KPIs that Achieve Supply Optimization & Rein in Costs

Why smart KPIs are needed

Medical supplies and devices represent the second highest expense, after labor costs, in hospitals’ specialty procedure or interventional areas, and can constitute as high as 40% of the total expense budget at hospitals with a high Case Mix Index. Since these areas account for the largest proportion of supply-related expenses, and the items they use are essential for carrying out patient care, it’s essential that meaningful and actionable metrics, or Key Performance Indicators (KPIs), are put in place to accomplish a lean inventory and prevent waste. Effective KPIs provide hospitals with the data visibility that’s necessary for guiding and achieving inventory optimization, controlling supply spend, and setting their cost savings goals. Smart KPIs are the cornerstone of a competitive and more strategy-oriented supply chain.

And yet, hospital supply chain organizations traditionally focus on metrics that fail to show the data necessary to effect inventory management improvements; for example, most metrics in use are not geared towards reporting the connections between supplies and performance, thereby completely missing the opportunity to identify and quantify opportunities for supply optimization and consolidation. How quickly are unused or obsolete items being identified and substituted? How effectively are expiring items being identified and removed? How well-aligned are purchases with the actual clinical need? To optimize their inventory and supply spend, departments must apply metrics that answer these questions by examining, for example, expiring or expired inventory as a percentage of on-hand inventory value, unused inventory as a percentage of on-hand inventory value, and purchased inventory versus consumed inventory.

California case study

We’ve had tremendous success implementing these kinds of KPIs in the cardiovascular department of a major teaching hospital in California over the past couple of years. This department lacked control, visibility, and automation in managing consumable devices and supplies inventories, resulting in high rates of wasted and unused inventory, and inaccurate and incomplete supplies documentation and billing at the point of care. We enabled the department to implement meaningful metrics and KPIs, in conjunction with innovative automated data capture solutions, to generate the information needed to enable them to achieve full visibility, accountability, and control of their inventory. This has led to streamlined operations, reduced waste, automated procure-to-pay processes, increased billing, and enhanced clinical documentation accuracy.

The health care supply chain continues to be riddled with endemic waste, poor and error-ridden documentation at the point of care, and a lack of basic information like what is in stock and where it is located. And while it might not be immediately apparent to clinical departments, poor inventory management directly affects their ability to achieve their profitability as well as patient care objectives. A clear priority for specialty departments must be to improve inventory alignment, reduce inventory expenses, and uncover savings opportunities. Our experience in California shows how doable this is when meaningful metrics are used in combination with effective data capture and inventory management tools. 

Come hear about this live at AHRMM19!!
VUEMED’s COO and Co-Founder, Lana Makhanik, will be presenting this Case Study at AHRMM19 on Monday, July 29th!