Effective Operating Room Inventory Management

Transcription

1 CE ONLINE Effective Operating Room Inventory Management An Online Continuing Education Activity Sponsored By Grant funds provided by

2 Welcome to Effective Operating Room Inventory Management (An Online Continuing Education Activity) CONTINUING EDUCATION INSTRUCTIONS This educational activity is being offered online and may be completed at any time. Steps for Successful Course Completion To earn continuing education credit, the participant must complete the following steps: 1. Read the overview and objectives to ensure consistency with your own learning needs and objectives. At the end of the activity, you will be assessed on the attainment of each objective. 2. Review the content of the activity, paying particular attention to those areas that reflect the objectives. 3. Complete the Test Questions. Missed questions will offer the opportunity to reread the question and answer choices. You may also revisit relevant content. 4. For additional information on an issue or topic, consult the references. 5. To receive credit for this activity complete the evaluation and registration form. 6. A certificate of completion will be available for you to print at the conclusion. Pfiedler Enterprises will maintain a record of your continuing education credits and provide verification, if necessary, for 7 years. Requests for certificates must be submitted in writing by the learner. If you have any questions, please call: CONTACT INFORMATION: 2014 All rights reserved Pfiedler Enterprises, 2101 S. Blackhawk Street, Suite 220, Aurora, Colorado Phone: Fax:

3 OVERVIEW The operating room has traditionally been one of the highest revenue generators for healthcare organizations. As reimbursement has declined, so have the profits for surgery. This has caused healthcare organizations to more closely examine the potential to improve their bottom line by improved supply management in the operating room. Traditionally, this area has flown under the radar screen because hospital leadership is reluctant to challenge surgeon and staff practices. Given the need to become more financially solvent and operationally efficient, healthcare organizations are now looking at supplies in the operating room as a potential area where new savings could be generated. The operating room represents 40-60% of total hospital supply expenditures, but improving supply management in the operating room has long been a challenge. Poor inventory management, physician preferences, lack of good data, lack of standardization and inefficient practices all contribute to a system that is costly and ineffective. This continuing education activity will provide the perioperative nurse with information on ways to improve inventory management in the operating room. It will review the challenges and opportunities associated with effective supply management, and provide specific strategies on product standardization, inventory management and reduction, reduction of waste, data analysis and improved physician preference card management. Finally, participants will leave with a better understanding of current technology that can facilitate improved supply management in the operating room. OBJECTIVES After completing this continuing nursing education activity, the participant should be able to: 1. Discuss why supply management in the operating room is important. 2. Describe the challenges for effective management of supplies in the operating room. 3. Review the current processes used to manage supplies in the operating room. 4. Outline strategies to improve inventory management in the operating room. 5. Review the roles and responsibilities of the perioperative nurse in effectively managing supplies in the operating room. INTENDED AUDIENCE This continuing education activity is intended for nurses and other healthcare professionals interested in learning more about key factors in Effective Operating Room Inventory Management CREDIT/CREDIT INFORMATION State Board Approval for Nurses Pfiedler Enterprises is a provider approved by the California Board of Registered Nursing, Provider Number CEP14944, for 2.0 contact hour(s). Obtaining full credit for this offering depends upon completion, regardless of circumstances, from beginning to end. Licensees must provide their license numbers for record keeping purposes. 3

4 The certificate of course completion issued at the conclusion of this course must be retained in the participant s records for at least four (4) years as proof of attendance. IAHCSMM The International Association of Healthcare Central Service Materiel Management has approved this educational offering for 2.0 contact hours to participants who successfully complete this program. IACET Pfiedler Enterprises has been accredited as an Authorized Provider by the International Association for Continuing Education and Training (IACET). CEU Statements As an IACET Authorized Provider, Pfiedler Enterprises offers CEUs for its programs that qualify under the ANSI/IACET Standard. Pfiedler Enterprises is authorized by IACET to offer 0.2 CEUs for this program. RELEASE AND EXPIRATION DATE This continuing education activity was planned and provided in accordance with accreditation criteria. This material was originally produced in June 2014 and can no longer be used after June 2016 without being updated; therefore, this continuing education activity expires in June DISCLAIMER Accredited status as a provider refers only to continuing nursing education activities and does not imply endorsement of any products. SUPPORT Grant funds for the development of this activity were provided by CardinalHealth. AUTHORS/PLANNING COMMITTEE/REVIEWER Margaret A. Camp, RN, BSN, MSN Medical Writer/Author/Planning Committee Judith I. Pfister, MBA, RN Program Manager/Planning Committee Pfiedler Enterprises Donna Reeves, MED, MA, PhD Medical Writer /Author/Planning Committee Aurora, CO Aurora, CO Denver, CO Julia A. Kneedler, EdD, RN Aurora, CO Program ManagerReviewer Pfiedler Enterprises 4

5 DISCLOSURE OF RELATIONSHIPS WITH COMMERCIAL ENTITIES FOR THOSE IN A POSITION TO CONTROL CONTENT FOR THIS ACTIVITY Pfiedler Enterprises has a policy in place for identifying and resolving conflicts of interest for individuals who control content for an educational activity. Information listed below is provided to the learner, so that a determination can be made if identified external interests or influences pose a potential bias of content, recommendations or conclusions. The intent is full disclosure of those in a position to control content, with a goal of objectivity, balance and scientific rigor in the activity. Disclosure includes relevant financial relationships with commercial interests related to the subject matter that may be presented in this educational activity. Relevant financial relationships are those in any amount, occurring within the past 12 months that create a conflict of interest. A commercial interest is any entity producing, marketing, reselling, or distributing health care goods or services consumed by, or used on, patients. Activity Planning Committee/Authors/Reviewers: Judith I. Pfister, MBA, RN Co-owner of company that receives grant funds from commercial entities Margaret A. Camp, RN, BSN, MSN No conflict of interest Donna Reeves, MED, MA, PhD No conflict of interest Julia A. Kneedler, EdD, RN Co-owner of company that receives grant funds from commercial entities PRIVACY AND CONFIDENTIALITY POLICY Pfiedler Enterprises is committed to protecting your privacy and following industry best practices and regulations regarding continuing education. The information we collect is never shared for commercial purposes with any other organization. Our privacy and confidentiality policy is covered at our website, and is effective on March 27, To directly access more information on our Privacy and Confidentiality Policy, type the following URL address into your browse: In addition to this privacy statement, this Website is compliant with the guidelines for internet-based continuing education programs. The privacy policy of this website is strictly enforced. 5

6 CONTACT INFORMATION If site users have any questions or suggestions regarding our privacy policy, please contact us at: Phone: Postal Address: 2101 S. Blackhawk Street, Suite 220 Aurora, Colorado Website URL: 6

7 INTRODUCTION Healthcare organizations are realizing that supply chain processes can become a strategic cost savings tool instead of a daily operational process. 1 Over the past several years, healthcare facilities have established reasonably effective supply management processes in all areas EXCEPT the operating room. The operating room has not been ignored, but rather overlooked as it relates to supply management because the OR continued to generate revenue for supplies, and there was no desire to upset what appeared to be a well-functioning department. Over the years, the cost of supplies in the operating room has continued to escalate while reimbursement has continued to decline. 2 The need to control costs without sacrificing quality patient care is currently driving most healthcare organizations to prioritize efforts, and seriously look at supply management processes in the operating room. They are starting to analyze the potential savings that might be generated by improving the management of supplies in the operating room. It is estimated that 40-60% of the total supply costs in a hospital reside in the operating room. The average supply spend per surgical suite annually is $850-$1M. The inventory dollars per surgical suite is $100,000-$120,000. The average annual inventory turns in a surgical suite is 4.8 times. 3 In the operating room, supplies are duplicated in many areas. The same supplies can be found in the surgical suite, OR Core area, specialty carts, case pick areas, case carts, general stores and other non-official areas, such as the nurses lockers! It is estimated the average 15-room OR has products in multiple locations. Multiply this number by inventory dollars per operating room and the figure becomes overwhelming! It is no wonder hospital leadership is identifying opportunities to reduce this expense. Historically, operating rooms have not been held accountable for the cost associated with their supplies. Supplies were ordered with little, if any, thought given to the associated expense. There was limited, if any, emphasis on supply standardization and consolidation, better inventory control or accountability for the expenses related to supplies. Perioperative nurses were generally concerned with ensuring the needed product was available and often had little, if any, knowledge of the associated cost. So, why is good supply inventory management in the operating room important? Times have changed and the operating room is rapidly becoming a cost center as opposed to a revenue-generating center. The cost of doing business in the operating room has escalated to a point where action needs to be taken if the healthcare organization is to survive financially. Supplies (inventory) are the lifeline of nursing care in the operating room. Poor management of supplies (inventory) can lead to patient complications, wasted supplies and can sometimes result in surgery delays or cancellations. 4 INVENTORY MANAGEMENT CHALLENGES Managing the inventory in the operating room is no small undertaking. Some of the major challenges include diversity of procedures, physician preferences, past practices, limited data, procedure card management, duplication of supplies, and lack of automated inventory control systems. In addition, there are multiple categories of supplies stocked in the OR. Custom procedure packs, general medical supplies, implants, sutures, medications, instruments, linens and gloves are a few of the supply categories one can find in every operating room; managing to keep track of the supplies is a major challenge. It is important 7

8 for the perioperative nurse to understand how each of these challenges impacts the facility s ability to better manage supplies. Now, we will examine each of these areas to gain a better appreciation of why managing inventory in the operating room requires integration, control, strategic focus, supportive structure, empowerment, physician support, consistency, skill set and organization. 5 PROCEDURE CHALLENGES The operating room is unique in the type of work performed there. Everyday across the United States, there are thousands of procedures performed, and each of these procedures requires a variety of supplies. For example, a laparoscopic cholecystectomy in any given operating room could have as many preference cards, with a unique list of supplies, as it has surgeons who perform the procedure. There is little, if any, consistency in what is used and why. The cost for supplies for a simple laparoscopic procedure can vary by hundreds of dollars. While the perioperative team is committed to ensuring the patient receives quality care, is this related to the type and number of supplies used? The answer is probably no, but in the past there have been limited efforts to quantify that spending more on supplies improves patient outcomes. While different procedures require different supplies, many basic supplies are required for all surgical procedures; however, few, if any, operating rooms have been willing to eliminate any supplies in fear of not having something the surgeon might request. In addition, past practice was more is better. Rarely will anyone run out of supplies in the operating room because historically the practice has been Just-In-Case (JIC), which is placing one on the shelf and one in the drawer, JIC it s needed! The challenge in changing these practices is that operating rooms have not had the data to prove the financial or clinical impact of these practices. PHYSICIAN PREFERENCES A driving factor behind the high cost of doing business in the operating room has long been physician preferences. Many surgeons develop preferences for specific products or vendors early in their careers. In the past, there was little, if any, reason for surgeons to change the products they used since beginning their practices. While many products are similar, one study showed that surgeons select surgical products without any comparative performance data, like products do not have equivalent performance profiles. 6 So something as simple as a suture or an endo-mechanical trocar may not perform equally when being used in surgery. This supports the case that surgeon preferences do need to be considered when a facility is looking to standardize on products. At the same time, many products used in the operating room may be clinically equivalent and could be standardized. For example, basic gowns and drapes should not affect the performance of the procedure, or the patient outcomes, and may offer facilities the ability to standardize and consolidate products as a cost savings measure. According to a report by the Studer Group, surgeons seek four things from hospitals: quality, efficiency, input and appreciation. Responding to physician preference requests, according to Eric Studer, demonstrates to surgeons that the facility values them, respects their time, cares about their patients and wants them to have an efficient environment in which to do their work. 7 So, the dilemma is how to affect cost savings and not create a hostile work environment. There are ways to accomplish this in a way that is a winwin for the facility and physicians. Specific strategies will be discussed later in this study. 8

9 PAST PRACTICES Effective inventory management in the operating room has been, at best, marginal. This is the result of several factors, including the lack of systems to provide data supporting the level of inventory that is needed and identifying product duplication. Additionally, the fact that the same supplies have multiple locations within the operating room leads to poor inventory management. Perioperative nurses have not been well educated on managing supplies, or the cost of supplies, and their focus has been ensuring the surgeon has everything and anything they might (or might not) need. The practice of opening everything on the preference card has been the norm. Another factor contributing to poor inventory management in the operating room is the supply acquisition and distribution have been managed by the facility Supply Chain. While this department is knowledgeable about the mechanics of ordering, receiving and distribution, rarely are questions asked about what is being ordered because they are unfamiliar with what happens to a product when it gets to the operating room. The underlying problem appears to be that supply chain and surgical services are not fully integrated. In a 2011 survey done by the Association for Healthcare Resource and Materials Management, it was reported that only 15% of the respondents reported full integration of Supply Chain with Surgical Services. 8 This lack of integration contributes to poor inventory management in the operating room. Another problem with inventory management in the operating room is having good information on usage and replacement/replenishment. While most of the other hospital departments have very defined PAR levels, this is not so in the operating room. With no defined PAR levels to guide reordering, overstocking is a common problem in the operating room. The last challenge is that the job of reordering supplies often falls to the perioperative nursing staff. Lacking a good knowledge and understanding of managing inventory, and the cost associated with overstocking, puts the perioperative nurse at a disadvantage when trying to help control costs through better inventory management. DATA ANALYSIS GAPS There is an old saying that knowledge is power. Lack of quantifiable data regarding supply usage, inventory levels, product duplication and procedure cost by physician has been a barrier to implementing processes to improve inventory management in the operating room. As was noted in an article about the University of North Carolina s efforts to improve inventory management, the data collected in the operating room has been primarily manual. In addition, data is retrospective and based on tracking by exception, whichis generally inaccurate and does not provide required information to convince either surgeons or perioperative nurses there is a better way to manage inventory in the operating room. 9 Capturing actual supply usage by physician, by case, is necessary to convince the key stakeholders (surgeons and perioperative nurses) of opportunities for cost savings through improved inventory management. As Susan Phillips, Vice President for Perioperative Services at The University of North Carolina stated, We have to do more than manage materials. We have to be experts at materials management. 10 As healthcare organizations look to make improvements in operating room inventory management, it is critical to have systems or processes in place that allow real-time data to be collected on supply usage. Benchmarking supply utilization and performance metrics allow hospital 9

10 leadership to engage staff and physicians in a collaborative process to improve operating room inventory management. PROCEDURE CARD MANAGEMENT Physician preference cards have been the guiding light for perioperative nurses for more than 25 years. The problem is preference card items are typically 20-40% higher than what is actually used. In a recent report, it was noted that procedure card value was $25 million, while the actual value was $8 million; this means there was a potential waste of $7 million. 11 Multiply this by the number of cases performed in every operating room, and minimizing this loss alone could result in millions of dollars of savings annually. So, what about this $7 million dollars that was either opened and not used or returned to inventory? The inaccuracy of procedure cards not only adds unnecessary direct costs (waste and return to inventory), but also creates unnecessary labor at the front end (case picking) and at the back end (returning to inventory and crediting the patient). Updating procedure cards to reflect actual products needed/used is generally only completed if time allows. In a busy operating room, finding the time to update preference cards has not been a priority for the perioperative nurse. Unfortunately, this resulted in physician dissatisfaction, unnecessary expense and contributed to inefficiencies and poor inventory management. PRODUCT DUPLICATiON One of the major challenges in the operating room regarding effective inventory management is product duplication. There is not a day that goes by that some new and better product is introduced in the operating room. However, rarely, if ever, is there clinical evidence to prove this new widget improves patient outcomes. Product duplication drives supply costs up in the operating room! As an example, think about how many different types and sizes of surgical gloves are stocked in an operating room. While there is often a need to stock several different types and sizes of gloves for specific procedure needs, there is probably no way to justify stocking similar gloves from two or three different vendors. Another example is exam gloves; why do operating rooms have several different types of exam gloves? Think of the cost savings that could be generated by standardizing to one type of glove from one vendor! Another huge area for savings opportunity in inventory management is suture. While is it necessary to stock different types of suture; does it make good financial sense to stock an 18, 24 and 36 of the same material and needle type? Reducing product duplication offers facilities huge opportunities for cost savings and improved inventory management. AUTOMATED INVENTORY CONTROL SYSTEMS While technological advances have been embraced in most areas of healthcare facilities, automated inventory control systems lag far behind, especially in the operating room. This is a major barrier to implementing processes to improve inventory management. Without an automated process to track real-time data for supply usage, inventory and costs, the operating room will struggle to achieve measureable supply cost savings. Setting PAR levels, managing vendor consignment inventories, developing protocols for 10

11 the entry of new products, identifying inventory levels and associated costs, and tracking procedure costs by physicians require more than a manual paper trail. In a study done by the University of Arkansas, adopting an automated inventory management system was able to significantly help facilitate a reduction in supply costs in the operating room. 12 The major hurdle is the associated cost with today s systems and the lack of valid data to support a timely return on investment (ROI). Automated systems information allows facility leadership to approach physicians and staff with real-time data that is meaningful. Today s stakeholders (perioperative team members) are not willing to consider making a change to current practices without valid data. Experience demonstrates that surgeons respond to data about their individual performance. Presenting valid, blind data serves as a mechanism to educate the surgeon and the perioperative team, and as a catalyst to engage the stakeholders in implementing processes that improve operating room inventory management. 13 AN OVERVIEW OF CURRENT SUPPLY MANAGEMENT IN THE OPERATING ROOM While many healthcare organizations are proactively addressing ways to improve current operating room inventory management, the majority of facilities are struggling to overcome this seemingly endless undertaking. The lack of automation as related to supply utilization, inventory levels, physician preferences, and clinical outcomes is a major problem. Same procedure supply differences and variations are also creating unnecessary inventory cost and waste. Inaccurate physician preference cards continue to plague many surgical suites, again creating unnecessary cost and rework. As mentioned earlier, in a 2010 survey, only 15% of the reporting facilities indicated that surgical services and supply chain were integrated. As one author indicated, the supply chain can no longer be viewed as a back dock support service that provides products and services required by clinical staff. 14 It has also been reported that 25% of perioperative staff s clinical time is spent on supply chain functions. This is problematic because most perioperative staff lack the knowledge and skills to manage inventory. 15 In addition, this takes away from the time they could be spending delivering patient care. Many operating rooms still rely on manual systems for reordering and replenishment, which leads to over or under ordering, and again, is costly and contributes to staff and physician dissatisfaction. While progress is being made in most operating rooms in controlling the flow of new products, this is still an area that, if not well-managed, will drive up costs. Product duplications, both in product type and location within the operating room, are the norm for most operating rooms. Waste, loss and theft are also ongoing problems in the operating room. Most operating rooms have little, if any control over their instrument inventory. Instrument repair and replacement is a huge expense line for most operating rooms. The saga of inefficient systems, lack of controls, outdated practices, overstocking, and lack of sufficient resources continue to cause supply costs to escalate in the operating room. 11

12 STRATEGIES TO IMPROVE INVENTORY MANAGEMENT IN THE OPERATING ROOM So, what can healthcare facilities do to address the inventory management challenges in the operating room? While from the surface it appears correcting the problems with inventory management is close to impossible, there continue to be reports of success stories in both small and large hospitals across the United States. As one consultant indicated, the key to success is to address root problems in current operating room organization and processes. 16 This has to start with hospital leadership. First and foremost, hospital leadership must champion the plan to improve inventory management within their facility. This starts with getting supply chain out of the basement, where they have been relegated for years. 17 Supplies are an essential part of every healthcare facility s daily operations. According to a report by AHRMM, supplies now represent as much as 31% of a hospital s expense on a per-case basis. In addition, researchers indicate the cause of runaway supplies is due largely to a lack of cooperation between hospitals and physicians. 18 The opportunity to challenge, understand and manage supply costs and inventory management must be the result of a collaborative effort between hospital leadership, physicians and staff. It is a process that can be successful, provided there is a plan, purpose and commitment. ADDRESSING THE CHALLENGE Implementing a successful inventory management system in the operating room requires an understanding of the basics of supply chain. These include integration, control, strategic focus, supportive structure, empowerment, physician support, consistency, skill set and organization. 19 Each of these basic concepts will now be explored, as well as how to apply the concepts to improve inventory management in the operating room. INTEGRATION In order for the plan to be successful, there must be integration between supply chain, hospital leadership and clinical staff. This requires collaborative action to examine and review the facts in an open and non-threatening way. It is critical to access and present the facts to the stakeholders as the first step in addressing the problem. The cost of the supplies, the cost of duplication, the variation in procedure costs, the costs of excess inventory, and the cost of ineffective inventory management systems must be shared with the stakeholders. Education through sharing of information on the actual costs being incurred is critical. A great strategy to educate the perioperative nursing staff in a way that will be meaningful to them is to have a Price is Right in-service. Demonstrating to the staff what the actual cost of supplies used is very beneficial in helping them be attentive when opening supplies. Benchmarking procedure costs by physicians and posting (blindly) on a chart quickly raises the interest and attention of the surgeons. Selecting a few easy wins, such as reductions on non-critical supply duplications or targeting savings on the top five highest spend items, will get the stakeholders engaged. One example of a facility that took a collaborative, integrated data-driven approach to addressing their operating room inventory challenges was St. Luke s Hospital and Health Network in Bethlehem, PA. By pulling supply data on contracts, supply costs, purchase 12

13 history, inventories, physician preference products and quality indicators, they were able to save the hospital more than $3M in perioperative supply chain costs. This savings was the result of the collaborative efforts of supply chain, surgeons, clinical staff and hospital leadership. 20 CONTROL The second basic concept is control. For a cost-reduction initiative to be successful, it is critical to understand the roles and responsibilities of the individuals involved in the process. Who is currently ordering supplies and signing contracts? Who is managing requests for new products? Who is controlling vendor access in the operating room? Who is managing physician preference cards? Who is tracking inventory levels, locations, turns and outdates? Who is organizing reports for the stakeholders to review? Who is involved in setting the annual supply budget for the operating room? Are there measures to track spend on a daily, monthly, and annual basis? Who is accountable for this spend? All of these questions need to be addressed in order to clearly understand if there is a better way to organize current supply processes in the operating room. Gaining control over these issues requires a process to dismantle the supply chain silos in surgery that restrict the organization s ability to impact change. Hospitals that have been successful in implementing supply cost savings in the operating room have moved the control from the operating room to a higher level. They have established multidisciplinary committees that may be called a Value Analysis Team, a Surgical Services Executive Committee or a Surgical Services Task Force. 21 The name of the committee is not important. What is important is that successful facilities define the leadership roles to ensure accountability and eliminate ambiguity. Placing hospital leadership in control resulted in them being able to involve the right stakeholders, address problems and issues along the way, and empower the team to implement solutions and improve problematic processes. Selecting the right individuals for the team is another key factor. In addition to key corporate suite members, clinically respected surgeons and anesthesiologists, and perioperative and supply chain leaders are the core members of the team. The charter of the team is to provide a strategic focused effort to improve operating room supply operations, financial performance, and quality clinical outcomes. STRATEGIC FOCUS Like any plan, it is important to define the vision. The focus should be on the total impact of care, which includes controlling cost while delivering quality patient care. According to Brent Johnson of Intermountain Healthcare, there is more to reducing costs than just adjusting pricing. Overall outcomes are better when an organization improves utilization, reduces practice variations, and standardizes practices. 22 A great example of standardizing practices is working with staff to evaluate current draping practices. Are staff still lining back tables and mayo stands with towels? Today s products are intended to resist fluids, and adding additional towels is a cost that could be eliminated. Are staff wearing the right gown for the intended procedure? Cases with limited fluid do not require high-end, expensive surgical gowns. Working with vendors to develop procedure kits can be a strategy to control supply costs. To stay on target with the overall strategic focus, 13

14 it is important to set benchmarks to track progress. In addition, communication about progress to all members of the team, as well as the clinical staff, is an important element in keeping the strategic focus on track. SUPPORTIVE STRUCTURE In order for the plan to be successful, a strong internal support system is required. This includes leadership commitment to supporting change recommendations when they are based on clinically-proven evidence. Another key factor is trust. The members of the team need to trust the information provided is valid. The members of the team need to trust the facility Supply Chain experts to guide them in implementing improved processes to manage supplies. The physicians need to trust that everyone is committed to delivering quality patient care and improved efficiency regarding management of supplies. The perioperative team needs to trust that recommendations will benefit them. EMPOWERMENT Empowerment begins with sharing information! What does it take for a Value Analysis Team or Surgical Task Force to be successful? What does it take to engage surgeons and anesthesiologists in meaningful discussions about controlling costs? What does it take to engage the technician pulling cases to understand the impact of pulling the wrong product, too many products, or not enough products? It is about honest, open communication as to why the project is being undertaken. It is about sharing the goals and outcomes the organization hopes to accomplish as a result of the project. It is about reaching out not only to the team members, but also to staff, to get their feedback and engage them from the start. Too often, projects are launched without involving the staff, and this can be a missed opportunity because they typically have beneficial ideas. Reaching out to them for ideas engages them in the process that is going to change the way they practice and creates an opportunity to empower them to be part of the change. PHYSICIAN SUPPORT It goes without saying that physician support is critical to the success of the program and process. This must start with sharing meaningful data. Experts advise the best way to communicate a need for change about cost efficiency is through the use of data. Supply cost reduction strategies, while fueled by cost data, must also include clinical data. It is only after physicians are satisfied about the quality of a product, and the facility is committed to quality, that they will be open to discussing financial outcomes and the impact on the hospital. 23 At St. Luke s Hospital and Health Network and the Leigh Valley Health Network, engaging key physicians as champions early in the process reduced perioperative supply costs. The facts are clear; physician involvement is key because physician preference products such as implants, stents, balloons, and pacemakers can account for as much as 60% of the total supply expenditures. The process of physician engagement should be one that develops a long-term collaborative relationship that is respectful, professional, and demonstrates to the physician the hospital s commitment to delivering quality patient care. 24 One of the key requirements for physician support is physician education. They never really needed to 14

15 understand the economics of running a hospital. They have not, until recently, had a financial stake (hospital-employed physicians) in the hospital s success or failure. So, it is critically important to include physician education so they feel educated and empowered about how they can make a difference. CONSISTENCY Another basic concept of effective inventory management is consistency. Accurate reporting of supply costs, variations, price changes, and supply contracts must occur on a monthly basis. Case or procedure costs, which include supply usage and revenue and cost reports, should be run quarterly at a minimum. Inventory value reports should be run twice a year. 25 All of the processes under review should be addressed consistently. For example, if there is a review of the current procedure trays, this must include all services, not just one or two. If there is a process to evaluate supplies stocked in the surgery suites, this should include all of the suites, not just one or two. If suture inventory is being evaluated, it needs to be an across the board effort. Lack of consistency in the overall evaluation of existing processes, proposed savings initiatives, or implementation of the changes will quickly undermine the overall plan. COMPETENCIES (SKILL SET) The current changing environment of healthcare is requiring those involved with managing supplies to have a whole new skill set. Today s environment requires analytical skills to evaluate spend history and cost-benefit analysis. Today s environment requires the ability to analyze cost by procedure type. It also requires the ability to identify correct supply levels, movement of inventory, and the cost of obsolescence. It requires the ability to facilitate and negotiate with vendors on high cost items. Gone are the days of shifting boxes and transporting supplies form one area to another. It is about being financially knowledgeable about the overall impact of supply expenses on the organization s ability to survive and be successful. ORGANIZATION The last of the basic skills needed to manage inventory in the operating room is organization. Most operating rooms, while organized around the procedures they perform, sorely lack organization regarding the management of supplies. Effectively controlling or reducing supply inventory management requires a deep dive to clearly understand the supply chain functions in the operating room. Who orders, what and why have not been addressed or challenged. Historically, the process has been to fill any and all requests for supplies issued by the operating room. There has been little, if any, control over requests to add new products. Ordering processes are,at best, fragmented and disorganized. If operating rooms are to improve management and inventory control, they must institute a master plan to organize everything from how products are requisitioned, to how they are distributed and replenished, to where they are stored, and how they are used in procedures. 15

16 POTENTIAL INVENTORY MANAGEMENT SOLUTIONS In terms of improved inventory management in the operating room, there are many solutions some take limited time and energy, while others require more time and planning. So what are the opportunities? Historically, the operating room has set inventory levels based on instinct as opposed to valid data. This has resulted in actual inventory that far exceeds the required par levels. Subsequently, inventory becomes obsolete or damaged and unusable, before it even gets to the operating room. There are few, if any, processes to track the actual inventory, and inventory is duplicated across the surgical suite. Some examples include suture, gloves, dressings, instruments, solutions and masks. New look-alike products get added to inventory without reviewing similar products that are currently available. The operating room typically purchases special products in box quantity rather than individually, thus the inventory sits on the shelf. Duplication for expensive products such as orthopedic and spine implants, CV implants, synthetic and biologic tissue, and plastic supplies is a common finding in many operating rooms. Opportunities to control inventory include product consignment, product consolidation and standardization, system automation, accurate preference cards, improved acquisition and distribution processes, improved case picking, and instituting a process to control new product flow and vendor access. PRODUCT CONSIGNMENT One of the opportunities to improve inventory management is to work with vendors to identify consignment of high cost products like trauma, orthopedic and spine implants. Purchasing these products can represent a huge expense for the organization. In addition to the expense involved with outright purchases, there is less potential for product to become obsolete when products are consigned. The other consideration for consignment is the instrumentation used to place orthopedic, spine and trauma implants. Again, this represents a huge expense on the part of the facility, and most vendors are willing to place the needed instrumentation at the facility if they are using the vendor s implants. Consignment can also help control inventory because vendors generally do not want to place a large number of products that will be used rarely. The challenges with consignment are keeping an accurate account of what products are placed in the facility, and encouraging vendors to keep consigned product to a minimum. While implementing consignment does require time on the front end to determine the appropriate types and levels of inventory that will be kept on site, ongoing maintenance is relatively easy to manage. One of the recommendations for consigned inventory is that at a minimum, there is a quarterly report from the vendor on what products are currently assigned to the facility. This ensures the facility has an accurate accounting of consigned products and they do not experience charges for lost inventory. PRODUCT CONSOLIDATION An initial step in controlling inventory in the operating room is to consolidate like products. The most painless and effective approach to this is to select non-physician, commodity products first. Most operating rooms have an excess of like commodity products such as surgical gowns, drapes, dressings and exam gloves. Consolidation of commodity products 16

17 can be as simple as standardizing to one vendor instead of three for products like exam gloves. It can also be reducing the number of locations where individual products are located within the operating rooms. It might be to consolidate individually pulled products for surgical procedures into a single kit. A great example of this is IV Start Kits. While the cost to convert to a kit may initially appear to be more expensive, when all of the facts regarding ordering, stocking, and replenishing the individual items is evaluated, it makes better sense to stock one kit. Developing custom procedure packs or kits for high volume procedures can also accomplish inventory management. The recommendation is to do a quarterly review of the products in the kits to ensure waste is kept to a minimum. The rule of thumb is 90% of the products need to be used 90% of the time. The inventory benefits associated with consolidation include, but are not limited to, an ability to manage high volume commodity products, provide a framework for standardization, facilitate reduced inventory levels on commodity supplies, reduce the touch points for ordering, stocking, dispensing, opening and charging for supplies, decrease case picking time, and improve staff morale and physician satisfaction. The clinical benefits of consolidation are reduced time to open products for cases, improved case pick accuracy, enhanced charge capture and improved utilization of physician preference cards. 26 STANDARDIZATION Standardization and consolidation complement each other. When you consolidate products, you quickly identify opportunities for product standardization, both of which contribute to improved inventory management in the operating room. Standardization to fewer vendors often affords the facility savings opportunities. A great example is surgeon gloves. If the facility is currently purchasing surgeon gloves from three different vendors, staff has to stock, order and replenish at least 15 different products (based on sizes and types). If the facility can standardized to one or, at-the-most, two vendors, they can reduce current inventory by one third. In addition, vendors are much more likely to consider better pricing if they have guaranteed volume and purchases. As mentioned with consolidation, product standardization offers facilities significant savings opportunities. From a clinical perspective, standardization can facilitate reduction in multiple/duplicate products. This offers less-costly, clinically-acceptable products, optimizing the use of limited storage space in the operating room and increasing staff and physician satisfaction. SYSTEM AUTOMATION While automation has been widely used in other industries, healthcare has been slow to adopt technology that will assist in managing one of their most expensive costs supplies. Unlike the auto industry, which can ask suppliers to design a specific kind of brake for a car, hospitals usually accept what the vendor offers from their existing inventory; hospitals have to take what the supplier has on the shelf. 27 According to the University of Arkansas, automated inventory management systems helped three of their facilities to forecast their inventory needs and order appropriate inventory that ultimately resulted in improved efficiencies and reduced expenditures. 28 It is estimated the average operating room runs at less than 68% capacity, and surgical cases costs are increasing more than 4.1% annually, 17

18 while reimbursement is declining by 4.2%. Automation in the operating room helps to manage variable supplies, tracks implants and tissue utilization, ensures correct pricing, provides critical data for inventory management, improves compliance and charge capture, and secures access and process control. 29 It also minimizes or eliminates stockouts, reduces expenses associated with rush orders and streamlines workflow and processes. A key in the successful implementation of an automated information system in the operating room is to involve staff. Expecting this will resolve all of the supply management issues without adequate staff education and training is a huge mistake. ACCURATE PREFERENCE CARDS According to a pilot program instituted at Bluewater Health in Ontario, Canada, procedure card management is one of the keys to effective inventory management in the operating room. Results of this pilot project showed decreased supply expenses, marked improvement in productivity, and staff reported a more collaborative work environment. 30 Unfortunately, keeping procedure cards up to date has been overlooked or done poorly at many hospitals. This is the result of too little time, knowledge, and skills, as well as a lack of understanding how this impacts patient care, staff and physician satisfaction. Inaccurate information on physician preference cards leads to inconsistencies and errors. The benefits of a well-managed system for physician preference cards will support clinicians by reducing case times, improving room turnover, and ultimately freeing clinicians to focus on delivering patient care. IMPROVED ACQUISITION AND DISTRIBUTION PROCESSES Improved acquisition and distribution starts with the basics. Before a process can be improved, it is critical to understand what currently exists. First steps include a full walk through of the operating room to identify key facts, such as stocking locations, inventory duplications and overstocking, PAR levels and current processes for ordering, receiving and distributing supplies. Observing the process for case picking, evaluating the configuration of the main stock room, reviewing pick lists for accuracy and tracking returns are a few of the actions that need to be taken to identify areas for improvement. Once the problems have been identified, a detailed plan needs to be developed on the best way to approach each of the issues. It is important to include those individuals currently involved in the processes to get their ideas on how the systems can be improved. Inventory and supply handling responsibilities need to be assigned to individuals who have the knowledge and skills to handle the tasks effectively. Clinical staff input is critical to ensure the correct supplies are available for the cases being performed. IMPROVED CASE PICKING Accurate case picking is essential in reducing and managing inventory in the operating room. Accurate case picking begins and ends with accurate physician preference cards. It requires an organized pick area that allows the employees picking the cases to do this efficiently. Organizing products according to how they are listed on the preference cards will improve overall accuracy and efficiency in case pulling. In addition to improving 18

19 productivity, accurate case pulling will result in improved data on product utilization, facilitate standardization of similar or like products, free up storage space and most importantly, improve inventory management and overall reduce costs. 31 The benefits of improved case picking include decreased case picking time, improved case set up time, reduced time searching for supplies, improved charge capture, and more accurate identification of costs per procedure. CONTROL FLOW OF NEW PRODUCTS AND VENDOR ACCESS One of the major challenges in effectively managing inventory in the operating room is the flow of new products and unrestricted vendor access. The flow of new products into the operating room adds cost, increases duplication, creates confusion and in most cases, does not improve clinical outcomes. The first step is to establish and enforce a policy and procedure on new product entry. The framework for the policy and procedure needs to be based on product clinical efficacy, safety and cost. The second step is to establish a multidisciplinary committee that oversees requests for new products. The third step is to establish regularly scheduled meetings to review requests for new products. Leigh Valley Health Network established a multi-focal Value Analysis Team to improve their processes for new product entry. They set specific goals to guide and direct them in their undertaking. These include simplifying and shortening the process for new product entry, involving physicians in the process of new product introduction and evaluation, improving patient safety by enhancing communication to new product introduction, and improving operating room efficiency through standardization of perioperative products. 32 As a result of having this type of structure in place, organizations can take the bias out of new product entry, facilitate requests for new products, control inventory, and improve staff and patient satisfaction. Controlling vendor access is another key element in managing inventory in the operating room. While there are situations where the vendor presence is needed and necessary, there are times when it is not. On average, vendors only provided true clinical support 50% of the time. It is common knowledge that many large manufacturers market directly to the surgeon. Common practice for vendors is to pull trunk inventory from their car and bring it to the operating room for the surgeon to use. This is not only a patient and facility safety factor, but contributes to excess inventory, and often at a premium price. The problems with trunk stock also include the potential to delay cases if the products are delivered unsterile, lack of clinical evidence the product truly improves patient outcomes, and concerns that allowing vendors in the operating room may violate patient confidentiality. As with new product entry, policies and procedures must be in place to control vendor access in the operating room. It is very important to have surgeons involved in creating these policies and procedures, as buy-in is critical for enforcement. 33 Clearly there is a need for healthcare organizations to develop partnerships with vendors as they provide a needed service. At the same time, healthcare facilities need to ensure that vendors add value, not just products. 19

20 PERIOPERATIVE NURSE RESPONSIBILITIES The perioperative nurse is an integral part of improved inventory management in the operating room. He or she touches and uses supplies every day in providing care to patients undergoing surgery. Perioperative nurses are generally concerned with having the correct products the surgeon or anesthesiologist needs to deliver quality patient care. They are not happy when the products they need are not available when needed. They want to be more productive and effective in their role as the patient advocate. Perioperative nurses have a responsibility to be a part of the healthcare facility s efforts to control inventory and supply expenses. They are critically important identifying standardization opportunities, and key in identifying processes to improve overall supply management. So, what are some places that perioperative nurses can make a difference in inventory management in the operating room? They can help manage changes related to reduction in product duplication. They can help identify supply reduction opportunities within the operating room itself, and supply storage areas throughout the operating room. They can serve as a liaison to support change with their peers, physicians and vendors. Perioperative nurses need to be the champions of eliminating costly practices that do not improve patient outcomes. They are the foundation of any undertaking to improve management of inventory in the operating room! 20

21 CONCLUSION It is important to remember that supply chain in the operating room begins and ends with the patient. At the end of the day, everyone involved wants to ensure care is delivered efficiently, effectively,and clinical outcomes are met. Improving management of inventory in the operating room is a collaborative effort by hospital leadership, the perioperative team and the supply chain. Unfortunately, operating rooms have functioned for too many years with nice to have as opposed to need to have supplies. Given the current state of healthcare, operating rooms need to transition from the JIC to JIT model. They need to take advantage of the technology available to help them manage a shrinking pool of resources. They need to be knowledgeable about the financial and clinical impact of poorly managing supplies in the operating room. Today, we see an unparalleled opportunity in the operating room to ensure longevity of the organization through a serious and ongoing commitment to proactive stewardship in effective management of the supplies in the operating room. 21

22 GLOSSARY Automated Inventory Control Systems Benchmarking Cost Benefit Analysis Integration Inventory Management Inventory Turns PAR Level Performance Metrics A system of real-time inventory tracking that takes place on a perpetual basis. Typically, it includes technology such as the use of barcodes and radio-frequency identification (RFID) tags to provide automatic identification of inventory objects. A search for the best practices that will lead to superior performance. Internal benchmarking makes comparisons within an organization, such as developing best practices from several hospitals that perform similar functions. A method used to help appraise, or assess, the case for a proposal; the process involves weighing the total expected costs against the total expected benefits of one or more actions in order to select the best or most profitable option. Combining or coordinating communications between separate divisions to provide a harmonious, interrelated whole. The process of monitoring and controlling the goods and materials that are held in inventory to ensure that appropriate levels are maintained. The number of times in a given period that onhand supplies are completely replaced. Example: If 20 items are kept on hand and 100 are ordered during a year, the number of inventory turns is five. Boundary markers in inventory levels that signal you must reorder supplies to ensure inventory will not run out while waiting for resupply. The PAR level would also be the order point. Measurements of an organization s activities and performance. 22

23 Perpetual Inventory Quantifiable Data Radio-Frequency Identification (RFID) Tags Replenishment Return on Investment (ROI) An inventory management technique that constantly monitors and maintains on-hand quantities at optimal levels. Refers to the numerical facts and figures collected during a research investigation. The data and/or observations are analyzed and used to interpret a situation. Data gathered is measured on a numerical scale such as a chart. The wireless non-contact use of radio-frequency electromagnetic fields to transfer data for the purposes of automatically identifying and tracking tags attached to objects. The action of restocking depleted items or materials. Data used to evaluate the efficiency of an investment in finance and economics. 23

24 REFERENCES 1. Jayanthi A. 5 Tips to Reduce Supply Chain Costs. Becker s Hospital Review. December 2013:P1. 2. Petrohoy G, Bleznak A, Toomey S. Value Analysis: Perioperative Link in the Supply Chain. Poster Presentation: AORN Congress; Philadelphia, PA.: March Thomas, M. Here, There, Everywhere: Effective OR Inventory Management. Cardinal Health. January Teaching Nurses to Stand up to Surgeons in the OR. Journal of Nursing. Dec 2007: Gagliardi A. Supply Chain Management Inventory Control: The Basics. ASCs Conference Burns L, Lee J, Bradlow E, Antonacci A. Surgeon Evaluation of Suture and Endo- Mechanical Products. Journal of Surgical Research. 2007;141: The Physician Preference Card. hfma. 2009: Supply Chain Services Integration With High Cost Departments. AHRMM Position Statement Cutting Costs in the OR. University of North Carolina, Cardinal Health. 2013: Cutting Costs in the OR. University of North Carolina, Cardinal Health. 2013: ORstat. Cardinal Health Improved Inventory Management Increases Supply Chain Efficiency. Becker s Hospital Review. December 2013:P Miller L. 5 Tips to Approach Cost Reduction on Physician Preference Items. Becker s ASC Review. July 2013: Gagliardi A. Supply Chain Management Inventory Control: The Basics. ASCs Conference Thomas M. Here, There, Everywhere: Effective OR Inventory Management. Cardinal Health. January Cutting Costs in the OR. University of North Carolina, Cardinal Health. 2013: Carey School of Business. Reducing healthcare costs through supply chain management. Arizona State University W.P. 2010: Carey School of Business. Reducing healthcare costs through supply chain management. Arizona State University W.P. 2010: Gagliardi A. Supply Chain Management Inventory Control: The Basics. ASCs Conference

25 20. Starr A, Karagory D, Tangeman C. A Cohesive Approach to Cutting Perioperative Supply Chain Costs. hfma. 2011: Dahl R. How Hospitals Can Increase OR Profitability. Surgical Directions LLC. 2013: Lee, J. Losing preferential treatment. Modern Healthcare. Feb Phillips L. Reining in the Cost of Physician Preference Items. HealthCare Solutions Bureau. May 2010: Phillips L. Reining in the Cost of Physician Preference Items. HealthCare Solutions Bureau. May 2010: Thomas M. Here, There, Everywhere: Effective OR Inventory Management. Cardinal Health. January Thomas M. Here, There, Everywhere: Effective OR Inventory Management. Cardinal Health. January Carey School of Business. Reducing healthcare costs through supply chain management. Arizona State University W.P. 2010: Better Inventory Management Systems Can Reduce Operating Room Costs, Study Finds.University of Arkansas Newsletter. Oct Operating room supply chain: Pilot program yields real savings within two years. Canada s Health Care Newspaper. January 2012: Operating room supply chain: Pilot program yields real savings within two years. Canada s Health Care Newspaper. January 2012: Thomas M. Here, There, Everywhere: Effective OR Inventory Management. Cardinal Health. January Petrohoy G, Bleznak A, Toomey S. Value Analysis: Perioperative Link in the Supply Chain. Poster Presentation: AORN Congress; Philadelphia, PA.: March Phillips L. Reining in the Cost of Physician Preference Items. HealthCare Solutions Bureau. May 2010:

26 Please click here for the Post-Test and Evaluation 26