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Research Reveals Number Of Superbug Infections Tied To Olympus Endoscopes

November 29, 2018Sri Mandava Infection Control Managing Endoscopes Patient Safety Regulatory Compliance

A research report by the International Consortium of Investigative Journalists (ICIJ) has revealed that the number of superbug infections in patients following the use of an Olympus endoscope totaled over 190 between 2012 and 2015 in the United States and Europe.

The number of deaths linked to patients infected with superbugs and the role superbugs played in those deaths remains unknown. As this article from the Japan Times further explains:

“The ICIJ also revealed that an Olympus executive in Tokyo sent an email in 2013 to the company’s U.S. arm stating, “It is not need (needed) to communicate to all the users actively” about the possibility of infection due to the use of Olympus duodenum endoscopes.

“You should communicate with the user who has asked a question,” the email presented as evidence in lawsuits said.

U.S. website Kaiser Health News has reported that at least 35 people have died since 2013 after developing infections linked to Olympus duodenoscopes.

It is believed infections may have occurred due to difficulties in cleaning and sterilizing the equipment.

Around 50 lawsuits have been brought against the major optical equipment maker seeking compensation over the superbug infections.

In 2015, the U.S. Food and Drug Administration issued a warning to the company for failing to promptly report the bacterial infections even though it was aware of them in November 2012.

Olympus declined to comment because doing so “could influence” the legal proceedings.

The TJF-Q180V duodenoscopes that are believed to have caused the infections have been sold since 2010 in Europe and the United States, according to a report compiled by a U.S. lawmaker and lawsuit documents.

More than 190 people were infected in 17 medical institutions in the United States, the Netherlands, France and Germany, they said.

European authorities, suspecting that the infections could be the result of difficulties in cleaning the endoscopes, ordered Olympus to warn equipment users of that possibility.

After the safety warning was issued by Olympus in Europe in January 2013, the number of infections in the region was about 50, significantly lower than the around 140 seen in the United States.

Separate data analysis by the ICIJ conducted since spring of this year showed that more than 5.4 million cases of health problems linked to medical devices, including Olympus duodenoscopes and other manufacturers’ products such as pacemakers and intrauterine devices, were reported to the FDA over the past 10 years.”

Read the entire article here: Over 190 superbug infections reported in U.S. and Europe after using Olympus endoscopes, probe finds

As legal problems and patient safety issues mount for Olympus and other manufacturers of endoscopes, hospitals must ensure that they’re doing everything they can to protect themselves and their patients from harm. Documentation of rigorously followed procedures will become a must have for the hospitals in case of legal issues. Make sure that you are investigating automated documentation systems such as iRIScope, which can make the capture and reproduction of such documentation seamless, and reduce the amount of time sterile processing staff spend documenting their work. This documentation can be the difference between successfully defending hospital staff in court and severely damaging a hospital’s reputation and pocketbook by losing a lawsuit related to patient safety.

Scope Documentation Lacking? This Technology Can Help

November 20, 2018Sri Mandava Hospital Management Infection Control Joint Commission Managing Endoscopes Patient Safety Regulatory Compliance

Over the last several years, endoscope-related outbreaks from around the US and the world have led to increased oversight of the endoscope high-level disinfection (HLD) process at many hospitals. Many hospitals are now finding themselves in a struggle to oversee the HLD process at their facilities without introducing too much oversight and intervention into the process due to resource constraints.

The simple solution that many facilities have introduced is to increase surveillance or sampling of their employees to make sure they are following standard protocols while being observed. But what happens when no one is watching? Do you trust that all of your employees, when no one is looking over their shoulder, will reprocess scopes properly and never skip any steps? Most facilities still have staff go through their HLD routines based on memorization, but recent technology products have been introduced in recent years to ensure staff follow the same process each and every time – even when no one is watching.

One such product is iRIScope from Mobile Aspects. The way that iRIScope and other systems like it work is to walk staff through the HLD process for each scope in a workflow that matches the hospital’s existing standard operating procedures. By using a combination of RFID technology and touchscreen kiosks, staff are guided through the HLD process and are required to log all steps as completed before they can move on to the next step. If a step is missed, a reminder to complete that step is displayed and the missed step is logged in the system. This ensures that no scopes are skipping any of the key steps in the HLD process. It also allows managers to properly train their employees by highlighting the employees that are most prone to skipping steps. Using this data helps managers train up their staff efficiently based on analytics coming out of the system, rather than observations noticed while sampling.

Additionally, these systems increase the quality of the documentation surrounding the use of endoscopes in hospitals. In addition to a complete record of all steps completed for every scope during reprocessing, the system also ensures that there is a record of each scope used on each patient for safety and compliance purposes. Having a centralized repository of this information, rather than having to check separate systems like the EMR, AER or surgical instrument tracking software, can be a life-saver when The Joint Commission visits or in case of an infection control issue.

The infection risk with flexible endoscopes continues to be a major worry for hospitals. Facilities must ensure that 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 scope they disinfect, investigate the use of software systems such as iRIScope. These systems help hospitals and surgery centers ensure that each of their flexible endoscopes is reprocessed the proper way each time, and any breaches of protocol are logged and immediately addressed. Documentation is also greatly improved by having a permanent record of all steps of the endoscope lifecycle, from procedure, to reprocessing and back to clean storage.

Olympus Continues To Set Aside Reserves For Expected Scope-Related Lawsuits

November 14, 2018Sri Mandava Hospital Management Infection Control Managing Endoscopes Patient Safety Regulatory Compliance

As the United States Department of Justice continues to examine Olympus’ role in infections related to the use of its duodenoscopes, the company is setting aside millions of dollars in reserves to cover expected losses from related lawsuits. As the leader in duodenoscope and endoscope sales in the US, Olympus expects to bear a majority of the losses from the DOJ investigation.

Olympus’ role in the illnesses of hundreds of patients worldwide who underwent procedures with contaminated scopes continues to be the focus of the investigation. Though the DOJ had no comment on the current status of the investigation, this article by Jon Harris of The Morning Call further explains:

“…The company said in a notice Tuesday that it recorded a reserve of 9,653 million yen — or about $85.6 million in U.S. dollars — in the second quarter of its current fiscal year, which will end March 31. While the ultimate loss will be dependent on the probe’s final outcome, Olympus said it believes the reserve amount is “reasonable as expected losses according to the status of the investigation.”

“The company has cooperated fully with the Department of Justice,” said Mark Miller, a spokesman for Olympus Corp. of the Americas in Center Valley. “As the matter is still pending, it would be inappropriate for us to comment further.”

It’s been more than three years since Olympus received subpoenas, in March 2015 and August 2015, from the Justice Department, seeking information about the duodenoscopes the company manufactures in Japan and sells across the globe. Federal prosecutors also sought information about Olympus, which controls about 85 percent of the U.S. market for gastrointestinal scopes, from hospitals that experienced deadly outbreaks of antibiotic-resistant bacteria in patients following procedures that used the duodenoscopes.

The Justice Department did not immediately respond to a request seeking comment on the status of its investigation.

As many as 350 patients at 41 medical facilities in the United States and worldwide were infected or exposed to contaminated scopes from Jan. 1, 2010, to Oct. 31, 2015, according to a U.S. Food and Drug Administration document obtained by the House Committee on Oversight and Government Reform and made public in mid-April 2016. While that document did not list how many deaths were reported, many medical facilities, including Huntington Hospital in Pasadena, Calif., and UCLA’s Ronald Reagan Medical Center, have confirmed that several patients died during that time period after being infected with bacteria tied to medical scopes.

While Olympus is, by far, the largest seller of duodenoscopes, Fujifilm and Pentax also sell the devices in the United States.

In Olympus’ case, its TJF-Q180V duodenoscope came under scrutiny because the device’s closed-channel design made it difficult to clean, leaving the potential for bacteria to become trapped and then transmitted from patient to patient. In January 2016, Olympus announced it was recalling and redesigning the device, replacing its forceps elevator mechanism with a new design consistent with a submission cleared by the U.S. Food and Drug Administration. The FDA said the new design created a tighter seal, reducing the potential for leakage of patient fluids and tissue into the closed elevator channel.

Across the United States in 2016 and 2017, Miller said Olympus “inspected and/or repaired” more than 5,800 duodenoscopes and also performed more than 4,000 educational and training visits to more than 1,700 customer sites.

Duodenoscopes, a flexible, lighted tube threaded through the mouth, throat and stomach into the top of the small intestine, are used during endoscopic retrograde cholangiopancreatography (ERCP), most commonly performed to diagnose and treat conditions in the pancreas and bile ducts. The FDA says duodenoscopes are used in more than 500,000 ERCP procedures each year.

More recently, on March 9, the FDA issued warning letters to Olympus, Fujifilm and Pentax for failing to comply with a federal law that required them to conduct postmarket surveillance studies to assess the effectiveness of reprocessing the duodenoscopes.

Miller said Olympus, which responded to the FDA on March 23, has undertaken significant efforts to enroll the studies, but there have been challenges with the enrollment.

“We are working diligently to address these enrollment challenges, resulting in a robust plan with the goal of completing this study,” he said. “We take this matter extremely seriously and are working diligently to provide the requested information.”

Read the entire article here: Olympus setting aside more than $85 million related to federal investigation into its scopes

Olympus, other scope manufacturers and hospitals can all expect lawsuits from scope-related infections to increase in coming years based on the DOJ’s findings. In trials like these, documentation of rigorously followed procedures will become a must have for the hospital’s defense. Automated documentation systems such as iRIScope can make the capture and reproduction of such documentation seamless, and reduce the amount of time sterile processing staff spend documenting their work. This documentation can be the difference between successfully defending hospital staff in court and severely damaging a hospital’s reputation and pocketbook by losing a lawsuit related to patient safety.

Improper Ultrasound Probe Disinfection Leads To Class Action Lawsuit

November 7, 2018Sri Mandava Hospital Management Infection Control Joint Commission Managing Endoscopes Patient Safety Regulatory Compliance

A hospital in Western Pennsylvania has recently been hit with a class action lawsuit from patients who underwent ultrasound procedures at the hospital. UPMC Jameson, a hospital in the UPMC Health System, had recently reached out to more than 200 patients who underwent ultrasound procedures at the hospital from October 2017 to October 2018.

Attorney Dallas Hartman Jr. has filed the class action lawsuit against UPMC Jameson on behalf of potentially affected patients of the improperly disinfected ultrasound probes. As this article by Brent Addleman at The Sharon Herald explains:

“On Thursday, we decided to file a class-action lawsuit,” Hartman said Monday morning. “We got a good amount of calls in the office, and we were able to get a better picture of what happened.

“We felt this was the best way to proceed. We did an interview with one of our proposed lead plaintiffs, and we decided to file on Friday.”

Contacted by email, Lisa Lombardo, senior public relations manager, said the hospital had no comment beyond the statement it released last week.

That statement noted that an internal review had found that “the proper cleaning process was not followed for some ultrasound probes used in internal prostate, obstetrical and gynecological exams. Any related health risks are extremely low.” It added that “corrective measures were immediately implemented.”

The statement went on to say that UPMC had reported the situation to both the state Department of Health and The Joint Commission accreditation organization, and that “appropriate education and disciplinary measures were taken to ensure the highest level of quality and patient safety.”

UPMC Jameson also contacted all potentially affected patients with additional information, offering free precautionary blood and urine testing to ensure patient safety.

The plaintiff in the suit alleges that in “June/July 2018” an ultrasound procedure was performed while the plaintiff was two months pregnant.

In the court filing, the plaintiff claims, “on our about Oct. 30” the plaintiff “received a phone call from a representative of UPMC Jameson, warning for the need to obtain testing to determine if the patient contracted an infectious disease from exposure during the ultrasound.” Patients were tested using a blood draw or urine sample.

The suit alleges that ultrasound probes used in internal prostate, obstetrical, and gynecological exams must under go high-level disinfection between usage, and UPMC Jameson was not following the procedures.

The filing reads, “It is believed that in or around the summer/fall of 2018 an internal quality assurance review at UPMC Jameson found that the proper cleaning process was not documented or followed for some ultrasound probes used in internal prostate, obstetrical and gynecological exams.”

The suit claims the plaintiff “as a result of UPMC Jameson’s negligence, carelessness, and/or recklessness will continue to endure emotional distress, suffering, inconvenience, humiliation, embarrassment, and loss of life’s pleasures.”

Hartman is seeking a jury trial and is requesting monetary damages outside of current arbitration limits.”

Read the entire article here: Class action filed against UPMC Jameson over improper disinfecting of equipment

The infection risk with ultrasound probes and all probes and 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 probe or scope 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 their reprocessing is kept electronically using advanced RFID technology. Any instances of employees bypassing the proper workflows can be alerted in real-time to avert any patient safety risks. Staff that needs re-training can also be identified using the reports coming out of the system that identify missed steps in the HLD process and the most common offenders.

Is Hospital Consolidation Driving Any Supply Chain Savings?

October 31, 2018Sri Mandava Cost Reduction Hospital Finance Hospital Management Supply Chain The Business of Surgery

One of the key tools US hospitals are using to increase margins in today’s healthcare environment is consolidation. By merging operations with other regional hospitals or systems, many executives are looking to pad their margins through economies of scale.

However, it appears that consolidation as a strategy to improve margins may not be working, at least when it comes to supply chain costs. A recent study by the Wharton School noted that supply chain savings from consolidation saved only about $176,000 per hospital. As this article from Rob Austin at Stat News reports:

“In the past three years, two-thirds of the country’s leading hospital systems saw declining operating income, resulting in nearly $7 billion in lost earnings. It’s a dire situation that looks even worse when you consider the relative strength of the overall economy. Supply chain costs are second only to labor and represent 30 percent of hospitals’ expenses. That cost could rise to the top of the list by 2020.

Common wisdom in the health care industry usually offers one solution to this kind of problem: Get bigger. Scale up to bring down costs. The larger you are, the greater your negotiating power when it comes to the supply chain, the companies that provide hospitals with everything from tongue depressors to CT scanners. The supply chain makes up a large chunk of most hospitals’ bottom lines.

The only problem with that supposed wisdom is that the data keep proving it wrong.

For example, despite a record 115 hospital merger and acquisition transactions last year, my company’s most recent survey of 2,300 hospitals found that they’re spending an average of 18 percent more in supply chain operations, processes, and product use than necessary. That’s a 10 percent rise from last year, representing up to $25 billion in cost savings opportunities, or about $11 million per hospital, a figure roughly equal to the salaries of 160 registered nurses or the cost of 5,900 defibrillators.

A recent working study of 1,200 hospitals by Wharton School researchers put an exact figure on the disappointing cost savings that result from consolidation. They found that the average estimated supply-chain savings for target hospitals in a merger-of-equals to be about $176,000, a fraction of what was likely expected. Not only that, supply-chain costs to acquiring hospitals actually increased in certain areas.

The bad news is that the economies of scale that promised to drive down costs haven’t so far materialized. The good news is that there are ways to reduce costs in the supply chain. An added bonus is that those reductions have shown to have no effect on quality of care. What’s more, the opportunity to save money exists no matter the size or location of the hospital — urban or rural, for-profit or not, or system-based or standalone. All hospitals can benefit from a few data-driven improvements.

The health systems with the highest-performing supply chains have a few things in common. They pay attention to data analytics, they engage their clinicians in these analyses, and then they use both the soft conversations and hard numbers to find areas to improve. That includes reducing the number of suppliers, contracts, and unnecessary variation in clinical processes.

That was the approach Main Line Health took to an analysis of the antibiotic bone cement it was using in knee and hip replacements. The five-hospital health system outside of Philadelphia found it was using far more of the bone cement than needed, which then led to conversations with its physician partners to standardize appropriate use across the system. The result: an 80 percent drop in use, a 45 percent reduction in costs, and more than $100,000 in annual savings from this category alone, all without hurting the quality of patient care.”

Read the article here: Consolidation is hurting hospitals’ supply costs, not helping them

As hospitals look to remove much of the waste from their supply chain, data analytics become the key to realizing significant savings. 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.

Average Hospital Spending $11 Million Annually On Supply Chain Waste

October 24, 2018Sri Mandava Cost Reduction Hospital Finance Hospital Management Operational Efficiency Supply Chain The Business of Surgery

A recent study from Navigant Consulting concluded that hospitals across the US are wasting an aggregate of $25.4 billion annually in their supply chain, or $11 million per hospital. The amount of waste is up 10.2% from 2017.

With hospitals increasingly focused on eliminating waste from their operations to increase profitability, the supply chain is become a target area for reducing costs for many executives. As this article from Jack O’Brien at HealthLeaders continues:

“The study suggested proper supply chain spending would result in a 17.7% average expense reduction, totalling $11 million per hospital annually. That amount equals the annual salaries of 160 registered nurses or 42 primary care physicians.

In an era of shrinking operating margins and challenging revenue streams, supply chain costs are another aspect of the financial enterprise that hospital executives must address to ensure a stable outlook for the organization.

Rob Austin, director at Navigant, told HealthLeaders hospital financial executives have a heightened awareness of the potential to save significant costs, but health systems aren’t making a big enough impact due to underinvestment.

“There’s a huge opportunity to reduce supply costs, the second-largest costs for a health system behind labor, but [executives] need to do a few specific things,” Austin said. “[Executives] have to engage clinicians, focus on data, and have more people professionally trained in the supply chain. For a CFO to invest in supply chain, [they need] a supply chain leader who has a vision and skills, sometimes [from] outside of the industry, that they can apply to healthcare.”

Austin added that the systems he has analyzed with the most effective and efficient supply chain operations have implemented strategic initiatives to hire educated employees from outside of healthcare to get new ideas on how to streamline the process for the system.

Along with incorporating college-educated employees into two to three year timeline, Austin said successful systems have also embraced collaboration between the financial and clinical sides of the enterprise to foster new solutions.

Peer-to-peer communication, according to Austin, is one of the most effective steps to identifying areas where supply chain leaders, physicians, and nurses can determine what resources are most necessary for the system.

Another crucial step for a high-performing system is data utilization and technology management that results in effective supply chain operations. Austin said that systems may have a great item master or data inventory management system, but without proper usage and knowledge of how to pull the data to act upon it, the system will not benefit in the long run.”

Download a copy of the case study here: Annual Supply Chain Savings Missed by Hospitals Total $25.4 Billion

Most hospitals are learning to live in 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.

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

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