CONTROLLING SUPPLY COSTS

Controlling Supply Costs

Controlling Supply Costs

Introduction

The operating room (OR) has an aura of mystery. Bold signs restrict personnel. Special attire, hats, and masks hide faces and bodies from view. Patients enter, are anesthetized, cut and opened, repaired and closed, and emerge, groggy but cured.

The mystique of the OR can create significant barriers to managing expenses. Often there is the underlying hint of clinical blackmail: Cost reductions and restricted spending will drive away key surgeons.

Financial managers should remove barriers to efficiency, cost effectiveness, and cost reduction in the OR relating to inventory and inventory control. Strategies to achieve this include using members of the medical staff to set product standards and negotiating more advantageous contracts with vendors.

Controlling operating room inventory is critical to cost reductions in the OR. In an operating room suite of eight or more rooms, inventory value may exceed $1 million. This sum can be reduced by 10 percent to 30 percent, not including related savings such as holding costs. Although the inventory control process is lengthy and complicated, it is well worth pursuing.

Controlling OR inventory requires a detailed inventory plan that considers the complexities and nuances of the surgical suite. The basic tenets of an OR inventory plan are:

Count

Value

Reduce the value

Statement of the Problem

Hospitals must cut costs in the operating room, pharmacy and supply rooms rather than simply concentrate on reducing inpatient hospital stays, according to the most recent Center for Healthcare Industry Performance Studies.

"The 1996-97 Procedures Resource Book: A Guide to Inpatient Surgical Procedures" indicates that while reducing lengths of stay helps to cut nursing costs, it does little to rein in ancillary costs.

What's more, the report's author said, pushing patients out the door more quickly is getting harder to accomplish.

"Due to concerns over quality and access to care, the move to shorter stays is being monitored by patient-advocacy groups and legislators," states study author Susan E. White. "It is imperative that facilities turn their attention to tighter control over the cost of ancillary services to meet the expectations for controlling the costs of health care."

The report provides analysis of surgical procedures with information on where "industry-wide cost and length-of-stay savings" might be found, as well as analysis of the influence of managed care penetration on costs.

White said that the hospitals that had the best handle on ancillary costs were those involved in group-purchasing alliances.

"You can almost not afford to be in one," said Rick Wade, senior vice president of communications for the AHA.

Probably 90 percent of hospitals in the country belong to either a state hospital association purchasing plan, a not-for-profit alliance, a for-profit purchaser or a large, nationwide hospital company that uses its size to buy at a discount for its hospitals, Wade said.

White said that hospitals in the report clearly show that ancillary costs must be cut.

"The question is [some hospitals] spending their ancillary dollars wisely so that maybe the length of stay is down?" she said.

For example, data might show that for some procedures, a hospital is using a more expensive drug ...