6 Supply Chain Mistakes That Drain an ASC's Budget

Supplies are one of the highest costs for ambulatory surgery centers. Knowing how to control these costs can mean the difference between a successful ASC and a financially failing ASC. Beth Johnson, vice president of clinical systems at Blue Chip Surgery Center Partners, and Bob Scheller, COO of Nikitis Resource Group, share six supply chain mistakes that drain an ASC's budget.

1. No clear policies. "One of the first things that has to be done [in an ASC] from a materials management perspective is for the facility or the management entity to develop clear policies related to how inventory is set up (physically and within the information database), controls for purchasing and receiving and how the entity plans to handle requests for new items," Ms. Johnson says. If the facility plans to case cost, which Blue Chip highly recommends, accurate pricing/unit of measure and how to account for supplies used should be outlined in policy, according to Ms. Johnson. "Apples to apples comparison is essential," she says. Blue Chip also recommends limiting the number of storage locations and determining inventory par levels when creating supply chain policies.

Mr. Scheller says one costly mistake for ASCs is to acquire supplies for a new surgeon who never commits to the ASC. Creating policies for supplies in relation to new surgeons may prevent the loss of money from unused materials.

Consistent and standardized policies ensure the ASC knows the expectations for supplies and strategies for meeting these expectations. If there is a discrepancy in inventory counts of more than 5 percent, Blue Chip requires its ASCs to develop an action plan to identify and resolve the variance. The action plan may be as simple as changing the number of people involved in calculating inventory or setting up teams responsible for different parts of the supply acquisition and depletion process.

2. No regular inventory counts. Ms. Johnson says it is critical for ASCs to know what is in their inventory at all times. Blue Chip requires quarterly physical counts and utilizes weekly reports from inventory software to identify potential errors. "At any point in time, we know what we have on the shelves and the dollar value," Ms. Johnson says. She suggests frequent review of inventory "because supply costs can get out of control so quickly."

According to Ms. Johnson, one challenge in counting inventory may be bulk supply items or medications that are not charged back to the patient. Monthly, rather than quarterly, counts would be more appropriate for these items, she says. Knowing the exact price for supplies and how frequently they are used can help ASCs manage supply costs. "Know where every dime goes," Mr. Scheller says.

3. No GPO or contracting organizations.
Group purchasing organizations offer ASCs cost savings on supplies. Mr. Scheller says proper selection of GPOs is important to receive the most benefit. "Get [a GPO] that is tuned into your kind of specialty," he says. "One method is to pit one against the other. It's a matter of competition." Negotiating with multiple GPOs allows ASCs to compare GPOs' strengths and weaknesses and drive down costs through competition between the organizations. Ms. Johnson says regional and national contracting can also offer ASCs savings on specialty items, service or maintenance agreements and reprocessing opportunities..

4. Acquisition of only new items.
Mr. Scheller says reprocessing is a useful strategy for lowering supply costs and may provide greater value than newer, more expensive equipment. ASCs can also save money on supplies by buying on consignment. "We try to get as many supplies and implants [as we can] consigned to us so we pay when we use them versus paying upfront and have them sit on the shelves," Ms. Johnson says.

5. No insurance for supplies.
Mr. Scheller says one mistake is to not have the necessary insurance coverage for supplies acquired through consignment. ASCs are responsible for the equipment on their property. Failing to insure supplies can leave the center vulnerable to huge costs due to equipment damage from weather or other incidents.

6. No education or involvement of physicians or staff.
"We believe it's our responsibility to keep our physician-partners informed in supply chain matters," Ms. Johnson says. "We involve them in the case-costing process and in any type of cost analysis or value analysis that we perform on new purchases or existing products."

Increasing physicians and staff awareness of what a supply item costs can help them make informed decisions on what supplies they order and use. "We want staff to be educated and our physicians to be involved; when you fail to do that, less than optimal decisions may be made," Ms. Johnson says.

Related Articles on Supply Chain:

7 Top Challenges to Overcome When Purchasing Surgical Instruments

5 Things Surgery Centers Need to Know About Meaningful Use and the 50% Rule

Buying Resold Surgical Disposables: Q&A With Gary Van Meer of Palm Harbor Medical

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