Medical Supplies Eat Up Budgets
While hospitals are in the business of caring for patients, make no mistake, it is a business. According to Johns Hopkins University Bloomberg School of Public Health, hospital CEOs understand their hospital’s performance is based primarily on patient outcomes but also on profitability. That means hospitals must be as efficient as possible.
This isn’t easy. In an NBC news article, Gary Young, director of the Center for Health Policy and Healthcare Research at Northern University said, “A general principle is that about one-third have margins that are above zero. Probably about one-third of hospitals are pretty close to zero, particularly when you talk about patient care, and about one-third are running in the red.”
It appears the smaller the hospital and those outside of big cities are the ones who struggle most to stay in the black. The one thing both hospitals have in common, however, is the need for medical supplies. These supplies may not, at first, appear to make a dent in a budget, but a recent report shows otherwise.
In a review of supply expense data from 3,500 U.S. hospitals collected by the American Hospital Association, a study found an average of 15 percent of total hospital expenses were spent on medical supplies. That number went as high as 40 percent for certain hospitals. With nearly half of a hospital’s budget potentially going to medical supplies, the question of how to manage those costs is inevitable.
In a fascinating ProPublica article, “What Hospitals Waste”, we get a look into the underbelly of the hospital system. Unused medical supplies, purposely or inadvertently tossed out of hospitals, fill warehouses with little explanation. These are perfectly good supplies that add up to a whopping $765 billion per year. To put that number into perspective, the entire U.S. Defense Department budget is less than that. Sadly, even with the overflowing shelves, this isn’t where all unused medical supplies end up. Many supplies go straight to the landfills.
It’s difficult to know exactly why this is happening, but it’s clear that it’s contributing to the medical supply budget drain. Much of the waste is due to hospitals cleaning out patient rooms in an attempt to isolate potential infection. Others toss out the supplies when the hospital signs new contracts with vendors. Until hospitals get a better handle on the supplies they have and use, the waste will continue.
Medical Supply Carts Are More than Convenient
Medical supply carts may not be exciting, but they do enable doctors and nurses to have greater access to medical supplies. These carts are mobile, allowing providers to bring medical supplies with them instead of traveling to and from medical supply rooms to retrieve what they need. Many hospitals purchase them for convenience, but their utility goes beyond a nicety.
In a related article published by Healthcare Business & Technology, the author believes the solution to wasted medical supplies resides in supply chain management to accurately track how supplies are used. The article also sites a pilot program a California hospital implemented to incentivize its doctors and nurses to reduce waste. Only specific, required supplies were loaded into medical supply carts, per surgeon’s orders or per patient needs. By not overstocking the medical supply carts with unnecessary supplies, the hospital was able to drop their medical supply costs by 6.5 percent, totaling approximately $836,000 in a year. Interestingly, the control group who went along as status quo increased their medical supply spend by 7.5 percent during that same time.
Medical Supply Carts Can Help Prevent Waste
The key is in how the medical supply carts are stocked. When the medical supply carts are viewed only as a bulk storage container, there is potential for them to be misused. When they are well organized, have a locking mechanism to prevent unauthorized access, and are stocked with only the items that are required for those patients, there is less of a risk for waste.
Of course, reducing medical supply waste and, thereby, reducing unnecessary hospital expenditures isn’t achieved solely by a medical supply cart. There is much more that goes into curbing the waste. Perhaps the first place to start is in provider education. Just as an office employee may not see the harm in taking a box of pens home from the office supply room, hospital staff likely doesn’t understand how a few wasted supplies here and there make a difference. The problem is, these wasted items add up fast.
Educating providers on the basic profit and loss outlook for the hospital can help them understand how the hospital earns money, where they lose money, and how it all leads to how providers are paid. They should also understand how critical it is to order the right supplies in the right quantities, use those supplies in the right manner, and replace unused supplies to the medical supply carts properly so they aren’t disposed of in the patient’s room.
The medical supply carts need to have a locking mechanism to prevent supplies from walking off the floor. Patients have been known to take supplies when providers aren’t looking. One survey found patients steal as much as $52 million worth of items from hospitals every year and 64 percent of nearly 100 hospitals reported such incidents. Simply by locking up medical supplies in a medical supply cart, hospitals can greatly reduce their losses.
A Bright Spot in Medical Waste
Thankfully, there are those who recognize the waste and are determined to do something about it. These aren’t necessarily hospital CEOs or regulators. Instead, it’s people like Elizabeth McLellan, a retired nurse, who started a movement to retrieve these unwanted medical supplies and use them for good. Instead of stocking our landfills with perfectly good medical supplies, she stocks the shelves of hospitals and clinics in third-world countries and poorer nations. At any one time, her warehouses contain $20 million worth of medical supplies… and that’s just what she and her team of volunteers have collected. Millions more supplies are being collected and donated by do-gooders like McLellan who see these supplies can still be utilized, even if not in the U.S.
Hospitals are always looking for ways to cut costs. Medical supply waste is a big deal and it’s costing them millions. By bringing accountability into the workflow, ordering and organizing supplies responsibly in medical supply carts, limiting access to authorized providers, and educating staff, hospitals may stand to reduce their costs significantly. It’s an initiative that has worked and is a simple, inexpensive way hospitals can boost their profitability.