How do you make a plan to improve something without first being able to fully define it?
Do you know how much of your supply chain is consumed by the OR? While the need to define, and address, the effectiveness of your supply chain has become more important, there is very little formal data on true OR costs. Why? There are so many variables at play when trying to determine the cost of one minute of OR time: fixed costs such as labor fees, and variable costs such as supplies, equipment, and the type of procedure being performed.
Because there are so many factors, facility administrators often use the ballpark figure of about $15 to $20 per minute for basic surgical procedures. So, how do you determine how to save money when it’s so difficult to determine the true cost?
As we discussed in our last blog, “The Power of Precision,” it’s most commonly reported that the OR accounts for an average of 40% of total hospital expenses, and generates approximately 70% of revenue. For ambulatory surgery centers, the average ASC supply costs account for 17% to 25% of net revenue, with 25% of clinical staff time allotted for supply chain activities.
Time is, quite literally, money. Delays in the OR can cost a facility millions over the course of a year. This is yet another variable cost for the supply chain executive to try to pinpoint and control.
Additional spend challenges
In addition to a lack of visibility into OR spending and usage, supply chain executives face other challenges. To reduce supply spend, lean inventory management with accurate tracking and forecasting is a must, and too often skilled employees are wasting valuable time looking for and sorting supplies. Supply chain management may also face pushback from clinicians who lack an awareness and understanding of the actual cost of supplies, or who prefer one item over another. It’s also important to look at the bigger picture and align priorities with the rest of the supply chain.
The importance of spend analysis
So how do you determine a plan of action to improve something without first being able to fully define it? The simple answer is that you must do your best to define it, which is why spend analysis is so important. It’s impossible to make improvements to the supply chain without first understanding where you are spending money—and why. With the help of a specialty distributor like Suture Express, which for 18 years has provided suture, endomechanical, mesh, and energy products, you will be able to look beyond transactional savings, and think lean inventory management, accurate tracking and forecasting, and achievable results.
The status quo is never the solution
Banner Health in Phoenix, Arizona is a large IDN with 28 hospitals and several specialized facilities across six states. It performs 115,000 surgeries per year with an annual spend of approximately $14 million on suture/endo. In a system this size, inventory control is a must. In 2016, Banner ranked 11th overall in Gartner’s Healthcare Supply Chain Top 25 ranking—this is clearly a healthcare system that understands the intricacies of its own supply chain, and where improvements are needed. In 2005, Banner chose Suture Express because they needed next-day service but faced 3-5 day lead times with manufacturers. In 2014, Banner Health implemented a mixed distribution model and asked Suture Express to innovate with them. They reduced costs by storing and distributing high-volume items at a consolidated service center, while having low-volume items shipped directly to end user facilities.
Banner identified a need, and sought a solution. It used Suture Express data and analytics to streamline ordering and cut excess supplies, and was able to reduce on-hand inventory and lower carrying costs.
Whether you’re a large system like Banner or a single hospital, you should never be satisfied with the status quo. Ask yourself, what percent of your supply chain spend comes from the OR? What percent of your supply chain hassle is it? And where can you make improvements?
To learn more about what Suture Express may be able to do for you, visit us at sutureexpress.com or call 877-790-1873.