INVENTORY MANAGEMENT 101: how to make the process cost effective, accurate and efficient By ANN GEIER, MS, RN, CNOR, CASC Vice President Clinical Informatics, SourceMedical
ABOUT THE AUTHOR Ann Geier has worked in the ASC industry for almost 30 years. She has managed financial and clinical operations in numerous freestanding surgery centers and served as a surveyor for AAAHC since 2006. Ann joined SourceMedical in 2013, taking the role of Vice President of Clinical Informatics to focus on the research and education for which she has become recognized. In 2014, Ann was selected by the Ambulatory Surgery Center Association (ASCA) Board of Directors to represent the association as a liaison with the Accreditation Association for Ambulatory Health Care (AAAHC). Prior to her time with SourceMedical, she was Senior Vice President of Operations with ASCOA, where she annually reviewed policies and procedures for all ASCOA centers and served on the MedAssets Ambulatory Advisory Committee. She has served on the ASC Quality Collaborations Expert Group since its inception in 2006. TABLE OF CONTENTS About the Author 2 Introduction 2 Establishing and Maintaining Efficiency 3 Encouraging Accuracy 4 Ensuring Accurate Inventory 4 Be Cost Effective 5 Making Every Dollar Count 5 Other SourceMedical Resources 6 Ann s clinical background is the operating room, where she served as a scrub nurse, circulator, educator and director. She is an active member of AORN and ASCA, teaches in the AORN Ambulatory Boot Camp, and speaks at a variety of national meetings. INTRODUCTION For surgery centers and hospitals, inventory consists of many different items that are tracked within some sort of inventory system. The staff member who oversees everything from gases to sutures to office supplies and monitors their usage is typically the materials manager. However, in smaller centers this role may fall to an instrument tech or a surgical tech. To make your inventory process cost effective, accurate and efficient, examine your center s inventory process from signing for deliveries to paying invoices. This whitepaper will offer best practices for prioritizing the inventory process and maximizing revenue. 2 Inventory Management 101
\ ESTABLISHING AND MAINTAINING EFFICIENCY The best way to establish an efficient inventory process is to map out the materials management system before your center opens. If your facility is new, you should take several weeks to research and establish your process. Train personnel. Make sure every employee at your center understands his/her role in the inventory process. Only one or two people should be given the task of entering data when you re first setting up the inventory module. This will take significant time. If too many people enter information, there is a greater possibility for error. Load each item into the computer. SourceMedical software has an inventory module, and you can request training for proper setup. Load all preference cards. Consult with the surgeons who will work in your center. Though it may be difficult to persuade surgeons to review and submit their preference cards, these cards are critical to the center s efficiency. Case costing will not be accurate if the cards are not loaded and up-to-date. Check and double-check the accuracy of information. Standardize inventory categories. Date items upon receipt (preferably on a sticker that can be removed if you need to send the item back). This allows tracking of how quickly a supply item is used. Rotate stock. Limit the locations where supplies are kept. An efficient and complete materials management system can improve case costing, accurately track supply item usage, and reduce the risk of error. Elimination of manual inventory management means consistent documentation in one central location, greater efficiency and improved staff productivity. 3 Inventory Management 101
If your center is already open, you may find it difficult to load inventory. You will need to enlist help when building your inventory process, and this effort may require working after hours. The following steps will help you maintain inventory once your process is set up: Stay up-to-date with your ordering. Consider how often you receive supplies and adjust accordingly. Let nurses manage drug orders. Use Just In Time Inventory as a technique to carry the minimum amount of inventory needed at all times. This makes yearly inventory counts easier and simplifies tracking of each item in stock. Consider your consignment options. ENCOURAGING ACCURACY When designing your inventory system, consider best practices for keeping counts accurate. If your center is already open, identify the areas where reconciling counts may be a challenge. Keep storage areas to a minimum, including the use of specialty carts. Remember that vendors and sales reps are your partners. They have a vested interest in helping you get the supplies you need on time and at a competitive price. When researching new vendors, consider their availability. If you call them after 5 p.m. because you need a supply item for your first case in the morning will they meet you when your center opens the next day? ENSURING ACCURATE INVENTORY You can achieve consistent accuracy by taking three important steps: Assign locations to the items loaded in your system. Develop reporting processes. Consult with your materials manager and create guidelines for notifying an administrator regarding issues with supply levels. Make staff training mandatory. Every employee should observe best practices pertaining to inventory management. Select a champion to field any questions or concerns. Check with your vendors about their availability and delivery schedules. 4 Inventory Management 101
BE COST EFFECTIVE There are a number of ways to build cost efficiency into your inventory system: Assign a global charge for Pre-Op and PACU. For example: If you have an IV start kit with gloves, alcohol swabs, etc., price that kit at a fee such as $10. You can follow the same steps for PACU and thus avoid entering each item every time. Determine unit costs. Track implants, which are a common cause of money loss. In some cases, payer-contracts insist that implants are carved out. Thus, if your facility makes a small profit on implants by adding in administrative charges, you will lose that profit. If a staff member forgets to document usage of an implant and the billing occurs without correcting the error the implant won t be billed. Audits can track implant usage, and your staff can then compare the data to the number of implants ordered and received. Any disparity impacts your center s revenue. Many group purchasing organizations (GPOs) offer free memberships and sizable advantages including: m Contract compliance. A pricing audit from your GPO can confirm that your facility is getting accurate pricing. m Velocity reports. Your GPO can help with these usage statements. m Backorders. Your GPO can provide transparency into the ordering process, assist with rebates, and answer questions regarding any problems with materials purchased. m Contract listing. Check the major suppliers on the GPO list. If your supplier is not shown, it may require some time to be added. MAKING EVERY DOLLAR COUNT Review the following tips for more ways to make your center cost effective: Post pricing on bins. Include pricing on preference cards. Track savings achieved by careful purchasing and use. Involve everyone in case costing. Use QuickBooks or similar software to track how money is spent and keep the invoices and payment information in one place. Avoid penalties for late payments. Make sure your vendor has your correct address. 5 Inventory Management 101
OTHER SOURCEMEDICAL RESOURCES RELATED TO ASC OPERATIONS Whitepaper: Whitepaper: The Top 5 EHR Implementation Hurdles and How to Avoid Them Trimming A/R, Growing Profits Whitepaper: E-book: Is Quality Compromised By All the Reporting? Admin 101: What Every New ASC Administrator Needs to Know 6 Inventory Management 101
To learn more about clinical and management software for your facility, call 800-719-1904 or email info@sourcemed.net SourceMedical TM is the leading provider of software and billing services for Ambulatory Surgery Centers, Specialty Hospitals and Rehabilitation Clinics nationwide. For nearly 30 years, SourceMedical has been the trusted brand for innovative applications, industry expertise and unsurpassed customer service. Last year, our software and billing services processed over 14 million outpatient transactions via 21,000 therapy professionals. For the past 11 years, SourceMedical has earned a position on the Healthcare Informatics list of Top 100 healthcare information technology companies. In 2013, SourceMedical ranked among the largest revenue-cycle management firms, as tracked by Modern Healthcare magazine. 100 Grandview Place, Suite 400, Birmingham AL 35243 www.sourcemed.net 2014 Source Medical Solutions, Inc. SC7899