6 keys to evaluating inventory management solutions for high-value medical products


Jean-Claude Saghbini

Chief Technology Officer and VP of Inventory Management Solutions
Cardinal Health

Today’s changing healthcare environment is causing many hospital supply chain executives to reevaluate how their supply chains can drive more value.

While healthcare costs have been under the microscope for a long time, we have started to see greater need for cost containment and inventory reduction in recent years. The Affordable Care Act has helped shift the focus from being volume based to value based, taking into consideration the total cost of care.

Reimbursement decisions are now being made with an emphasis on value to the patient, forcing otherwise similar medical device manufacturers to become more competitive by demonstrating additional benefits to the patient and to the overall system of care. Operational concerns such as waste, patient safety, charge capture accuracy and transparency are also under intense scrutiny because of their impact on the overall cost of care. Despite pressures to streamline operations, most hospitals and health systems have failed to effectively address one of their main sources of rising costs and inefficiency – inventory waste. At an aggregated level, the result is an estimated $5 billion of annual waste in high-value medical devices[1] alone.

Not all medical supplies are created equal, yet, often inventory management solutions fail because they attempt to manage all inventory in the same way. Tongue depressors and cotton swabs don’t require real-time inventory visibility, but it’s a worthwhile investment to track a $10,000 pacemaker in real-time through the supply chain. To tackle your inventory waste problem, consider the following when evaluating inventory management solutions:

1. Ease of use

Ultimately, the best inventory management solution is one that reduces the amount of time a clinician has to spend managing inventory, and allows them to focus on patient care. Inventory management systems need to be easy and intuitive, or they simply won’t be used. For example, imagine a clinician simply placing a stent in a cabinet, and the cabinet automatically capturing data from the stent (such as model, size, lot number, serial number, expiration date) and then updating the inventory profile of the department with this information. Then imagine removing the stent from the cabinet – and the cabinet automatically raising a flag in the system that a stent is missing, which is resolved by either returning the item to the cabinet or charging it to a patient. Solutions that are easy to use tend to be accepted quickly. 

2. Accuracy counts

When it comes to patient safety and cost management, having an automated system that is 80%, 90%, or even 95% accurate is not acceptable. Proper inventory management in a clinical setting requires full accountability of assets. While 95% accuracy may sound good, this could mean that five out of every hundred devices are not adequately tracked. If that device is a $10,000 pacemaker, lost medical supplies quickly add up to hundreds of thousands of dollars in waste. This also means that 5% of products may be expired or recalled without the hospital knowing. When it comes to patient safety there is no room for error.  If onlymost of your assets are accounted for, your automated system isn’t optimized. However, with the right technology, automated systems can help facilitate near-perfect inventory management.

3. Real-time tracking and charge capture

Many hospital systems audit their inventory once per quarter, which does not provide the visibility needed to manage day-to-day supply challenges. Real-time automated systems can track inventory levels every few minutes without any human intervention. This frequency is critical to managing daily procedures and regularly right-sizing inventory, ensuring that inventory levels are sufficient and that soon-to-be-expired inventory is prioritized or redistributed.  

Even with full visibility across all inventories, tracking is a pointless exercise if appropriate items are not charged to the patient after use. Tracking devices to the point of charge capture ensures that items are accounted for from the store room through to the charge description master (CDM) after every procedure, every day.

4. Trending analytics

We’ve seen hospitals incur significant losses because par levels are either too high or too low. Excess par levels translate into valuable capital being unnecessarily invested in supplies you don’t yet need, and may well expire before use. On the other hand, insufficient inventory can lead to product shortages, increased patient risk, and cancelled procedures.  Analyzing historical trend data and matching inventory par levels to usage patterns can lower overall par levels without risking product shortage, while allowing you to predict and plan for recurring trends. Particularly for high-value items, predictive analytics that look at historical use to anticipate future use are necessary for long term inventory strategy to be successful. Analytics also support par level matching for usage, cost-per-case analysis and product standardization efforts across multiple hospital systems.

5. Futureproof solutions

Systems that can quickly adapt to emerging technologies will extend the life of the investment for years to come. Inventory management solutions should anticipate changes whenever possible, and should be built on a flexible framework that allows for innovation in tangentially related areas.

One good example is the emerging trend toward near-field communication (NFC) technology. This technology is fast becoming available in every smartphone, and in new wearable technologies like the Apple watch. It’s possible in the near future that clinicians, materials managers, and other hospital employees will use a cell phone or tablet, with NFC technology, to scan and track products throughout the system. Ensuring inventory management solutions are compatible with this technology, and other future technologies, will likely lower barriers to use and increase the long-term return on the solution investment.

6. Scalability

Inventory management solutions need to be compatible with multiple levels of use: across products, hospital departments and health systems. From cotton swabs to stents, solutions must account for diversity of supplies while keeping an accurate total view of inventory. With a complete view of inventory across departments, total par levels can be substantially reduced and product can be reallocated where it is needed before expiration. There is obvious value in connecting departments and affiliated hospitals together through inventory management systems. The greatest returns can be realized when complete visibility is recognized throughout a large hospital system.