How Hospitals Can Use Inventory Management Analytics

by | Mar 27, 2019 | Healthcare

Reading Time: 5 minutes

Retail workers have long been accustomed to scanning products on store shelves and at customer check-out. More and more healthcare employees are becoming familiar with such procedures as inventory management proves effective at reducing cost, increasing efficiency, tracking expired and recalled products, and curbing loss and fraud.

Healthcare executives expect information technology will be the top market sector for growth (46%) in 2019, followed by home health/hospice (31%), assisted living/skilled nursing (8%), insurance providers (8%), pharmaceuticals (6%), and medical devices (3%), according to a Capital One healthcare survey. While inventory management software doesn’t account for the entire IT sector, hospitals are seeing impressive returns on supply chain analytics tracking each step of the inventory process: from the loading dock, to the supply cabinet, to the patient’s hospital room.

Reduce Cost, Increase Efficiency

Leeds Teaching Hospital NHS Trust in the United Kingdom recently launched a program that replaced many paper-based processes with barcode scanning mobile devices that scan patient wristbands, medicine, supplies, and equipment to ensure accurate inventory counts and improve patient care procedures. Cost savings and time efficiency improved 95% as a result of the new technology implemented at 114 wards across the hospital system, according to Paul Davis, Scandit Vice President of Sales for Northern Europe.

Supply chain data also allows hospitals to monitor the complicated equation of how much is paid for a product, how much patients are charged, and how much is reimbursed by insurance or Medicare and Medicaid, according to a 2018 report published by the Association for Healthcare Resource and Materials Management.

In addition, as mergers and acquisitions of health systems become more prevalent, providers find cost savings in consolidating purchasing to leverage greater purchase power across multiple locations.

Track Expired and Recalled Products

Just as grocery store clerks must remove milk from refrigerator cases that has passed its sell-by date, hospitals must track and discard any items that have expired or have been recalled. This process of tracking products is often time-consuming and costly, especially when hospitals and clinics generally over-order inventory rather than risk any negative patient safety outcome caused by running out of a supply. Inventory management software provides a mobile dashboard that can be utilized as easily from the C-suite as from the nurses’ station.

Prevent Loss and Fraud

With the opioid epidemic sweeping the nation, doctors and healthcare organizations are increasingly being scrutinized for drugs that are not used for their intended purpose. A well-publicized case at Emory University Hospital in Atlanta involved two pharmacy employees who illegally diverted more than 1 million doses of codeine and other controlled prescriptions over a period of more than four years. It’s difficult to imagine how the hospital did not notice the loss for so many years, not to mention the dangerous repercussions of such substances being used by addicts on the street. According to Healthcare Financial Management, inventory is too-often overlooked from a financial compliance perspective, whereas it’s a primary focus of a manufacturing or retail audit. If hospital inventory traditionally has been considered a minimal or immaterial financial loss, it is becoming a substantial litigation risk.

The Richmond Ambulance Authority uncovered yet another example of improved inventory controls after implementing a barcode system. Following a cross-check of the barcode data, it was discovered that the number of needles used far exceeded the number of patients transported by the emergency service. An investigation revealed that the culprit was not employee theft as was originally feared. Apparently two needles were pre-packaged in such a way that when extracting one, the second in the package would frequently become contaminated and discarded as not usable. Ambulance personnel adopted a simple change by moving the second needle in the package to a separate bin, which saved the ambulance authority thousands of dollars and reduced needless waste.

From Index Cards to AI

The most rudimentary inventory management systems utilize pen and paper methods; for example, a tally kept on an index card in the supply room is then transposed to an Excel spreadsheet or Access database to track orders and stock new supplies. Unfortunately, poorly managed supply orders are frustrating doctors, threatening patient safety, and costing time and money.

A 2018 Cardinal Health survey of operating room surgeons and hospital administrators found:

  • 83% were utilizing manual counting methods for inventory
  • Only 15% had moved to an automated RFID “radio-frequency identification” system with barcodes to track items

The same survey showed:

  • 69% of respondents had delayed an operating room procedure due to missing supplies
  • 64% cited waste or overuse of supplies as a significant problem at their facility
  • 27% had seen or heard of an expired product being used on a patient
  • 23% had seen or heard of a patient harmed due to lack of supplies

Too many supplies and not enough supplies are dual problems that can be solved with software systems utilizing predictive analytics and artificial intelligence. These systems provide the ability to track previous purchase amounts and model the need for future orders to automatically replenish supplies and improve business decision making.

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Kelly Taber
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