According to research highlighted by Forbes, a quarter of US healthcare spending — almost $1 trillion — is wasted on inefficient or unnecessary patient care. Operational inefficiencies represent a tremendous opportunity for healthcare organizations to increase their retained earnings while bringing in the same revenue.
There are several common operational inefficiencies that every healthcare leader should know. By understanding the opportunity for improvement, healthcare leaders can take the steps needed to reduce waste and realize cost savings.
1. Over-Procuring Inventory
Inventory can include one-time-use products, such as syringes and medications, and multi-use products, such as medical devices and reusable equipment. Part of a lean healthcare model involves avoiding unnecessary surpluses of inventory.
The wastes created by inventory surpluses depend partly on the type of inventory. One-time use or disposable products are often only suitable for specific periods. Medications and sterile disposable products, such as needles, alcohol swabs, and IV tubing, will expire if not used within a particular time frame. When overstocked, these products will expire unused, leading to waste.
Multi-use products do not expire like single-use products but are often more costly to overstock. Inventory of multi-use products, like IV pumps or ultrasound machines, incur costs by being idle. Suppose an emergency room has three bedside ultrasound machines but only routinely needs one. In that case, the unused devices fail to generate revenue while still creating the capital cost to acquire them and ongoing maintenance costs.
Beyond the main costs that excess inventory creates, several other expenditures are not frequently considered. These can include:
- Time and effort spent making unnecessary purchasing decisions
- Avoidable shipping costs
- Stocking costs
- Cost of maintaining inventory records
- Disposal costs
By reducing inventory levels to avoid unnecessary surpluses, organizations can realize significant waste reduction and improve operational efficiency.
2. Lost Inventory
Modern technological advances have led to the development of medical devices that are increasingly compact and easy to transport. While this improves the clinical utility of these devices and enhances their mobility, it also makes them easier to lose.
While the loss of single-use products has only a minor financial impact, losing medical devices can lead to significant waste costs. Medical devices get lost when moved to an area outside of where they are normally used, such as when clinicians borrow them in another care area.
Medical devices can also be lost when they are accidentally removed from the facility, either unintentionally discarded or taken home accidentally by a staff member. Theft is also another source of inventory shrinkage.
The loss of medical devices can be quite costly. Depending on the type of medical device, a single lost piece of equipment can easily cost tens of thousands of dollars. Another aspect of the loss is that the device will not be present where needed for clinical use, resulting in disruptions in clinical care and increasing costs.
3. Unnecessary Transportation
Transportation of medications, supplies, or devices is a source of waste. Any device or supplies that are being transported cannot be used while being moved. Any transportation of supplies equipment decreases knowledge about its location, increasing the risk that it could be lost.
While transporting medical equipment may be a necessary form of waste, such as moving supplies from storage to clinical areas, other movements may be less critical. Moving devices from one care area to another, for example, can decrease the time that the device is in use and productive.
Improving Operational Inefficiencies
With operational inefficiencies costing the healthcare system hundreds of billions of dollars each year in the United States alone, improving these inefficiencies is essential for any healthcare leader. Mitigating losses from waste can improve retained earnings while improving the efficiency of clinical care.
Ultimately, true operational efficiency occurs when the right resource is in the right place for the right person at the right time. A high level of operational efficiency also requires that the minimum amount of resources needed to achieve this is used, reducing and avoiding idle time for clinical devices and situations where products expire unused.
Reducing the waste of single-use products is relatively straightforward. Healthcare administrators and providers can minimize waste from single-use products by combining a first-in, first-out (FIFO) inventory management approach with developing and maintaining periodic automatic replenishment (PAR) levels that avoid over-procurement.
Decreasing waste incurred by under-managed clinical device use and movement may seem more complex to mitigate but offers far greater rewards given the high value of these devices. Inefficiencies caused by medical devices are best reduced by using an asset management program (AMP).
Asset Management Programs
Modern asset management programs digitally track each medical device in a facility, allowing operational leaders to monitor the location and movements of every piece of equipment in inventory. Improving the visibility of each asset’s location and state enables accurate and informed inventory planning, avoiding over-procurement that can occur when devices are not tracked adequately.
Asset management systems also reduce shrinkage by enabling operational leaders to quickly recognize and recover devices that would otherwise be lost due to theft, accidental removal from the facility, or even misplacement within a facility. These systems also enable tracking of the motion of devices, providing analytics that reduce unnecessary transportation.
Leveraging the benefits that an asset management program provides an average of 35% return on investment (ROI) for hospitals that use them to reduce waste and improve operational efficiency.
Questions about how you can reduce waste and mitigate operational inefficiencies at your healthcare facility? Contact us.