4 ways to control inventory and costs

While hospitals historically have focused on driving down costs by making improvements in their revenue cycle, nurse productivity and supply chain management efficiency, one area that hasn't received as much attention is the costs associated with the number of assets hospitals own and maintain, said John McCarthy, general manager of asset management professional services at GE Healthcare.

While the number of clinical assets, like wheelchairs, IV pulls and wound vacuum assisted closures have increased over the past 15 years by 62 percent, McCarthy said, net patient revenue has not increased at a corresponding rate. "It's flat, but the assets required have multiplied quickly," McCarthy said.

Why do assets continue to pile up if net patient revenue doesn’t keep pace? Some healthcare organizations invest in new inventory because of the advancements in technology – they always want to have the best and newest equipment right away, McCarthy said.

Another prominent reason is because of demand from clinicians. "They don't have time to physically look for the assets they need. So, if a nurse or a doctor doesn't have something immediately available to them – if they don't see a wheelchair in hallway, for example – they request more, when there could be hundreds not within eyesight," McCarthy said.

McCarthy offered four key initiatives healthcare organizations can take to reduce overall inventory and drive down costs.

1. Observe processes that are in place


"Many hospitals work on vertically integrated systems," McCarthy explained. "But when you think about the assets used, oftentimes they cross departments.” Because assets transcend single departments, healthcare organizations need to take a horizontal approach to their asset management. This means observing current processes, and then working with each department an asset touches to create new processes that make everything more efficient thereby improving the overall utilization of the equipment.

2. Clean up remaining contracts


It's important to make sure healthcare organizations don't have too many service contracts, especially on equipment that's been pulled out of their system. "Many hospitals have multiple service contracts on the same piece of equipment, or on equipment they don't even own anymore," said McCarthy. "Once the asset inventory of a hospital has been made efficient and normalized, the next step is to clean up the contracts of the equipment that's actually left."

3. Create a capital plan


"Hospitals need to know the utilization of their assets and then ask themselves how many of one thing should they have versus how many do they actually need," explained McCarthy. Creating an integrated capital plan that extends out three to five years helps take the guesswork out of what future capital requests might be for a healthcare organization. "This ensures they're replacing equipment they have, not what's been taken out of inventory. Having a predictable plan is something healthcare system leaders need," McCarthy said.

4. A program has to be actively managed


Asset management isn't a noun, it's a verb. "It's not a part number; it's not something you buy off a shelf,” McCarthy said. “Once you put in place a program, you then have to actively manage it. Once you have, and the program continues to develop, the savings will become sustainable and continue to improve over time."