Sterile Processing University, LLC MODULE 25: INVENTORY CONTROL & MANAGEMENT [Ambulatory Surgery]

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1 Sterile Processing University, LLC MODULE 25: INVENTORY CONTROL & MANAGEMENT [Ambulatory Surgery] Copyright Sterile Processing University, LLC 2012 All Rights Reserved. This material may not be copied or used without permission of SPU. TOTAL INVENTORY CONTROL Inventory control within a healthcare facility is usually the responsibility of a materials management department. Total inventory control refers to an efficiently organized, costeffective process for maintaining optimum levels of inventory in the storeroom and in all user areas. In this system, the storeroom staff inventories each using department daily. The inventories include medical and surgical supplies, office supplies, forms, housekeeping products, and sterile procedure products. For each product, the using department has a preprinted requisition stating the storeroom product number, the product description, and the predetermined quantity levels. The contents of requisitions are determined collaboratively by the using department and materials management department based on user needs and, when available, prior usage history. User needs should be monitored frequently to ensure that each using department receives what is required. Inventories can be done by hand or by means of hand-held computers. The quantity needed to bring each supply to its predetermined level is input into the materials management system or downloaded from the hand-held computer. From this information, a pick list of needed supplies is generated. Items are picked up and placed into a cart for delivery to the using department. All items are charged directly to the using department. All patient-chargeable supplies are credited to the using department when the patient charges are completed. Revenue is credited to CS/SPD or to the storeroom, depending on the finance system of the facility. Inventories are performed for all using departments seven days a week. In theory, a total inventory system allows the best control of a facility s supply inventory (official and unofficial), but it is extremely labor-intensive. PATIENT CHARGES All facilities use some method of charging patients for supplies and equipment. Charges may be bundled by procedure or by individual supply item use per patient. Whichever system is used, it must be effective and accurate. The primary objectives are to recapture the cost of the supplies, to identify costs, and to generate revenue for the facility. Although facilities receive set amounts for each procedure or patient stay (as negotiated with each insurance company), it is nevertheless important for facilities to know their actual costs per medical or surgical procedure or stay. This information is helpful when a facility is negotiating contracts with insurance companies. Therefore, good record-keeping for all patient charges is essential. A requisition, charge card, or piggy-back adhesive label can be attached to each item. The user completes the patient information on the card or requisition and attaches the label. If a computerized request system is available, the using department makes its requests for supplies through a computer that is linked directly to the patient accounting system and creates a charge on the patient s bill. A bar code scanner can be used both to request the supply and to create the charge directly on the patient s bill. 1

2 The success or failure of any patient charge system depends on the full cooperation of all departments involved. Every system has an impact on labor and has advantages and disadvantages. Facility logistics and size help determine which system will best meet the needs of users. Systems can be customized for optimum use and cost-effectiveness. It is imperative that record-keeping and documentation be as accurate as possible. Record-keeping is also one of the most important aspects of cost-containment programs in healthcare facilities. Without accurate records, there will be delays in payment, which, in turn, lead to cash-flow issues. Any system, whether manual or computerized, is only as good as the people performing the day-to-day operations, data input, and monitoring. Tracking, continuing education, and regular system reviews help make the difference in the success or failure of the chosen method for inventory control, distribution of supplies, and patient charges. INVENTORY MANAGEMENT The inventory of medical and surgical supplies can represent up to 40% of a facility s operating budget. Considering the current emphasis on cost containment, it is important that inventory be managed in a way that reduces costs while at the same time increasing efficiency and accountability. Because of staff awareness and the integrated systems available, facilities carry less inventory today than they did even five years ago. Consequently, to prevent shortages and stock-outs, personnel working in the inventory area must continuously be aware of what is on the shelf and what is on order. Computerized Inventory Management: Most facilities today use some form of computerized inventory management system. Several types of systems are available. Some of the more sophisticated ones store records of receipts and issues for faster processing of data, calculate up-to-date information, track utilization of each item in inventory, and communicate data to the materials management system for direct reordering of the items. Some systems are also capable of interfacing with the facility s financial system. In some cases, the inventory management system might not meet all the needs of a facility; as a result, CS/SPD might find it necessary to maintain a manual record system. Perpetual Inventory Management: The ongoing management of inventory is known as a perpetual inventory system. In this system, each supply is tracked individually. In a manual system, an inventory card is created for each item in inventory. This card is used to track all transactions, which are manually recorded. This task is time-consuming, but extremely important for good inventory management. The information on the card includes a description of the item, the manufacturer s catalog number, the packaging quantity, when the item was ordered, how much was ordered, how much was received, and the date of receipt. Some computerized perpetual inventory systems are integrated into a case cart, OR inventory management, or materials management inventory system. When the system is implemented, a complete physical inventory is taken of the store room or sterile storage area. The names and numbers of items are entered into the computer, and then the system is activated. All items dispensed are entered into the computer. Most computerized perpetual inventory systems have a program that can be run daily to identify those items that need to be ordered (on the basis of the minimum and maximum levels set up in the database). When items are received, they are entered into the computer to adjust the levels on hand. It is essential that all items dispensed and received be entered in a timely manner to ensure the accuracy of the data. Either the manual or the computerized perpetual inventory system requires a method of verifying the accuracy of the data. One such method is a yearly physical inventory. During this process, all items are counted, and the counts are compared to the information on hand. 2

3 Another method is the cycle count. During cycle counts, a small amount of inventory is counted on a given day. Cycle counting might be found to be a better method of achieving accurate inventory. Cycle counting does not require the department to be shut down while inventory counting is performed and allows for investigation of discrepancies in smaller quantities of stock. Cycle counting could potentially take the place of performing a yearly physical inventory. Both physical inventories and cycle counting can lead to the discovery of discrepancies before potential problems occur. There should be a process in place for ongoing continuous improvement by reviewing and correcting discrepancies to prevent reoccurrences. Periodic Inventory System: In a periodic inventory system, there are fixed intervals between placing orders. The inventory is checked at specified intervals; if the quantity is below the base level, an order is placed. Regardless of the inventory method used, it is essential that all data (receipts as well as items dispensed) be entered into the system accurately and in a timely manner. Inaccurate data will affect the credibility and validity of the inventory levels and inventory value, which can result in stock-outs and financial concerns because of the inaccuracy of the inventory value. Inventory turnover measures how many times inventory is replaced over a specified period of time, usually a year. To calculate inventory turns, the annual cost of goods sold is divided by the average inventory (the beginning inventory plus the ending inventory, divided by two). Generally, the higher the number of turns, the better the facility makes use of its assets. Items are sometimes classified according to an ABC system, which prioritizes items according to dollar value and frequency of use: A: Items that have a large dollar value but are not used frequently. B: Items that are moderately priced and are used relatively frequently. C: Items that have a low dollar value. During cycle counts, A items have the highest priority because they are the most expensive. Other elements of economical inventory management, which are recorded manually or by computer, include the following: Reorder Points (ROPs): The reorder point is the lowest quantity of an item that can be on hand before it is reordered. This quantity represents sufficient stock to last until the receipt of replacement stock, plus a safety margin to prevent stock-outs. The ROP is based on historical data on distribution and receipts. Minimums and Maximums: Like an ROP, the minimum is the smallest amount of stock on the shelf before an order is placed for replenishment. The maximum is the largest amount of an item that should be in stock at any one time. Economical Order Quantity (EOQ): The EOQ is the optimum quantity of an item to order. Based on historical data, the EOQ helps prevent overordering. 3

4 QUALITY ASSURANCE Inventory and distribution practices should be consistent throughout the healthcare facility and should be verified by an initial quality audit and by ongoing monitoring and documentation, with appropriate corrective actions taken when needed. Monitoring line-item fill rates will help determine the effectiveness of the inventory system. That is, does the department have what is needed when it is needed? Line-item fill rate is calculated by dividing the number of items distributed by the total number of items ordered. The quality of inventory and distribution can be assessed and improved by the following measures: Evaluating the receiving, holding, and general stores areas for conformance to sterility maintenance policies and procedures; taking any necessary compensatory measures (e.g., remodeling, increased frequency of cleaning, construction of shelving); and regularly auditing personnel practices. Periodically examining requisitions for completeness, timeliness, and accuracy. Periodically reviewing the inventory management system (manual or computerized). Routinely auditing distribution personnel practices and inspecting distribution carts to verify that all items are properly packaged, labeled, and, where applicable, carrying appropriate expiration dates and sterilization indicators. Evaluating all transportation vehicles for cleanliness and functionality, taking compensatory measures when needed (e.g., replacement, repair), and conducting a regular preventive maintenance program. Determining response time and reviewing all transportation routes. Promoting quality audits in user areas. Annually evaluating the inventory control and distribution system to identify changes in the facility's operations that could affect the current system or indicate the need for a new or modified system. COMPUTERIZED SYSTEMS IN CS/SPD Hospital CS/SPDs have a dramatic need for computerized information. Inventory is often monitored by computer. CS/SPDs frequently provide surgical instruments and supplies to ORs and other specialty departments on a case-by-case basis (surgical case cart system). The CS/SPD is considered a manufacturer of sterile products; therefore, good manufacturing practices dictate accountability in processing. All of these services mandate computerization of the various processes to enhance data management and provide detailed management reports. The most commonly used system in CS/SPD is the count sheet computerized program. INSTRUMENT COUNT SHEETS AND RECIPE CARDS Most surgical instrument manufacturers provide a computerized inventory sheet (count sheet or recipe card) for surgical instrument sets. These are user-friendly systems, and many companies provide both the software and the hardware at no additional cost to the facility. As with any inventory management system, it is important to define who will be responsible for data entry of the count sheets and who has the authority to add sets to the database or delete them. Before a count sheet is entered, it should be reviewed by OR personnel for accuracy. The data should 4

5 include the correct name of the instrument ( nicknames can be provided in parentheses), the manufacturer, the catalog number, and descriptive information (e.g., length, curved or straight, with or without teeth). After data entry, it is important that someone double-check the count sheet for accuracy because CS/SPD will use the count sheet as a guide for set assembly. Count sheets must be monitored frequently for accuracy, and there should be a specific procedure for additions to or deletions from the contents. (See Chapter 7 regarding the safety of using count sheets inside sets.) TRACKING SYSTEMS Tracking systems have been become a necessary asset in CS/SPD. When one considers the thousands of surgical instruments that pass through CS/SPD on a daily basis, a surgical instrument tracking system becomes essential for monitoring the second most costly inventory in the hospital (exceeded only by medical/surgical supplies). It is not uncommon for a 500-bed hospital to have an instrument inventory exceeding $1.5 million. Tracking systems are not limited to instrument sets. They are also useful in tracking surgical case carts, specialty devices, loaner instruments, employee productivity, equipment and instrument utilization, specific processing information, and preventive maintenance of instruments. Some tracking systems can be interfaced with the sterilizer to provide load control and documentation of the sterilization process. These systems use bar codes that are specific to each item or set. At each step in the use and processing of a set (distribution to the requesting department, use, return to CS/SPD, decontamination, preparation and assembly, sterilization, storage), the set is scanned to track its location. Some systems also track patient care equipment. Some companies offer the ability to track individual instruments by marking instruments by laser, etching, or applying an adhesive dot. The newest technology uses a peen marking (which does not damage the chromium oxide layer of the instrument) for identification. A different type of scanner is needed to read peen markings, which look like Braille. If a facility decides to mark and track each individual instrument, it is important to consider the additional costs and the additional time for CS/SPD technicians to scan each instrument into the system. Regardless of the system used, it is important for the CS/SPD technician to accurately input data and follow all departmental procedures associated with the tracking system. SUMMARY The inventory of medical and surgical supplies represents 40% of a facility s operating budget. Inventory must be managed to reduce costs and increase efficiency. We are all being asked to increase quality, do more with less, reduce inventory, be competitive, and do our part in helping our facilities grow. Computers and good, sound information systems provide the tools needed to be better, more prudent, successful managers. REFERENCES AND SUGGESTED READING Association for the Advancement of Medical Instrumentation. Comprehensive Guide to Steam Sterilization and Sterility Assurance in Health Care Facilities. ANSI/AAMI ST79:2010 & A1:2010 & A2:2011. Arlington (VA): AAMI, Hurlbut T. Cycle counting. Inc., June 1, Available at: Accessed October 17, Muller M. Essentials of Inventory Management. New York: AMACON,

6 Supply chain logistics: Going soft on the supply chain can save money. Healthcare Purchasing News, February Werner C. Count on it: No tricks to inventory management Surgical business. Healthcare Purchasing News, October NOTE: YOU HAVE NOW COMPLETED INVENTORY CONTROL. PROCEED TO THE QUIZ ON INVENTORY CONTROL. Please click on the link below There, you will find the quiz. Good Luck! 6