Hospitals that don’t automate their supply chains stand to waste 30 to 40 percent of their budget on overstocked or out-of-date supplies or emergency orders for understocked items.
That’s the thinking of Management Health Solutions, Inc. The Fairfield, Conn.-based provider of clinical inventory solutions is making a play for what it feels is an underserved market with the recent acquisition of AtPar, Inc., a Lebanon, N.H.-based developer of mobile supply chain software. Company officials say AtPar’s technology fits in nicely with MHS’ Optimal Inventory Control (OptIC) platform, designed to help hospitals manage their clinical and pharmaceutical supplies.
“This is a $70 billion industry with little automation,” said William Zierolf, MHS’ president and CEO, a self-described “supply chain guy” who joined the company in 2008 and has seen its customer base grow from 50 to 500 since then. “There are millions of dollars on the shelves of your average 400-bed hospital.”
According to Zierolf, clinical supplies are the second-largest cost that a hospital incurs, coming behind people and just ahead of facilities. Yet many hospitals still rely on manual audits, wasting the time of physicians and nurses – one estimate says 35 percent of a nurse’s daily routine is spent dealing with supplies.
MHS offers a three-step process to analyze and manage a hospital’s supply chain, says Zierolf. The company first completes a physical inventory, entering all data into an online portal, then installs a content management system that links the items in stock to the hospital’s Item Master. Finally, MHS adds software that allows hospitals to accurately link supplies with clinical uses, automating the reordering process and ensuring that supplies are not over- or understocked.
The system also ensures that out-of-date supplies are taken out of circulation.
“Every time we do a physical inventory, we get expired products on the shelf,” said Zierolf, who estimates 90 percent of all hospitals are also overstocked.
With political leaders looking to rein in skyrocketing healthcare costs and the struggling economy pushing supply prices higher, hospitals and healthcare networks are taking a closer look at how they manage their inventory. In an introduction to the Premier healthcare alliance’s Economic Outlook and Inflation Estimates last year, supply chain experts talked of the need for collaboration and automation.
“Maximizing the dollar will require close collaboration between the hospital, the medical staff, the group purchasing organization and the supplier,” said Eugene Schneller and Natalia Wilson, co-directors of the Health Sector Supply Chain Research Consortium at Arizona State University’s School of Health Management and Policy. “Now more than ever, supply chain executives will be critical in leading initiatives to provide organizational sustainability.”