Inventory Management: Cutting Costs (But Not Care) in the Cath Lab
Cost-containment initiatives are challenging cath lab managers, who must balance pressures from administration to cut inventory costs, yet still stock equipment requested by physicians—all without sacrificing patient care. Trimming waste, expanding buying power, building partnerships and automating processes can help achieve these goals.

Getting the best bang for your buck

"Understanding healthcare reform and the impact it has on individual hospital departments will be an imperative for the financial health," says Laurie Mulgrew, vice president of clinical services, Cardiovascular Care Center & Imaging at Southcoast Health System & Hospitals Group, a three-hospital system based in New Bedford, Mass. "Inventory management becomes an important component because there are effective ways to manage high-end cardiac devices and cut wasteful spending."

As healthcare budgets decrease, hospital administrators must pinch pennies without jeopardizing care. Jim O'Connor, vice president of supply chain management at Henry Ford Health System in Detroit, recommends revitalizing a hospital's inventory management process as a start. Hospitals that miscalculate their device use run the risk of holding products to expiry, a costly and avoidable mistake.

"Products often expire before use due to excess inventory," O'Connor says. "Knowing what products are used most often helps eliminate waste when reordering, which saves costs."

Because cath lab shelves house high-dollar inventory, the hospital team must find ways to reduce the incidence of expired products, streamline inventory control and increase charge capture. Physician preference determines most purchasing decisions in the cath lab, but with healthcare reform, physician choice may become more limited, Mulgrew says.

At Southcoast, one cost-cutting method includes requests for proposals (RFP). Physicians are essential to the process because they have established relationships with vendors. The RFP is given to vendors for specific cardiac devices after sufficient research and benchmarking is conducted. "If we decide that we will only pay $4,000 for a pacemaker, we would send out an RFP to the vendor and they would either sell us their specific pacemaker for $4,000 [the requested price], or turn us down," she adds.

"The vendors put their hat in the ring and make the choice whether or not to do business with us," Mulgrew says.

Having a physician leader help to manage purchasing decisions and collaborate with hospital departments creates a strong partnership. Likewise, appointing a physician champion to facilitate physician-physician dialogue can ensure that reordering and purchasing decisions are effective and the cath lab runs efficiently, says Thomas Rhodes, RN, director of the cardiac cath and EP labs at Sutter Medical Center in Sacramento, Calif. This also enhances the partnership between physicians, supply chain managers and vendors. Implementing a workable, effective product review process facilitates device adoption, says Rhodes. "There really is a science behind bringing in a wire, a stent, a catheter or a balloon," he says. "It's not just physicians saying 'I want that on our shelves.'" Sutter reviews data for a potential product, including safety issues, black box warnings and clinical trial results. "We ask: given the quality and outcomes measures, do we want this product in our lab?"

Cut waste, automate

Automating the inventory management process can reduce supply costs, increase revenue and streamline quality control. Inventory technologies set product PAR levels (boundary markers in inventory levels that indicate when it's time to reorder), maximize the rotation of stock and minimize staff time. The technology also flags products recalled by the FDA, Mulgrew says.

Automated management systems run custom reports that allow administration to track product usage and cost. This also determines which size and brands should be reordered, Rhodes says. "When a product is used, the computerized system reduces the PAR level by one and tracks how often the product is used per hour, per day, per month," he says.

For Henry Ford, an audit of inventory revealed that more than $7 million worth of inventory sat on the shelves. To cut back, staff adopted a Clinical Supply Solution system (Owens & Minor) to track product usage and inventory between the system's five cath labs, one EP lab and an interventional radiology suite.

Six months after implementation, inventory was reduced by 14.6 percent, or $557,000, according to O'Connor. Additionally, he says the system helped decrease the amount of expired product by 69 percent from the third quarter of 2009 to the first quarter of 2010—$171,277 to $53,056.

"This is about getting properly reimbursed for what you do," says O'Connor. "You must ensure that you have an accurate charge capture, and the inventory management system helps with that."

In fact, charge capture improved by 6 percent per patient encounter ($460) in Henry Ford's cath lab and 23 percent per patient encounter ($500) in the EP lab. The system also tracks products, applies SKU standardization, runs real-time inventory reports and provides better product visibility.

Strategizing and streamlining inventory management can decrease clinician time, make costs and waste transparent and revitalize the relationship between physicians and the supply chain.