Protect shrinking margins with supply chain data - MedCity News

Data is critical to all areas of healthcare, and the quality of that data matters. Most hospitals understand the need for high-quality data when it comes to medical care. They invest in the latest X-ray, CT and MRI technology and resources to help doctors spot patient problems, but rarely give the same importance to the hospital’s supply chain. As a result, instead of hard data and analytics, the hospital supply chain depends on spreadsheets and institutional knowledge.

This lack of investment is having an impact, because just as poor data on tumor location will reduce treatment effectiveness, the past two years have shown that not knowing what’s on the shelf, where it is, and when it’s likely to run out can has disastrous consequences for hospital finances, patient and staff safety, patient satisfaction, and more. Consider, for example, this 40% of hospital staff canceled cases due to out of supply, and 69% had to delay cases until they discovered the missing supplies. Since OR time costs hospitals between $20 and $80 per minute, delays alone can add up to $50,000 a year for a busy OR in a 250-bed hospital, and the cost of cancellations can be even higher. In addition to the financial impact, these disruptions create a lack of confidence in the system, causing nurses to resort to hoarding to ensure they have the supplies they need.

To prevent such disruptions, hospitals need real-time visibility into data that shows actual supply usage across departments and locations, by procedure and by physician. With this information, supply chain personnel can identify items that are critically low and reallocate inventory within the hospital or health system. At a basic level, hospitals need to know:

  • What do they have in inventory
  • Where is
  • How many do they have of each item
  • How quickly items are used
  • What is custom and
  • When will they finish?

Here are six insights that hospitals must be able to glean from their data if they want to avoid stockouts and overstocking, improve outcomes, and protect patient and staff safety.

Is PAR (Periodic Automatic Replenishment) accurate?
Without accurate transaction data, hospital PAR rates are often out of date. And since no supply chain technologist has ever had problems with having too much inventory on the shelf, this usually leads to over-ordering. While this can prevent stockouts, it also creates waste and ties up funds that could be better used elsewhere. By tracking actual item consumption, hospitals can establish PAR levels that match their demand profile and patient count, allowing supply chain leaders to adjust orders to avoid stockouts.

What is hoarding and why?
Knowing when a particular item is likely to run out means more than just tracking what’s on the shelf. If certain items are out of stock frequently, it may mean that employees are inaccurately scanning items to bypass PAR levels and generate orders in the quantities they think they need. While most hospitals understand the cost of stockouts, there is also a cost associated with restocking. We believe the typical hospital has between $1 million and $2 million worth of dead stock on its shelves. This is money that could pay for staff salaries or new equipment.

What is at risk of leaking?
Hospitals dispose of approx 765 billion dollars usable medical supplies each year and 7% to 10% of the items run out on the shelf. This is expensive for hospitals, and if an expired product is used on a patient, it can compromise safety and expose the hospital to lawsuits. To avoid this, hospitals need to know in advance which items are expiring. This allows supply chain leaders to move expiring inventory to higher volume areas or return it to pre-expiration inventory.

How much does each case cost?
Failure to understand the true cost of an individual case puts hospitals at risk of financial loss. This is especially true at a time when personnel costs are skyrocketing and supply shortages are creating unprecedented price increases. Many hospitals perform cases that cost them money every time. This is not sustainable with reduced operating margins dramatically compared to pre-pandemic levels. To address these challenges, hospitals need real-time analysis of material and labor costs for a given procedure so they can address clinical variances and inefficiencies that can affect the bottom line. Collecting this information also allows hospitals to compare costs with collected fees and reimbursements and take steps to improve margins.

How can I maximize staff resources?
Staffing shortages are hitting hospitals hard, forcing supply chain leaders to do more with fewer resources. Supply chain data can help here as well. Tracking the scanning activities and request lines generated by each employee allows supply chain leaders to better understand which employees and departments are carrying the load and which may need additional assistance or training. This allows hospitals to maximize existing resources while potentially improving the quality of work.

How accurate are preference maps?
Hospitals throw away an average of 1800 dollars of every surgery in the OR due to outdated preference cards. When preference maps are not supported, items selected for a box may go unused, creating waste. Meanwhile, required items may not be selected, causing delays in procedures while staff locates required items. By maintaining an accurate picture of what is actually used in a procedure, hospitals can update preference cards to improve outcomes and save money. In addition, understanding the differences in supplies that different doctors use allows hospitals to better understand changes that could lead to better outcomes.

With margins shrinking and costs rising rapidly, the financial outlook for hospitals and health systems is bleak. While there is a cost associated with collecting and analyzing data, the cost of not being able to reduce waste and control costs where possible is significantly higher. In short, failure to base delivery decisions on real-world conditions costs hospitals millions each year and potentially puts patient and staff safety at risk. The pandemic has taught hospitals that ignoring supply chain data comes at a cost in the form of stockouts and increased costs, but while those concerns are fading, supply chain challenges are not. As a result, hospitals that do not act now risk jeopardizing their own financial future.

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