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Bright Road Health Care System has been noticing a steady increase in its supply costs associated with their surgical services. Bright Road uses a periodic inventory system, which worked reasonably well when the system was smaller; however, as it has grew through mergers and acquisitions, this method of inventory management has become cumbersome and inefficient. The leadership team has been investigating the causal factors contributing to the escalating costs of inventory and has determined that the following are driving up the these costs: a) physician preferences and product type variability; b) charge capture inaccuracies due to manual input requirements; c) diversity of procedures and service lines in the OR; d) expired, obsolete, or recalled products (manual process); e) limited data on supply usage; f) manual procedure card management in the OR; g) maintaining consignment products; h) complicated clinical workflow; i) misalignment priorities between supply chain professionals and clinicians; j) and unknown related to cases in the OR.   

The following content was copied verbatim from the following website: http://www.pfiedler.com/ce/1265/files/assets/common/downloads/Effective%20Operating%20Room%20Inventory%20Management.pdf (Links to an external site.)

Healthcare organizations are realizing that supply chain processes can become a strategic cost savings tool instead of a daily operational process (Jayanthi, 2013). 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 (Petrohoy, Bleznak, & Toomey, 2011).

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 (Thomas, 2013). 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 3,000-4,000 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 (Teaching, 2007).

Sources:

Jayanthi A. 5 Tips to Reduce Supply Chain Costs. Beckers Hospital Review. December 2013:P1.

Petrohoy G, Bleznak A, Toomey S. Value Analysis: Perioperative Link in the Supply Chain. Poster Presentation: AORN Congress; Philadelphia, PA.: March 2011.

Thomas, M. Here, There, Everywhere: Effective OR Inventory Management. Cardinal Health. January 2013.

Teaching Nurses to Stand up to Surgeons in the OR. Journal of Nursing. Dec 2007:1-6

The student, serving as Director of Procurement for the Bright Road Health Care System, has been tasked with recommending solutions that will improve the operating efficiency and effectiveness of the organizations inventory management system and lower the supply costs. A formal recommendation should be prepared for the Chief Operating Officer (COO), Ms. Smith, logically presented, well-supported, and thoroughly vetted.

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