Dr J Sivakumaran, Kovai Medical Center and Hospitals, COO, KMCH, Coimbatore says that a balanced tradeoff between stock out and over inventory has to be worked out to keep cost under control, and expounds on the importance of maintaining a healthy inventory
Nation’s largest spending of healthcare expense happens through hospitals. To beat the competition, hospitals always invest in expensive technologies, due to which the cost of medical care is on the increase. One of the cost drivers for such increase is the cost of material. In any hospital, material cost (surgical + pharmacy) account for the highest per cent of the turnover. It is important for the top management to focus attention on this area so that the costs can be reduced, efficiency could be increased and patient care could be provided at an affordable cost. Apart from economic healthcare delivery, it is also important to deliver quality healthcare to patients to improve the satisfaction level. One of the ingredients of quality health delivery is the availability of quality material whether it is disposable, reusable, consumable or capital nature, consistently. Hence material function in a hospital is very important for financial improvements, quality clinical outcomes, physician and patient satisfaction. Better managed hospitals are those who procure material at a reduced cost and deliver improved clinical outcome without compromising quality of care. Even a smallest percentage of savings in the material cost will have high impact on the bottom line.
Challenges
Unlike the manufacturing industry, the availability of an item cannot be postponed, as it results in the life and death of patients in a hospital. Non-availability of a smallest item could result in stoppage of a procedure to a patient who is fighting for his life. Most of the products are available in a range of sizes and brands to suit the requirements of the users. Having all the sizes of different brands at all times is a real challenge to the materials manager of a hospital. He has to run the department without shortage but also without excess inventory so that the cost of material is at the desired level. A balanced trade-off between stock out and over inventory has to be worked out, to keep cost under control. Most of the hospital consumables bear expiry date after this date they are not usable to the patient care. Hence, every incoming and outgoing item needs to be monitored closely. Stocks are equivalent to cash and if inventory is not tracked and managed properly, chances of revenue leakage is high. While cost of care is of prime importance to the patients, efficiently managing the material cost is highly important for the hospital administrators in this competitive environment. Without having an idea of how much material is required for the next day, the materials personnel need to plan, procure and supply at the expected service level, economically.
Reasons for stock pile up
There are many reasons for inventory pile up in hospitals. Improper planning, non-involvement of users, preference of different brands by different doctors of the same speciality, improper control on inventory movements, too many stocking points, change of technology, change of speciality doctors, fear of scarcity, etc. are few of the major reasons. Though zero inventory system will not be successful in the hospital setup, at least the stock level can be reduced, if local suppliers are willing to keep inventory on behalf of the hospital. Many products are not readily available with the supplier and takes longer lead time to supply. As procedures cannot wait for products, the materials personnel necessarily needs to keep more stocks than required, to avoid any stock out. When the patient load is high, the users have a tendency to keep more stocks to avoid running here and there, when an item is needed. Though the users keep this as a safety measure, the material department will not have any clue on such stocks and this will be out of their control. When the patient load goes down, the extra items will not be returned back to the stores, resulting in excess inventory at each user area. Over a period of time, a few of these stocks will become slow moving, non-moving and subsequently they will get expired. Suddenly these items will be sent back to the stores either for replacement or for return. As these stocks were already expired, they could neither be returned to the suppliers for replacement nor push them to other departments where this is being used. Ultimately the hospital has to write off these stocks and get hit at the bottom line.
Care while indenting
It is very important to take care while raising indent to the stores by user departments. Only those items that are really needed in that ward for a particular period need to be indented. Due to the work pressure or lack of training, without assessing the real need, indenting will happen based on the previous indents. This will result in stacking items without usage. Every stock point needs to be checked periodically by the user supervisor to ensure that items relevant to that area only are kept as buffer stocks. Any unrelated items should be removed from the ward. Once such items are removed, the left over items need to be properly arranged, stocked and codified so that arrival of any unrelated items, in future, could be easily identified. Once such standardisation is done then proper check and balances is required for sustaining the system. By this exercise, lot of items lying unutilised could be issued to the area where there is a demand for usage. Monitoring slow moving and non-moving stocks also need to be exercised periodically by various ward staff to reduce the inventory. The expiry of each item needs to be checked at least once in a month and short expiry items, say less than three months expiry should be sent to stores for replacement. This will help the stores personnel to take steps for either moving these stocks with other departments before expiry or to get replacement from the supplier. The time limit of three months can vary from hospital to hospital depending upon their policy. System of surprise checking stock and expiry by an external person from other departments will bring more desired results.
Check on surgery sets
The unnoticed area where focus needs to be applied is the central sterilisation department (CSSD), where various surgery sets are prepared, packed and sterile for doing different surgeries. Each set is customised to individual operating doctors. For the same procedure the number of instruments in the pack may vary from doctor to doctor. The list instruments needed in a pack need to be validated by the user doctor at least once in a year. Many times, out of say 20 instruments packed in a set, only 10 to 15 items will get regularly used and the balance five items would not have been touched during the surgery. This may be due to the change of technology, doctor’s choice of instruments or change of doctor himself. But these five instruments, every time will undergo sterilisation, given for surgery and returned back to CSSD without use. If each set is going to have such unused instruments, it could be visualised the total wastage per day, per month and per year. This will lead to shortening the life of the instruments, wastage of man power, packing materials, wastage of energy in sterilisation and artificial shortage of instruments. As long as there is no shortage of instruments in the set, nobody will take the initiatives to highlight and remove these instruments from the set.
CQO movement: Association of Healthcare Resource and Materials Management, Chicago has introduced a new movement called CQO movement which is the intersection of three components cost, quality and outcomes. Instead of measuring the performance of the materials department only by cost, it insists that the quality and outcomes are also need to be incorporated to have more meaningful measurement. Mere reduced cost of material does not ensure the quality of care which is very much needed in this competitive environment. Here the cost refers to the total cost of care which includes supplies, services and other activities related to materials function, quality refers to the best possible clinical results and outcomes refers to the cost reimbursement based on clinical care. Though the third component is not much related to the Indian healthcare scenario, the first two components cost and quality is to be necessarily linked into. Whenever there is an effort for cost reduction, it should be related to the level of quality care, to make it more meaningful.
Who is responsible?
The inventory reduction is not only the responsibility of the materials personnel but with every user in a hospital. Unless the user takes initiatives, materials department in isolation can’t do much in reducing the inventory. The stocks lying at various user stock points will be under control of users only. The materials department loses its control, once an item is issued to the user department. The users must collaborate more effectively with the materials department, to get the desired results. Barriers, if any in participating and shouldering responsibilities is often cultural problem rather than a technical problem. All beneficiaries should come forward as a team and try to reduce the inventory for better financial results of the hospital. By holding dead stock or non-moving stock or excess inventory, nobody is benefitted, except the suppliers. On the other side, if only required quantity is indented and kept in the inventory, the financial burden of the hospital will ease out and performance will get improved. Hospital should treat this department as a contributing center and must extend the professional acceptance. Reduced inventory cost will lead to reduced cost of patient care which will lead to the improved image and reputation of the hospital.