Power Purchasing

The power behind every facet of a healthcare facility to function effectively rests within the efficiency of it materials management personnel and their astute purchasing habits. However, like any other area in healthcare, a successful purchasing program cannot be achieved alone. Teamwork is imperative and everyone must play their role.

Take, for example, the operating room (OR). The OR usually has the largest supply expense of any hospital department, both in volume and item cost, points out Marilyn Beug, BSN, senior consultant with Aramark Healthcares Supply Chain Services Consulting. In fact, the median medical/ surgical supply cost is 15 percent of a hospitals total operating budget.¹ This is why it is important for the trifecta of infection control practitioners (ICPs), purchasing managers, and OR managers to work together to create a smart, cost-effective approach to managing medical and surgical supplies within the facility.

A team comprised of the OR manager, by identifying the product criteria and required quality performance; the infection control practitioner, by supporting the OR desire for product quality and function; and the purchasing manger, who is able to source comparable products at competitive prices; is a powerful team in achieving the goal of having the best available product for the most cost-effective price, Beug asserts.

William P. Stitt, CHL, CRCST, CPHM, CMRP, FAHRMM, corporate director of materials management at University Community Health in Tampa, Fla., and the Region 5 board representative for the Association for Healthcare Resource and Materials Management (AHRMM), explains further, The key here is creating the trifecta or a partnership between all the parties. All the individuals have a stake in product selection and managing supplies, and there must be mutual respect with regard to the process, he says. All involved individuals or departments should strive to take a big picture view of how a product will affect an organization, its patients, staff, and financial well-being. Decisions should never be made in a vacuum, or for any reason outside of the inherent value of the product (i.e., vendor relationships, etc.).

I think there also needs to be a concentrated effort and understanding that not all initiatives will be approved. In addition, the parties need to present a united front at all times, which gives the process, as well as the outcomes, the credibility necessary to be successful.

Stitt continues, Decisions need to be based on concurrent consideration of a multitude of factors. Clinical benefits or outcome, product cost, capital/ minor equipment considerations, reimbursement (including margin and the affect on cost per procedure) and logistical and operational issues (staff time, etc.). A multidisciplinary approach is key since many materials management professionals do not have clinical backgrounds. By taking a diverse approach and looking at products from many different perspectives you can not only make good business decisions, but obtain buy in from clinical staff for the overall process, which is a primary key to success.

Forming a product evaluation committee is critical in achieving such success in streamlining materials management. By creating a multidisciplinary value analysis committee to review staff ideas on potential savings for products, as well as internal services and processes, healthcare providers can cut costs and standardize products across clinical service lines.² A product evaluation committee can serve as a unified body representing various user departments with common goals of product standardization, enhanced group purchasing organization (GPO) utilization to maximize best pricing, and involving physicians in the product selection process, explains Beug.

Physician involvement, and more specifically, surgeon involvement, is a very important step because they usually are the ones with the most costly requests or requirements. To minimize supply selection based primarily on physician preference, hospitals can take several actions, including providing data support for change and identifying appropriate incentives.³ Last summer, the Healthcare Financial Management Association (HFMA) released its 2005 supply chain benchmarking survey titled, Managing Resources to Achieve Improved Economic Outcomes and High-Quality Care. The report builds upon the findings of its similar 2002 study, both of which outline the state of supply chain management and identify best practices. The study also compares the findings from the 2005 survey to findings from 2002, revealing that although almost all hospitals have undertaken a standardization initiative, and most are using value analysis teams, physicians possess relatively low awareness of these initiatives.

In addition, the study highlights examples of clinical and financial outcome variations by product line and by physician as a way to encourage physician involvement in identifying best practices.

The document goes on to explain that while 65 percent of HFMA survey respondents indicated tremendous or high opportunity in physician involvement, the researchers write that according to a separate Veterans Health Administration (VHA) study, only 35 percent of physicians are involved in standardization and utilization programs, and more than 40 percent were found to be unaware as to whether their hospital even sponsored such programs.

This is surprising considering AHRMMs finding that more than 90 percent of hospitals have undertaken a standardization initiative over the past 12 months and 57 percent use value analysis teams, the report adds.

Best Practices

Beug says the first few things she assesses when consulting on a new job are the presence of an organizational focus on supply expense management and the current processes for purchasing, storing, and distributing supplies. We delve more deeply into each function, she explains. These functions include purchasing, inventory management philosophy/operation, and distribution. Beug breaks them down as follows:

Purchasing

: Centralized or decentralized process/ procedure for specialty areas (i.e. surgery, cath lab)

  • Membership in GPO
  • Number of items on contract (target is greater than 70 percent)

Inventory management philosophy/operation: Onsite or just-in-time delivery by vendor

  • Official vs. unofficial inventory
  • Inventory turns and forecasting demand
  • Inventory dollar value
  • Benchmarking total supply expense
  • Just-in-case inventory levels

Distribution: PAR level program in place to resupply user departments

  • Scheduled replenishment processes
  • Use of automation to facilitate replenishment processes
  • Level of customer satisfaction with service

Common pitfalls, according to Stitt, include the focus put solely on one facet of the product (i.e. clinical benefit or cost) to make the decision, or a vendor sales representative who plays too big a role in the process. Their role should be as a resource, not as an influence, he advises. Finally, multiple products from different vendors are not always considered, he points out.

Another common pitfall could lie within the item masters. Item masters may prove to be more of a hindrance than a help in streamlining materials data. According to a 2005 report from the Healthcare Financial Management Association (HFMA), many hospitals item masters have errors, redundancies, and oftentimes, outdated information. Additionally, they say, many high-end items and preference items often are not included in the item master. Some of the commonly encountered data problems include incomplete vendor and/or product information, nonstandard vendor names, vendor product numbers with missing information or additional characters, overly abbreviated product descriptions or product descriptions that are not normalized or may have missing attributes, and unclassified products.¹

Improvement measures include the use of well-defined guidelines for the product selection process (i.e. use of criteria to define product performance), according to Beug, as well as visible administrative support for cost-effective supply expense management, commitment to product standardization, and the use of GPO when sourcing products.

Have a diverse mix of professionals involved in the process and provide a structured process to include definitive steps and timelines, Stitt offers. Develop sound criteria for evaluation, including a comprehensive data gathering and analysis tool. Have a clinical champion to help facilitate evaluation, discussion, and implementation, and engage physicians in the process as appropriate, he adds.

Finally, Stitt says, Communicate the results of your findings whether the product is approved or denied as well as the reasons why; which include the sharing of clinical and financial data.

While it pays to put every product purchase under the microscope,² it also pays to ensure all purchases have a safety focus. Gina Pugliese, RN, MS, vice president of the Safety Institute, Premier Inc., and member of the Society for Healthcare Epidemiology of America (SHEA), asserts that safety must be thought through properly when selecting purchases for the organization.

Infection control and safety is really emerging as a combined approach, she explains. Looking at selection of products requires a combination of infection prevention and safety considerations in addition to cost-effectiveness. A study published in 1997 by the Centers for Disease Control and Prevention (CDC) shows that blunt suture needles significantly reduce the risk of suture needle-related injuries to surgeons ultimately protecting the patient but few hospitals are using them. So you have to determine what some of the issues really are that you are trying to address.

You have to balance infection and safety risks for both the worker and the patient in product selection. If youre dealing with the choice of a product, for example a gown, you want to consider the characteristics that will benefit both the patient and the worker considerations. This might include, for example, breathability of the material used for worker comfort, the ability of the material to resist penetration of blood (worker protection), and transfer of bacteria from the worker to the patient. The style may also be important, for example the length of the gown and location of barrier material (i.e., arms, front of gown) to resist fluid penetration. So, there are many issues for both the patient and the worker that need to be addressed when you choose products for use in the OR.

Pugliese also advises usability testing on some of the complicated medical devices that are being considered for purchase. If you are buying a device and it is new, hospitals should get their biomedical engineers involved to coordinate the usability testing, she advises. This can help you identify potential problems ahead of time before purchasing the device. Some of the questions to get answered during usability testing of complex devices include: Are the controls clear and obvious to the user? Do you get clear feedback after each action? If there is a problem with a device, do you get the kind of feedback you need to make corrections?

Pugliese continues, Are the messages displayed easy to understand? For example, you have three people and one says Oh, I thought that meant turn it this way, and then someone else says, Oh, I thought that meant turn it off, how much training do you need to implement this product and is additional training required because using this device/product is counter to other similar devices in use? How many different people are going to be using it and for what purposes or activities? Are the symbols or alarms or controls similar to other things you are currently using?

There must be clear messages on proper usage, she asserts. Consider how it is different from what you are currently using. Are there any environmental conditions (for example, noise or light levels) that make it difficult or impossible to use? So, usability testing is looking at how useful and how functional it is going to be in your setting, with your people, and with your type of procedures.

You have to determine your goals or standards and then determine the criteria and characteristics of a product to meet those goals. Pugliese says product selection should also incorporate taking a human factors approach in both the design and use of a product so it makes the device safe and easy to use. One example she uses of a human factors approach to a design is a forcing function.

A forcing function design forces you or makes it easy to do the right thing, and difficult or impossible to do the wrong thing when using the device. For example, some of the new smart IV pumps have forcing functions that prevent you from programming in the wrong dose of medication.

In the healthcare environment, we are looking at ways to get companies to build equipment in such a way that it makes it easy to do the right thing and use the device or product correctly and eliminate the risk of making a mistake or error. Then we would not need to rely [as much] on vigilance or memory to use the device correctly or remember all the steps we need to take to complete a task correctly.

When a company is pitching its product, purchasers should expect it to remain in compliance with hospital material management policies and procedures. Furthermore, the pitching personnel should use the proper channels to present the product. They should include hospital staff as well as physicians, and work through product review committees using proper procedures, Beug points out. They also should provide product information and efficacy studies as well as ongoing support and education after product selection, she adds.

Stitt says a company should be willing to provide complete and unbiased clinical efficacy data to be used in the process. The company should act only as an informational and training resource, and should be at an arms length during clinical trials, except to assist in the application or use of the product, he warns. Companies also need to show a willingness to support the supply chain flow of the product in conjunction with materials management. In other words, what is best for the organization, not just for them.

Stitt agrees that companies should never back-door sell or attempt to influence decisions by physicians or clinical staff. The product should be allowed to stand on its own merits for comparison purposes, he asserts.

Making another solid point, Stitt says companies should further understand the financial side of the organization and the challenge created by rising supply costs and reduced reimbursement.

Materials managements role in the product selection and evaluation process should be as a facilitator, not as the primary decision maker. Additionally, administrative support is a must for a progressive product evaluation process and they must work hard to give the process credibility and to stand behind their committees/groups in making such decisions. People who are not clinical should not make clinical decisions, but conversely, the clinical side needs to be sensitive to the operational and fiscal goals for the organization, he concludes.

References

1. HFMA. Managing Resources to Achieve Improved Economic Outcomes and High-Quality Care. July 2005. 
www.hfma.org/resource/
mckesson_benchmark2005.pdf

2. No cost-saving target too small for this hospitals product reengineering program. Health Care Cost Reengineering Rep. 1998 Feb;3(2):23-5.

3. Baker S, et al. Just what the doctor ordered. Healthc Financ Manage. 2003 Jul;57(7):70-4.

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