An Inventory Management Success Story

Susan Curtis, RT(R), Manager, Interventional Radiology, University of Iowa Hospitals & Clinics, Iowa City, Iowa
Susan Curtis, RT(R), Manager, Interventional Radiology, University of Iowa Hospitals & Clinics, Iowa City, Iowa
UI Hospitals and Clinics Saves $150,000 In First 90 Days of Implementing New Web-based Inventory Management System Efforts to improve cost effectiveness and efficiency are continuously underway in clinical departments, as financial pressures faced by hospitals continue to mount. Juggling the competing demands of offering new and more effective treatment options while cutting costs has become a way of life for practitioners, managers, and administrators. With supplies accounting for as much as 25% of a hospital’s operating budget, supply management is an area of intense scrutiny. The Healthcare Financial Management Association (HFMA) estimates that a three percent reduction in supply inventories can result in as much as a $10 million reduction in operating expense for a typical 300-bed hospital with a $300 million supply budget. Improving departmental inventory management, then, is a prime opportunity for cost containment. Some hospitals and managers are experiencing success using methods and procedures devised internally. Others, daunted by the time and scope of such a large endeavor, are making use of off the shelf inventory management options. These generally fall into three categories: 1. Secured storage systems combining computerized supply cabinets and a software module, 2. Stand-alone computer applications 3. Web-based solutions. This case study examines how one interventional radiology department used a web-based solution to automate inventory tracking and reduced on-hand inventory value by more than $150,000 within the first 90 days of implementation. As the manager of a large and busy interventional radiology department at University of Iowa Hospitals and Clinics, I knew that the manual methods being used to keep track of the extensive inventory of medical devices and supplies were costing us thousands of dollars. We were relying on visual checks, physical counting, and a paper message system to keep track of over 1,300 different items. And there was no way to track expiration dates. With such a large inventory, it was simply impossible to stay on top of everything and make sure we had exactly what each physician needed. Our first response was to overstock because you don’t want to run out of something. With 769 beds, UI Hospitals and Clinics serves as the teaching hospital and comprehensive healthcare center for the state of Iowa. More than 41,000 patients are admitted annually. The interventional radiology department’s three procedure rooms are in constant use 12 hours a day, sometimes more. During the last six months, the department had 528 neuro-interventional patients and 1,248 interventional patients. I am one of eight technologists in the department, and perform clinical services as well as administrative duties. Maintaining inventory is one of my responsibilities. I can remember, on many occasions, staying late to examine inventory and complete the paperwork needed by the purchasing department for reorders. Similarly, each budget cycle required tedious attention to paper records and the development of a spreadsheet to calculate usage history and make projections for the coming year. I was determined to find a better way to manage our inventory, and implemented a card out system which operated like the reminder slip in a box of bank checks. We put cards with the product information into our supply storage units at predetermined points. When a technologist reached the card, it would be put on my desk, triggering a reorder. Though not particularly sophisticated, the system helped reduced the amount of excess inventory and provided enough evidence that a more advanced inventory tracking system might provide greater reductions and cost savings. My administrators gave me the green light to take a look at what was available. I traveled to Chicago to get a first-hand look at a secured storage system, but I immediately saw a lot of limitations. The system kept track of the inventory and ordering information, but did not provide the information or data I needed to make informed purchasing decisions. For example, it could not give me the dollar amount for all inventory on hand. Another major drawback was the high price. As a comprehensive system combining storage units as well as tracking software, it would require a capital expenditure. My previous capital requests had been denied, so I was not too hopeful that it would be approved. A short time later, I received a promotional brochure about a web-based solution that was to be demonstrated at an upcoming RSNA show attended by my Technical Director, Janet Roe. I asked her to check it out for me. When Janet came back, she was very excited about it. I took things to the next level by making contact with the provider (InnerSpace/Datel, Grand Rapids, Michigan), and investigating it further. The system, called Spacetrax®, is offered as a monthly subscription and does not require a capital expenditure. Implementation of the system occurred over a weekend to minimize disruption. Staff members helped the vendor representatives conduct the physical inventory and enter data into the system. On the first day, the staff participated in a 20 minute inservice to learn how to add products, and we were off and running. The web-based tool uses the manufacturers’ barcode information on the products. Items are added and removed by scanning the barcodes, which are instantly matched to the product database via the Internet. The master database includes more than 20,000 items and is constantly being updated by the vendor with new information. During the two-day installation, I also established par levels for each type of product. On Monday morning, we had another 20 minute in-service on how to remove items from the inventory system. I also instituted some new procedures for pulling and adding stock to the physical inventory in order to manage product expiration. I instructed all of the technologists to pull stock in the same sequence: front-to-back, left-to-right. Then I selected the two technologists who are most detail-oriented to handle the adding and restocking tasks. It may not seem like a big thing, but it makes a huge difference in waste reduction. With automated inventory tracking, I estimate I have saved eight or more hours per week previously spent in physical inventory alone. The inventory tracking tool operates in real-time. I can get reports on the value of on-hand stock, the value of supplies on consignment, product expiration, physician utilization, and more. After three months of using the system, I lowered my on-hand inventory value by more than $150,000. After setting a conservative target of a three-week supply, I was able to reduce the on-hand quantities of almost a quarter of the items stocked. My on-hand quantity of each type of product was reduced by an average of 42%, freeing up both capital and valuable shelf space. As I have accumulated additional utilization data, I have been able to further reduce par levels on certain items. The utilization reports are also valuable in educating physicians about practice patterns and supply costs. They are usually blown away by the costs and understand the budget constraints under which we are working. We have used the data to make some decisions about product standardization and eliminating some redundancies. Automatic expiration notices allow us to prevent product waste. I let staff and physicians know a certain product needs to be used by a particular date, or I can choose to exchange older product with the vendor. We take utilization data to vendors to help negotiate more favorable pricing and consignment arrangements. Armed with market share analysis, I was able to secure an additional discount with one of our vendors for the coming year. I expect that discount to generate savings of at least $30,000 this year. In the six months since going online with the inventory tracking system, we have come to rely on and trust the information. Initially people would panic when they would see only one or two of a particular item on the shelf. Now we know that’s the way it should be. With most vendors shipping product next day, par levels have been set to minimize on-hand inventory levels. When necessary, the system automatically generates a product order, which is simultaneously e-mailed to the purchasing agent and me. The decision to implement the web-based inventory system was validated within the first few months, when a consulting team engaged by the hospital interviewed me to gather data for a cost containment study. They told me that I was the only department manager that could give them the dollar amount of our on-hand inventory, the value of expired product, and other key inventory figures. A year ago, I couldn’t have done that. They were impressed. Author Susan Curtis can be contacted at susan-curtis@uiowa.edu