste and the information that has been gathered. You also have to accept that changing habits and behavior is not going to happen quickly. You can’t expect that everybody leaves on Friday and on Monday there’s an entirely new process,” he says.

Pappas says sharing waste information data with staff is critical to achieve changed behaviors such as sharing the overall expired product that’s being wasted. “You need to share information in various formats. It’s not just an email. It’s not just a conversation. It’s both, and it’s also presenting the information to the teams involved.”

Read the article here: How to Limit Waste in Hospital Supply Chains

As hospitals look to remove much of the waste from their operations, getting a hold of the right data at the right time becomes an important requirement. If your organization lacks the proper tools to provide powerful data around your supply chain spend, consider systems such as iRISupply which can collect real-time data around supply and implant usage using RFID technology and provide actionable insights to help with vendor negotiations, on-hand inventory levels and owned-consigned item mix. Powerful data analytics included with the software will give specific recommendations on which items to reduce or eliminate, and which items should be owned vs. consigned, leading to millions of dollars in cost-savings opportunities. These cost-savings opportunities can help hospitals increase their margins and provide valuable dollars straight to the bottom line.

Top Health Technology Hazards List For 2019 Includes Endoscope Reprocessing

October 9, 2018Sri Mandava Hospital Management Infection Control Managing Endoscopes Patient Safety

The ECRI Institute, based in Philadelphia, has just released its annual list of health technology hazards for 2019. Endoscope reprocessing once again appears on the list, coming in as the number 5 hazard for 2019.

The Top 10 Health Technology Hazards List is the result of extensive research by ECRI’s engineers, scientists and clinicians, as well as investigation into its own problem reporting network. The list considers criteria such as severity, frequency and insidiousness when ranking the hazards. It’s no surprise that endoscope reprocessing came in as number 5 on the list, as reports of safety breaches have continued to appear in various locations over the last year due to improper reprocessing of endoscopes. The Executive Brief published by ECRI Institute explains why endoscope reprocessing continues to be such a concern:

“Cleaning and disinfecting flexible endoscopes between uses is known to be a challenging process. Failure to precisely follow a robust reprocessing protocol can lead to debilitating or even fatal infections. Less well known is that improper handling and storage practices can recontaminate previously disinfected scopes, heightening the risk of patient infections.

If endoscopes are not completely dried after being subjected to high-level disinfection, any remaining viable microbes can rapidly proliferate and colonize the instruments. To promote drying, ECRI Institute and relevant professional societies recommend purging endoscope channels with clean air at the end of the reprocessing process.

The disinfected status of endoscopes can also be compromised if the instruments are handled with unclean gloves—a practice that ECRI Institute has observed. Endoscopes that have been cleaned but not yet high-level disinfected are still contaminated with viable microbes; thus gloves used to handle an endoscope at that stage must not be used to remove the scope from the reprocessing machine.

Recontamination can also occur when transporting and storing endoscopes. Disinfected and dried endoscopes should be transported in a clean enclosed container, dedicated to that purpose, and should be prevented from contacting potentially unclean surfaces.”

Read the entire Executive Brief here: 2019 Top 10 Health Technology Hazards

In order to reduce the risk of improper disinfection and reprocessing of flexible endoscopes, invest in a system that can ensure all the proper steps are followed each time a scope is reprocessed in your facility. If your department wants to automate the workflow and documentation process of the reprocessing cycle while ensuring compliance with reprocessing SOPs, consider a software system like iRIScope. Systems like these ensure that your staff are performing consistent, repeatable and documented steps during reprocessing. They minimize manual efforts to document the process by incorporating advanced data collection technologies like RFID directly in to the workflow, and the system also includes smart endoscope storage cabinets that can be designed to include channel drying functionality. Having iRIScope in place in your facility will greatly reduce the risk that your staff will expose patients to potentially dangerous diseases due to poor reprocessing of flexible endoscopes.

US Hospitals Suffer Profit Drop For Second Straight Year

September 27, 2018Sri Mandava Cost Reduction Hospital Finance Hospital Management Supply Chain The Business of Surgery

A recent press release from Fitch Ratings noted that not-for-profit hospital operating margins fell for the second straight year. The median operating margin in the not-for-profit hospital space was 1.9% in 2017, down from 2.6% in 2016.

Even though balance sheets strengthened for the not-for-profit hospital sector in 2017, the drop in operating margins from 2016 has stoked fear about the ongoing strength of the sector. As this press release from Fitch Ratings explains:

“Ongoing struggles with operating margins reflect a broader sector trend in which healthcare reform pressures have only been alleviated not eliminated.

“Labor and wage pressures for experienced staff will continue with the U.S. labor market improving and the need for clinicians still strong,” said Senior Director Kevin Holloran. “Another factor that will add to operating margin woes is the ongoing transition to population health and at-risk contracting.”

Fitch Ratings’ 2018 medians show that operating margins have declined across the board for the entire rating spectrum of hospitals. Key balance sheet metrics like days’ cash on hand, cash to debt and leverage, however, have improved over the last year and are now at all-time highs. Whether this means better days ahead for the sector remains to be seen. One thing is clear, however. “Operating margins remain under pressure for the second straight year, which means stress is not letting up for not-for-profit hospitals,” said Holloran.

Though Fitch’s revised rating criteria places more emphasis on balance sheet strength, operating profitability is still very much a pivotal factor in determining a hospital’s fiscal health. Despite weakening operating margins, the median rating for Fitch’s rated credits remains at ‘A’. That said, “should operational pressures continue for an extended period of time, even strong balance sheets will begin to come under pressure,” said Holloran.”

Read the press release here: Operating Margins Remain Under Siege for U.S. NFP Hospitals

Many not-for-profit hospitals are learning to adapt to the new value-based care environment in real-time and adjusting on the fly. One place that hospitals may find immediate opportunities for reducing their costs is by better managing their implants and supplies, which make up the second biggest component of procedure costs after labor. If your organization lacks the proper tools to provide powerful data around your supply chain spend, consider systems such as iRISupply which can collect real-time data around supply and implant usage using RFID technology and provide actionable insights to help with vendor negotiations, on-hand inventory levels and owned-consigned item mix. Powerful data analytics included with the software will give specific recommendations on which items to reduce or eliminate, and which items should be owned vs. consigned, leading to millions of dollars in cost-savings opportunities. These cost-savings opportunities can help hospitals increase their margins and prop up an otherwise declining operating margin.

The Dangerous Trend Of Hospital Costs Outpacing Revenue Growth Rates

September 20, 2018Sri Mandava Cost Reduction Hospital Finance Hospital Management Operational Efficiency Supply Chain The Business of Surgery

A recent research report from Moody’s Investors Service noted that not-for-profit hospital revenue growth rate have been increasing at a slower rate than expenses, leading to shrinking profitability margins.

While there has been a slowdown in the growth rate of costs at not-for-profit hospitals, the reduction in the revenue growth rate was even faster in 2017 according to the report. As this article from Alex Kacik at Modern Healthcare reports:

“The median annual expense growth rate fell from 7.1% in 2016 to 5.7% in 2017 but annual revenue growth declined faster, from 6.1% to 4.6%, despite increased merger and acquisition activity, according to Moody’s Investors Service.

While not-for-profit hospitals have curtailed labor and supply costs, lower reimbursement rates, the shift to outpatient care and increased ambulatory competition have shackled revenue.

This marks the second consecutive year expenses outpaced revenue, which will remain the largest strain on not-for-profit hospital profitability through 2019, Moody’s analysts said.

“This is no longer solely about expense reduction. If not-for-profits just focus on that, they will be out of business in the next few years,” said Lyndean Brick, president and CEO of healthcare consultancy the Advis Group. “They have to grow volumes, be creative and do things differently than they have done.”

While not-for-profit health systems have started to curb expenses, more should look to grow volumes by embracing physician-led ambulatory surgery centers, bolstering managed-care plans, doing more direct contracting and monetizing operations like food services, Brick said.

Median Medicare and Medicaid payments as a percentage of gross revenue slightly increased to 45.6% and 15.5% in 2017, respectively, while the higher-paying commercial sector nudged down to 31.9%, according to Moody’s. Government payers’ share of hospital revenue will likely increase as the population ages, which has manifested in each of the last five years.

Notably, less than 3% of net patient revenue came from capitation and risk-based contracting in 2017. Most reimbursement was derived from diagnosis-related group payment (41%), fee schedule (28%) or from a percentage of the chargemaster or list price (17%).

“They have to monetize their assets,” Brick said. “They have to look at nontraditional revenue as a key driver in their future success.”

Moody’s expects more margin pressure through 2018 after median margins fell to an all-time low of 1.6% operating margin and 8.1% of operating cash flow. Income from operations was nearly cut in half from 2016 to 2017.

Another emerging trend is a large jump in hospitals with operating deficits and lower operating cash flow in 2017. More than 28% of hospitals reported operating losses last year, which rose from 16.5% in 2016. The 59% of providers reporting lower absolute operating cash flow is more than double the 24% reported in 2015—the highest percentage in five years.

While not-for-profit hospitals have reduced their debt over the last five years, their debt service coverage ratios have softened, Moody’s found. Funding capital needs through debt financing could exacerbate that trend, Moody’s analyst Rita Sverdlik said.

Investment income has provided a buffer, boosting the unrestricted cash and investments growth rate from about 5% to 9%, although that could change if the market turns, she said.

“Reversing sluggish volume trends and growing profitable service lines will be critical to improving the sector’s financial trajectory over the near-term as most hospitals continue to operate in a fee-for-service environment,” Sverdlik said in a statement.

As hospitals revamp their operations, suppliers and vendors also need to be held in check, Brick said.

“It’s important that the healthcare industry underscores a similar cost reduction pressure that hasn’t yet been fully achieved on the supplier and vendor side,” she said. “There needs to be some pressure on them to drop their prices.”

Download a copy of the case study here: Not-for-profit hospitals’ cost-cutting isn’t keeping up with revenue decline

Many not-for-profit hospitals are learning to adapt to the new value-based care environment in real-time and adjusting on the fly. Utilizing the vast amounts of data that they are gathering around their procedures will allow them to identify areas of improvement and make adjustments that should yield immediate returns. One place that hospitals may find immediate opportunities for reducing their costs is by better managing their implants and supplies, which make up the second biggest component of procedure costs after labor. If your organization lacks the proper tools to provide powerful data around your supply chain spend, consider systems such as iRISupply which can collect real-time data around supply and implant usage using RFID technology and provide actionable insights to help with vendor negotiations, on-hand inventory levels and owned-consigned item mix. Powerful data analytics included with the software will give specific recommendations on which items to reduce or eliminate, and which items should be owned vs. consigned, leading to millions of dollars in cost-savings opportunities. These cost-savings opportunities can help hospitals increase their margins and provide valuable dollars to the bottom line.

Study Reveals Bronchoscopes Ready For Use On Patients Are Still Dirty

September 12, 2018Sri Mandava Hospital Management Infection Control Joint Commission Managing Endoscopes Patient Safety Regulatory Compliance

Several recent studies have shown that despite best efforts to follow manufacturer reprocessing guidelines, bronchoscopes deemed ready for patient use are still contaminated at a high rate. Some of the most recent research highlighting the difficulties of disinfecting bronchoscopes was published by Cori Ofstead, MSPH.

In a recent presentation at the annual meeting of the Association of Professionals in Infection Control and Epidemiology (APIC), Ms. Ofstead discussed some of her recent findings. In a recent study, researchers found that 100% of the bronchoscopes evaluated had residual contamination after manual cleaning. Microbial growth was found in 58% of fully-reprocessed bronchoscopes, including mold, Stenotrophomonas maltophilia, and Escherichia coli/Shigella spp. This article by Kelly M. Pyrek at Infection Control Today discusses the inherent risks associated with bronchoscopes:

“In her presentation at APIC, Ofstead emphasized the continuance of breaches in protocols. “In theory and accordance with the IFUs, bronchoscopes are supposed to be reprocessed starting immediately after use; and the first thing that is supposed to happen is a bedside pre-cleaning as soon as that bronchoscope comes out of the patient’s body,” Ofstead says. “When that’s done, they should be transported to a reprocessing area where they would undergo a leak test and then they would be thoroughly cleaned and rinsed off. After that, they are supposed to get a visual inspection to make sure that you got all the gunk off, and that is supposed to be performed with lighted magnification. The guidelines from AAMI and AORN now recommend that there also be biological testing for cleaning verification, so because the scope is black and you can’t see inside of it, you must do something to make sure that the cleaning you did in the dark, so to speak, actually worked. Once you verify that it is clean, and if it’s not clean, you clean it again, then it would either be sterilized or high-level disinfected and dried before storage. In some of the guidelines it is also specified that it should get a visual inspection right before use. I caution people that we often boil down the steps into this short, compact list that sounds easy but what we know when we go in to perform audits there are numerous steps when following the guidelines and depending on the scope, there might be 100 to 140 steps they must do and they generally must do them in an order that is specific. So, it’s a lot to remember.”

Kovaleva (2015) reminds us of the risks associated with bronchoscopy; she writes, “The exogenous microorganisms most frequently associated with transmission of infection during bronchoscopy are Pseudomonas aeruginosa and mycobacteria. These microorganisms can be transmitted from previous patients or contaminated reprocessing equipment by contaminated endoscopes or accessory equipment. Exogenous infection should be prevented by strict endoscope disinfection procedures. During the period 1970-2012, 48 outbreaks of exogenous bronchoscopy-related infections and cross-contaminations involving 198 infected patients were reported in the literature. Several outbreaks of bronchoscopy-related transmission of multidrug-resistant P. aeruginosa and carbapenemase-producing Klebsiella pneumoniae have been published during the past few years.”

…Kovaleva (2015) adds, “Modern bronchoscopes contain multiple channels and ports which are difficult to clean and disinfect and allow for the collection of organic material and the forming of biofilms. A biofilm is an assemblage of microbial cells attached to a surface and enclosed in a matrix of exopolymeric substances. Biofilms are extremely difficult to remove, show increased resistance to disinfectants and antibiotics and can result in failure of reprocessing of endoscopes and outbreaks of endoscopy-related infections. Two outbreaks of bronchoscopy-related infection and cross-contamination of P. aeruginosa, Mycobacterium chelonae and Methylobacterium mesophilicum involving 28 patients were attributed to contaminated AERs with the presence of biofilm deposits on the internal plumbing.”

Kovaleva (2015) acknowledges that routine microbiological testing for endoscopes and AERs remains a controversial issue in many guidelines: “Microbiological surveillance of endoscope reprocessing has been recommended by several medical specialist organizations but there are no standards for the frequency of testing intervals of surveillance cultures. It is appropriate to trace contaminations of endoscopes and to prevent contaminations and infections in patients after endoscopic procedures. The use of environmental endoscope culturing is a rapid and simple method to monitor the effectiveness of standard reprocessing procedures. Contaminated bronchoscopes have been linked to many outbreaks of device-related nosocomial infections. The true incidence of bronchoscopy-related infections is unknown because of inadequate surveillance or no surveillance at all. Endoscopy-related infections can cause serious harm and can give rise to concerns over these procedures by physicians and patients. A continuous search for ways to improve the disinfection process and to construct such endoscopes that the risk of biofilm formation will be reduced, remains warranted.””

Read the entire article here: Device-Related Infections: Patient-Ready Bronchoscopes Found to be Contaminated Despite Cleaning and Disinfection

The infection risk with bronchoscopes and all flexible endoscopes continues to be a major worry for hospitals. Facilities must ensure staff are trained on general infection control principles and must adhere to reprocessing best practices. To ensure that your staff is following reprocessing best practices on every bronchoscope, colonoscope and other flexible endoscope they disinfect, install additional checks and balances into your workflow so that you can document that your staff is following the same process each time. Software systems such as iRIScope have been introduced in recent years to help hospitals and surgery centers ensure that each of their flexible endoscopes is reprocessed the proper way each time, and documentation of each step of the reprocessing cycle is kept electronically using advanced RFID technology.

New Research Concludes Academic Medical Centers Trail Community Hospitals In Cost And Quality Measures

August 30, 2018Sri Mandava Cost Reduction Hospital Finance Hospital Management Operational Efficiency Supply Chain The Business of Surgery

Academic medical centers (AMCs) play a prominent role in America’s healthcare system. They provide a disproportionate share of charity care, medical research and medical education when compared to non-academic medical centers. It has been assumed for a long time that AMCs also provide higher quality care than comparable non-academic medical centers, however there has been little research on the topic.

A new study released by Navigant Consulting concludes that AMCs trail non-academic medical centers when it comes to certain cost and quality measures. The study pinpointed some key data points that support this conclusion including:

“Cost per case was 5.8% higher at AMCs (2017), equating to $3.1 million in average added annual operating expense per AMC.
Cost per case disparity between high and low performers of 22% for AMCs, 19.8% for non-AMCs, equating to $12 million per AMC and $9.2 million per non-AMC in added annual operating expense.
AMCs received more Medicare value-based program penalties (2016-2018) — 40% got 7+ of 9 possible penalties vs. 23% of non-AMCs.”

Download a copy of the case study here: Study: Despite Improvements, Academic Medical Centers Trail Non-Academics on Cost and Quality Metrics

Looking at the data shows that despite higher costs at AMCs for procedures, they are not experiencing proportionately better outcomes, as many would have assumed. The data doesn’t identify the culprits for the lack of control of costs per case at AMCs, but it is reasonable to assume that running the business side of operations at AMCs is proving more challenging than at non-academic medical centers, which may be able to keep tighter control of their operations. With smaller staffs, less attending and rotating physicians and higher levels of accountability, they may be able to keep costs per case under control better than at AMCs, which have more resources and more volume to manage. This can be seen in the disparity between high performing and low performing AMCs, which have a 22% variance in their cost per case, versus a 19.8% variance for high and low performing non-academic medical centers.

Many AMCs are learning to adapt to the new value-based care environment in real-time and adjusting on the fly. Utilizing the vast amounts of data that they are gathering around their procedures will allow them to identify areas of improvement and make adjustments that should yield immediate returns. One place that AMCs (and non-AMCs) may find immediate opportunities for reducing their cost per case is by better managing their implants and supplies, which make up the second biggest component of procedure costs after labor. If your organization lacks the proper tools to provide powerful data around your supply chain spend, consider systems such as iRISupply which can collect real-time data around supply and implant usage using RFID technology and provide actionable insights to help with vendor negotiations, on-hand inventory levels and owned-consigned item mix. Powerful data analytics included with the software will give specific recommendations on which items to reduce or eliminate, and which items should be owned vs. consigned, leading to millions of dollars in cost-savings opportunities. These cost-savings opportunities can help AMCs close the cost gap with non-AMCs in a big way.

The Key Inventory Management Metric For Hospitals To Track

August 23, 2018Sri Mandava Cath Lab Cost Reduction Hospital Finance Hospital Management Operating Rooms Operational Efficiency Radiology Supply Chain The Business of Surgery Tissue Management

As hospital executives look for new opportunities to reduce costs in an era when value is taking over for volume, the supply chain is increasingly coming in to focus. For too long, hospital supply chains – more specifically the procedures for managing surgical implants and supplies that make up a large share of supply costs for hospitals – have been managed inefficiently. A lot of this has to do with the top-down method that hospitals have traditionally used for ordering implants and supplies, with physicians dictating which implants and supplies should be kept in stock. While this is done to make sure that physicians have what they need to treat their patients, inventory managers in the procedural areas have often taken a hands-off approach to making sure that these items are managed efficiently. Some of the results are bloated inventories, expiring items and vendor managed stock that hospitals have no visibility in to. All of these poor outcomes are costing hospitals real money, and the time for this mismanagement is coming to an end.

As hospitals look for ways to become more efficient with their inventory levels, they need to rely on data and track their performance against metrics to start to turn the tide. There are several metrics to consider but one stands above the rest in terms of its ability to measure inventory management efficiency.

The Key Metric You Need To Track

There are many established metrics that help you determine if your inventory levels are appropriate, but one metric can help you manage your efficiency better than any other: Inventory Turnover. Inventory Turnover is an efficiency ratio that looks at how often you are going through your inventory in a certain time period. The formula for Inventory Turnover is:

Inventory Turnover = Cost of Goods Sold / Average Inventories

As an example, a hospital department that has $10 million of supplies on hand and $20 million of supplies used annually would have an Inventory Turnover of 2.0x ($20 million cost of goods / $10 million inventory).

The reason that Inventory Turnover is the single best metric to track is that by definition it measures your efficiency. If you have way too much inventory on hand, your Inventory Turnover ratio will be low. If you have too little inventory, your Inventory Turnover ratio will be too high. And as you measure trends in your data, you’ll start to see that as your procedure volume drops, your Inventory Turnover will start to decrease, meaning it’s time to adjust your inventory levels downward to correspond with the drop in procedures. And if your procedure volume increases, your Inventory Turnover will start to rise, which may signal it’s time to start keeping more stock of certain items. Because Inventory Turnover looks at both your usage and your on-hand inventory level, it is a great resource for measuring inventory efficiency.

How To Track Inventory Turnover As A KPI

The first step to incorporating Inventory Turnover as a metric is to begin measuring and tracking it. No matter how efficiently (or inefficiently) you’re running your inventory operations today, it is a near guarantee that once you start tracking Inventory Turnover as a Key Performance Indicator (KPI) you will see opportunities for improvement.

In order to begin tracking Inventory Turnover, you’ll need access to good data around your on-hand inventories and inventory usage. While Inventory Turnover typically depicts an annual statistic of how many times per year you are turning over your inventory, you can measure Inventory Turnover monthly by annualizing the monthly usage data. To track your Inventory Turnover on a monthly basis simply use:

Monthly Inventory Turnover = (Monthly Inventory Usage x 12) / End-of-Month On Hand Inventory

While the textbook definition of Inventory Turnover requires an average inventory value for the time period, we can use end-of-month inventory as a quick proxy of what that number would be since you shouldn’t be seeing wild swings in your inventory levels.

What Does A “Good” Inventory Turnover Look Like

When you start to track Inventory Turnover, you may notice large swings in the monthly turns due to the seasonal nature of hospital procedures. When key physicians go away for vacation, you may see drastic drops in volume that reduce your turns for a month. And when business picks up during busy season, you may see large increases in turns as your supply usage grows. However, you want to begin to identify what your norm is and start putting together plans to improve upon it.

After you’ve observed your inventory turns data for 2-3 months, start to set up a simple goal that represents a reasonable inventory turns metric for your department to achieve. Your next question is most likely: what is a reasonable Inventory Turnover goal to reach? We can turn to the retail industry to understand how a “good business” turns over their inventory. Looking at retail leaders like Wal-Mart and Target shows us that leading retailers are turning over their inventory 7-10 times per year. We have in fact seen certain specialty hospital departments like tissue/bone banks and Electrophysiology (EP) Labs meet or exceed these benchmarks (up to 9-12 times per year). However, we have seen best practices at hospitals for the procedural areas like Vascular Operating Rooms, Interventional Radiology and Cardiac Catheterization Labs be in the range of 4-5 times per year. Given the nature of these areas where different sizes and certain products need to be kept on hand “just in case”, it may be difficult to exceed these targets without sacrificing patient safety.

Just one note of caution: when you start measuring your Inventory Turnover, do not be surprised if your inventory turns are in the neighborhood of 1-2 times per year. This is absolutely normal, especially in areas where Inventory Turnover hasn’t been tracked and used to improve efficiency before. But once you start measuring Inventory Turnover, you will now have the tool you need to set targets and eventually meet or exceed industry best practices.

Where Can I Get Valid Data For Measuring Inventory Turnover?

Hospitals often have a challenge getting their hands on reliable and accurate usage data for their supplies. Ordering data is typically easier to access than usage, but do not use this data as it will include data for items that are being over-ordered, or that are being ordered to replace expiring items and not necessarily used, and your actual needs for certain products will be overstated as a result. Without trustworthy usage data, you will not be able to accurately measure your Inventory Turnover ratio.

If getting your hands on high-fidelity usage data is currently a challenge, consider a system like iRISupply from Mobile Aspects. This hospital inventory management software will arm you with the data you need accurately track your Inventory Turnover ratio. Mobile Aspects supply chain experts will also sit down with you quarterly as part of a best-in-class customer success program to review your inventory turns trends, and will even recommend supplies that can be reduced or eliminated to improve your Inventory Turnover ratio.

A community hospital in Illinois recently used data coming out of the iRISupply system to improve Inventory Turnover in the EP Labs. Using the data and recommendations from iRISupply, they were able to increase their Inventory Turnover ratio from 5.7x to 11.8x in just 8 months. The hospital is now undertaking a similar process in their other procedural departments, which they estimate will result in over $1.5 million in savings for the hospital.

How A Periodic Update Of Your PAR Levels Can Save Your Hospital Millions

August 16, 2018Sri Mandava Cath Lab Cost Reduction Hospital Finance Hospital Management Operating Rooms Operational Efficiency Radiology Supply Chain The Business of Surgery

PAR levels (or periodic automatic replenishment levels) have been used in industry for decades to help businesses of all kinds keep just the right amount of inventory on hand without suffering from excess. Many hospitals solely rely on “gut feel” in order to understand how many items of each product type they should keep on hand at any given time. The lack of understanding of the utility of PAR levels, and the lack of data to periodically update those PAR levels, could be costing the average hospital millions of dollars in bloated inventories.

Why PAR levels are important

PAR levels are set to establish the minimum and maximum number of units of any given item that should be in inventory at a single time. Whenever the number of items in inventory falls below the minimum PAR level, a re-order should be placed up to the maximum PAR level (or the minimum if only the minimum PAR level has been established). The optional maximum PAR levels are set to keep you from holding too much of an item in stock and risking expiration.

Many hospitals have traditionally relied on the experience of the inventory management techs and nurses to keep their shelves stocked with needed implants and supplies. However, managing based on “gut feel” and instinct almost always results in either too much or too little inventory being ordered. Improperly managed inventories result in excess costs from rush orders for under-ordered inventory, and expirations and unnecessary carrying costs from over-ordered inventory. In this era of healthcare, when every dollar is being scrutinized in an effort to cut out waste, this bloat is now an expense most hospitals cannot afford.

Why hospitals struggle to set PAR levels

In discussions with hospitals, we have seen that the primary driver of poorly managed or non-existent PAR levels is the lack of data available to make optimal decisions. PAR levels are dependent on several variables, including the frequency of use and re-order or lead time. Without the right data to manage PAR levels, hospitals tend to overstock their inventories. This is perfectly valid in an environment where running out of an implant or supply isn’t just an inconvenience, but can also put someone’s life in jeopardy. However, it doesn’t have to be this way in today’s world where data is more reliable and readily available than ever before. You don’t need to rely on “safety stock” or items hidden away for an emergency to ensure that you have the right amount of supplies on hand. The right data if utilized properly will make sure you have everything you need when you need it.

How to settle on the “right” PAR levels

There is no “right” answer when it comes to setting PAR levels, so hospitals have to rely on a combination of data and experience to get to a reasonable decision. There are several factors at play when it comes to setting PAR levels within a hospital environment. One needs to strike the right balance between setting PAR levels too low – resulting in out-of-stock situations – and setting PAR levels too high – resulting in bloated inventories and increased administrative overhead to manage them. Inventory managers also need to factor in how critical a supply is in case they run out, and there are also some critical items that must be kept on the shelf “just in case”, even if used very rarely.

When setting PAR levels, make sure to have a very reliable, accurate and readily available set of usage data for all of your supplies and implants. As you may stock hundreds or even thousands of different items, start by working from the most expensive items on down, as savings with the most expensive items will have the biggest impact on your department’s financials (the 80/20 rule typically applies as the top 80% of your supply spend will be on around 20% of your products). You’ll need to come up with standard criteria to evaluate your usage – such as calculating the average use in a given period, or the maximum use in a given period – to understand where to properly set your PAR levels. By going through this exercise one product at a time, you’ll quickly realize that your current on-hand inventory has major opportunities for right-sizing. Each dollar that you can trim from your on-hand inventory is like a dollar that you have just given back to your department to invest elsewhere.

Where to get the data needed for setting PAR levels

If getting your hands-on high-fidelity usage data is currently a challenge, consider a system like iRISupply from Mobile Aspects. This hospital inventory management software will arm you with the data you need to move to a just-in-time inventory environment that eliminates excess. It also allows for perpetual inventory management due to the real-time nature of the on-hand data in iRISupply’s smart cabinets. iRISupply will not only provide you with the usage data you need, but will take it one step further and provide actionable recommendations about where you can set your PAR levels to eliminate waste. Mobile Aspects supply chain experts will also sit down with you quarterly as part of a best-in-class customer success program to discuss strategies to optimize your PAR levels and review the data behind those suggestions.

A community hospital in Illinois recently used data coming out of the iRISupply system to evaluate its PAR levels in the electrophysiology (EP) labs. Using the data and recommendations from iRISupply, they were able to eliminate nearly 50% of their owned inventory, and save over $300,000 just in their EP labs. They estimate that performing this same analysis across their procedural departments will result in over $1.5 million in savings for the hospital.

How To Turn Supply Chain Waste Into A Revenue Opportunity

August 9, 2018Sri Mandava Cost Reduction Hospital Finance Hospital Management Supply Chain The Business of Surgery

The healthcare supply chain is increasingly being looked at as a new frontier in hospital cost containment. With the supply chain making up the 2^nd largest expense category for healthcare providers, there is ample opportunity to drive costs out of the supply chain to boost profitability at hospitals.

What if there was a way to turn some of the identified supply chain waste in to a revenue opportunity? With the advent of online marketplaces for 2^nd hand goods, this is becoming a real possibility for hospitals. As this article by Jacqueline LaPointe at RevCycle Intelligence explains:

“Wasted supplies cost a provider organization. They can increase an organization’s overhead, which ultimately makes all costs at the organization higher.

But what if there was a way to recoup some of that wasteful spending?

Transforming the large cost center into a revenue-generating department may seem like an impossible task to most healthcare executives. But a health system in Colorado is actually seeing some money come in from their supply chain, rather than coming out of it.

The health system started seeing some revenue come in through their supply chain after participating in a web-based marketplace for healthcare supplies and equipment about three years ago.

Since then, the system has sold everything from an excess number of catheters to hospitals beds after the health system upgraded their beds.

“I’m the only one in the supply chain department who makes money,” a Project Coordinator at the health system recently told RevCycleIntelligence.com. “In supply chain, we spend money. That’s what we do. At the end of the day, it’s great to actually recoup some of the cost.”

The health system started to bring money in through the supply chain by pursuing her passion for recycling at the health system.

“When I started at the health system I started out as an administrative assistant for the Director of Supply Chain and I was absolutely astounded when I discovered they had absolutely no recycling, particularly with purchasing,” she said. “We would get catalogs upon catalogs. A lot of those just go into the bin.”

Looking for a way to reduce waste at the health system, she created a green team that focused on waste reduction and sustainability improvement in the supply chain department. As those initiatives progressed, the health system realized the potential value in scaling up some of the projects.

“As these clean-outs occurred more often, it became more evident that we needed somebody in there who could come in and help by not just putting everything in the trash and figuring out different ways to either reutilize or donate whatever we can, but to keep it out of the waste stream,” she explained.

That’s when she decided to use H-Source, a web-based marketplace dedicated to helping hospitals across the country connect to sell and purchase supplies and equipment. The no-contract, no-cost platform allowed her to put her health system’s excess or unused supplies up for sale.

“The sky is the limit,” she said in response to what type of items she can sell on the marketplace.

“Typically, we sell items out of the OR. Specifically, sutures, catheters, probes, forceps, and forceps tips. Those are a lot of what we’re able to get rid of in the disposable world,” she added. “As far as equipment, probably the largest thing we’ve done is a bed conversion and we sold 41 beds to a facility in Brooklyn, New York. The beds were about ten years old. We’ve also done a lot of stretchers.”

The health system is currently working on moving ventilators that hospital leaders have retired out of the system.

She emphasized that her health system’s excess supplies and equipment are still in good shape and ready for use elsewhere. The marketplace ensures that hospital buyers can view product expiration dates, model numbers, manufacturer information, and more on every item for sale so hospitals do not purchase low-quality items.

With the aid of the marketplace, hospitals are buying high-quality supplies for a discounted rate compared to the prices set by manufacturers. But that doesn’t mean that the health system isn’t making a profit by selling its excess products for less than they bought them.

The health system makes a profit on every item sold because those were products that “we weren’t getting any benefit from it anyways,” she said. The items would either be thrown away or donated, bringing in zero revenue for the health system.”

Read the entire article here: How Hospitals Bring in Revenue Through the Healthcare Supply Chain

Having the right data can be a powerful tool in optimizing supply chain strategies. As this article shows, your data can tell you what items you no longer need to keep in inventory. This can allow you to turn items that you may have previously kept on the shelf and re-ordered upon expiration into real dollars by selling your current inventory and eliminating any future orders. If your organization lacks the proper tools to provide powerful data around your supply chain spend, consider systems such as iRISupply which can collect real-time data around supply and implant usage using RFID technology and provide actionable insights to help optimize your stocking levels and other powerful recommendations. Data analytics included with the software will give specific recommendations on which items to reduce or eliminate, and which items should be owned vs. consigned, leading to millions of dollars in cost-savings opportunities.

Hospital Inventory Management In A Data-Driven World

July 31, 2018Sri Mandava Big Data Cost Reduction Hospital Finance Hospital Management Operational Efficiency Supply Chain The Business of Surgery

As hospitals grapple with increasing costs and declining reimbursements, reducing expenses has become an important tool for hospital CFOs to use to improve profitability. This contrasts greatly with hospital strategies from a decade ago that relied solely on increasing revenues to increase profitability.

Key areas that hospitals have been focusing on are their labor and materials costs. While controlling labor costs is a mathematical equation that is well understood, materials costs continue to be an area that is ripe for cost-cutting for almost any hospital. Hospitals are plagued by overstocked inventory and expiring items, and this has been the case for decades with no tangible improvements happening at most hospitals. With the proliferation of data analysis tools within hospitals, there is now the real opportunity to make meaningful cost reductions in hospital supplies and implants. As this article by Rachel Z. Arndt at Modern Healthcare explains:

“Within every hospital, supply problems are likely to lurk. Often, they’re problems of too much: too many sutures, too many surgical staplers, too much of too many items. Hospital staff, distrustful that they’ll have what they need when they need it, err on the side of excess.

But that’s beginning to change, as hospitals and health systems employ software with predictive analytics for inventory management. That way, they can forecast demand, reaching a Goldilocks level of supplies.

“The natural tendency is to just buy an entire mountain of inventory,” said Rick Conlin, a partner in the Advisory Board Co.’s spend performance solutions team. “Turning to some of these enterprise research tools gives them the ability to more confidently knock back some of that inventory and supply chain costs.”

Users of these inventory management tools will have to integrate them into their existing systems, and they’ll also have to learn to trust the data. That’s beginning to happen more, as ever-mounting costs are putting pressure on providers and health system staff to act.

The return on investment is fairly straightforward: As health systems use more advanced supply chain software, they free up cash, which they might use to buy new equipment or hire another physician—activities that generate revenue.

“If you can reduce the inventory you have on hand, it really can have a positive financial impact,” said Rob Austin, associate director at Navigant. And, he added, “if you’re managing your inventory more closely, you won’t lose it, it won’t become obsolete or expired, and you can run a more efficient operation.”

…

More efficient inventory management means not only cost savings but also better quality care, Spectrum’s [Bill] Selles said. Right now, he said, “we have the approach of more inventory is better, because the risk of running out of a critical supply is harm to a patient.” But because of that, there’s a lot of waste.

What’s more, if a hospital doesn’t manage its inventory well and a medical device recall is issued, for instance, the supply chain staff might not know if their devices are affected.

The problem of expiration dates isn’t unique to healthcare, Selles said, but its effects are potentially more profound. “If I work for Target and we expire a pallet of yogurt, that’s a problem, but it’s a wholly different story than if I expire medical devices that end up in point-of-care situations,” he said.

Even so, getting providers and supply chain staff to use these newfangled systems can be tough.

“Even within the past five to eight years, I’ve seen hospitals go out and buy demand and supply planning tools, and they don’t trust them,” Conlin said. “Or they’ll work back channels and maintain spreadsheets.”

But things are looking up, albeit not for ideal reasons. “Physicians, just in understanding how dire some of the finances can be, are starting to play nice,” he said. “There’s trust in performance.”

Read the entire article here: Hospital supply inventory management creating a cottage industry for technology

Having the right data can be a powerful tool in optimizing supply chain strategies. As this article shows, having accurate data and using it in the right way can lead to incredible cost savings opportunities for hospitals and health systems. If your organization lacks the proper tools to provide powerful data around your supply chain spend, consider systems such as iRISupply which can collect real-time data around supply and implant usage using RFID technology and provide actionable insights to help with vendor negotiations, on-hand inventory levels and owned-consigned mix. Powerful data analytics included with the software will give specific recommendations on which items to reduce or eliminate, and which items should be owned vs. consigned, leading to millions of dollars in cost-savings opportunities.

The Blog