Big gains are being made in supply chain cost cutting
Materials management is no longer simply a product purchasing function - it has gone beyond procurement and into analyzing how products are being used and just as importantly, where the products are at any given time. Understanding these dimensions has become critical to efficient utilization and inventory control, which are integral to optimal expense management.
The scope of materials management has evolved, as has the position itself inside hospitals over the past two decades. The department has become recognized by the C-suite as a cornerstone of fiscal restraint and is instrumental in exacting prudent product utilization, said Pam Poshefko, consulting manager for Chadds Ford, Pa.-based IMA Consulting.
"Materials managers are becoming educators for clinicians and helping them understand how to manage supplies and finances," she said. "That is a change in focus - this was always a siloed area."
Chief financial officers are also deploying materials managers as gatekeepers in the quest to control non-labor expenses, of which products comprise the largest portion, Poshefko said.
"They want to know if they are getting the best spend for their buck," she said. "They want to know how many supplies are bypassing materials management, what those supplies are used for and if they are getting the best prices."
Efforts to standardize product purchases to one or two brands have been going on for decades and over that time they have matured from being contentious to cooperative, Poshefko said. In fact, she says physicians have become strong allies of materials managers in the quest to get the best product value possible.
"There is a much greater awareness among physicians about value analysis for products," she said. "Where it used to be a process of materials managers telling them what they couldn't buy, they now present a united front on which products to select. Physicians are facing the same cost pressures and are now more willing to become part of the solution for their hospitals."
To be sure, materials management has come a long way from the days of being told "get me my stuff," Poshefko said.
"There are clinicians who are more financially astute and becoming part of the supply chain management team because they have the skills to be a liaison between the clinical and financial," she said.
Product 'traffic control'
A crucial aspect of cost-effective product utilization is knowing how many products are available and where they are in the hospital at any given time. While this may seem like a rudimentary procedure, it is more complicated than it looks, said Paul Segovis, director of materials management for Ellis Hospital in Schenectady, N.Y.
"Keeping track of mobile items can be problematic," said Segovis, who described the situation at Ellis three years ago before implementing a radio frequency identification system called Agile Trac. "We felt like we had more products than we needed because we often didn't know where they were. We felt we were purchasing too many products and realized that what we had was a distribution problem."
Confusion over where mobile products can be found is a common problem in hospitals, which led to the development of the Agile Trac RTLS System in 2002 and acquisition by GE Healthcare in 2008, said Fran Dirksmeier, general manager of global asset management in Richmond, Va. Three years after being deployed at Ellis, the system has helped the hospital realize $700,000 in savings by eliminating redundancies in inventory.
"The business case is to help customers manage the equipment in a much safer and sounder way," Dirksmeier said. "They need to look at every single process that clinicians touch every day to make sure they are performed in the same way, which includes product handoffs and communications."
Agile Trac is designed to be part of a hospital operations management system, which Dirksmeier equates with "air traffic control." The system manages workflows of all types and integrates functions so that they can be tracked anywhere in the hospital.
"It can be used for assets, staff and operations to anticipate bottlenecks, eliminate waste and promote efficiency," he said. "That way the asset meets the patient at the right time, from admission to discharge."
At Ellis, the most regularly lost items were IV pumps, wound vacuums, thermometers, beds, wheelchairs and sequential compression pumps, Segovis said. When the hospital implemented the system, he said the materials team tagged the IV pumps first, while phasing in the others. Between 1,000 and 1,500 items are currently equipped with a tracking tag.
With access throughout the facility, system users can find out where any of the tracked products are and get one if needed, Segovis said. What's more, he said the system ensures proper equipment service and sanitation protocols to boost safety and infection control.
"It has a feature that sets off an alarm if a device goes to an area where it doesn't belong, such as a soiled linen room," Segovis said. "That has actually added to our cost savings as well."
At this point, all the products that need to be tagged at Ellis' main campus are in the system, but there is more work ahead, Segovis said, as two other campuses need to be equipped. Segovis estimates that the implementation will take about 18 months to complete.