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After reviewing the files, the issue takes


on a different light. True, the IDN was pay- ing somewhere north of $1.5 million to the third-party management company to run the operation, but that number was only a small portion of the overall expenses. Here is part of what you saw (hypothetical and not intended to be representative):


Salaries and Wages (IDN Employees)


Food Acquisition


Equipment Maintenance and Repair


Depreciation


Management Services Total


$3,800,000


$5,600,000 $243,000


$200,000


$1,500,000 $11,343,000


Once again, you review the management agreement (the one you have been asked to address). Looking at it, you see that, while there are penalties to the supplier for not maintaining patient satisfaction scores above a certain level, there is nothing in the agree- ment that ties the supplier’s performance to the operating budget beyond some gen- eral language that says the vendor will help devise an operating budget and maintain or amend it in conjunction with the IDN leadership team. Once again you do the math: Saving 15 percent to 35 percent on the management agreement will net the organization between $225,000 and $525,000. Knocking 10 percent out of the overall budget will net $1,134,300. You show the numbers to the CFO. You tell


him that, while bidding out the management agreement may knock a nice chunk out of the operating budget, the agreement as currently written does little if anything to address the opportunity to control overall departmental costs — especially food acquisition and sala- ries and wages. Pointedly, you ask, “So do you want me


to address just the management agreement ‘as is’ or do you want me to address the problem with a solution that will impact total departmental expenses and bring the third-party supplier into the fray with skin in the game for total costs?” Without hesitation, the CFO replies, “Yes.” You scratch your head. “Yes, what? The first thing or the second thing?” “The second thing.” HPN


Your job just changed. Stay tuned for Part 3.


Fred W. Crans is a veteran supply chain consultant at Cincinnati-based TriHealth and a frequent contributor to Healthcare Purchasing News. He can be reached via email at fcrans@wowway.com.


“The success story I would like to share is one that was achieved during my tenure at Greenville (SC) Healthcare System. This particular instance dealt with a single item as opposed to an inventory group. Although the application applied to other devices, this particular instance came about as a result of the OR administrators’ frustration about losing a particular and expensive small, Bluetooth device valued at $19,000. The issue was that this had occurred minimally three times prior, and in each case the item required replacement. Theft was not assumed to be an issue, and the assump- tion was accidental discarding of the item with the disposable linen. Unfortunately, it was difficult to pinpoint by whom, how and when this may have occurred. “At that time we were trialing an RFID asset track-


ing program within the OR. I was aware that the company had the capability to construct a portal for a doorway and a means to affix an RFID tag to the missing item. Having purchased the RFID software and infrastructure, it wasn’t that much to add the portal and load the tag into the system. The concept was essentially very similar to those of high-end department stores with the portal at the exit. We were aware of a ‘pinch point’ or single hallway where most trash must pass through. We had an ideal location for the portal. Furthermore, we had the software capability to allow us to be notified either audibly or through email when a tag was determined to pass through the portal. Staff was informed of this process and the program was implemented. No alarms had occurred for three months and no lost devices were recorded during that time. However, one afternoon I got a call that the alarm went off. Consequently, a team went dumpster diving looking for and eventually finding the Bluetooth item. “No action was taken. However, four months


later, we received another alarm and retrieved another Bluetooth device. As a result, we had docu- mented records of a poor practice and evidence of unintentional loss of the device. Accordingly, the OR administrator set up a new procedure that assigned someone to locate the probe after every case and sign off on its location. This simple extra step ap- peared to solve the problem. But it was only after we saw proof of the deficient process that made the new procedure materialize.


“Omnicell has numerous success stories, and all of them share a number of key attributes, such as: • The customer establishes a program for continual success after the installation which includes dedi- cated subject matter experts in each department, a regular cadence of system review and updates and incorporating system training as part of the new employee on-boarding


• The customer recognizes the nuanced differences required to make the system most successful within each department, and has worked to configure the system to most efficiently meet those needs.” — Suzanne Alexander-Vaughn, senior


product manager, marketing, Omnicell Inc., Mountain View, CA


“According to the National Center for Biotechnology Information, a branch of the National Institutes of Health, ‘Nurses are the primary hospital caregivers. Increasing the efficiency and effectiveness of nurs- ing care is essential to hospital function and the delivery of safe patient care.’ The less time it takes for nurses to locate supplies, the more time they can spend with their patients. “Color-coding is recognized as an important


aspect of the core 5S of Lean Manufacturing, and these principles are applicable to the healthcare sup- ply chain. We recently renovated a medical/surgical clean supply room utilizing an existing plastic bin storage system, and provided a color-coded ‘Fit- To-Space’ high-density adjustable rack and basket solution. Supplies are organized into customizable compartments with color-coded labels representing each item placed on the front of each basket. Items are organized by category, such as PPE, Suction/ Feeding, Lab/IV, etc., arranged together in a vertical storage rack, then a chart is created and displayed to guide nurses to the desired item. By combining this visual method of color-coding, with a simple Kanban inventory methodology of two compart- ments or bins for each item, dramatic improve- ments were realized by both nursing and materials management for inventory replenishment.” — Glenn Tamir, Director, Distribution Channels, Pegasus Medical Concepts, Mission Viejo, CA


More at www.hpnonline.com/inside/2016-06/1606- PS-sidebars.html.


hpnonline.com • HEALTHCARE PURCHASING NEWS • June 2016 65


confidence grows in the system, nurses love the freedom of grabbing supplies they need without having to document their use — while for the Sup- ply Chain team, two-bin has created a significant reduction in on-hand inventory, reducing inventory costs and reducing labor associated with inventory management. At the foundation, this system is all about the data. Accurate, real-time and actionable data is allowing ‘perfect inventory,’ in this case, a system that’s meeting the distinct needs of every key stakeholder.”


— Sophie Rutherford, Vice President of


Business Development, Jump Technologies Inc., Eagan, MN


From page 62PRODUCTS & SERVICES “Many times in healthcare there are operational


processes that are very hard to manage without defined accurate information. The alert on the missing probe told the story and validated a poor practice. This RFID technology is now being deployed in many hospitals across the country to track equipment, people and things, including many inventory applications. I have called the use of RFID as providing visibility to invisible practices and processes, providing information for improved management.”


— John Mateka, Supply Chain Consultant and Interim Director, Materials


Management, Clarendon (SC) Health System


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