As an ASC board member, you are tasked with monitoring your ASC’s total operation. This is no simple feat! It can be difficult to know what questions you should be asking to ascertain whether or not your facility is operating as well as it could be. In an effort to help out, we sat down with our VP of Facility Operations, Kelli McMahan, who provided us with some insight into ASC materials management.
- What is your ASC’s medical supplies expense as a percent of its net revenue? Ideally, this figure should come in under 20%. If it does not, determine what’s causing it to be so high and act accordingly.
- Are all your physicians using the same supplies or are there any outliers? Sometimes one particular physician routinely uses a specific supply that no one else is using. When supplies can be standardized among all physicians, inventory can be reduced. Because many supplies have to be ordered in bulk, only having to stock one type of gloves in four sizes, for example, creates a more streamlined ordering process, minimizes inventory costs, and frees up valuable storage space.
- Does your facility use custom packs and review their contents routinely? A custom pack is a procedural pack that incorporates a majority of supplies used 90% of the time for specific types of procedures. Although most ASCs use custom packs, they tend to overlook the importance of reviewing the contents of those packs on a regular basis. When new procedures are implemented and/or supply preferences change, items that were once used frequently from the packs may now be routinely thrown away. Conversely, an item may be opened for every case that isn’t currently included in the pack. Instead of ordering, stocking, and opening this particular item every time, your ASC may be able to save money by adding it to the custom pack. At a minimum, custom packs should be reviewed annually to ensure they address the facility’s current needs.
- Does your ASC contract with a GPO (group purchasing organization) to provide the majority of your basic medical supplies? GPOs are able to extend discounted pricing based on their contracts with suppliers. Make sure your distributor knows you are hooked up with a GPO and loads your discounted pricing into their system. Periodically check the invoice pricing against the contract price to ensure your ASC is receiving the benefit of those discounted arrangements.
- Are you ordering inventory using the just-in-time methodology? Items that are used routinely should be ordered according to your case volume to avoid overstocking. Standard orders and delivery dates should be set up with your distributor. Knowing your delivery dates helps you manage supplies on hand. It may be better to place smaller orders two to three times a week rather than placing larger bulk orders which can naturally lead to overstocking.
- Have preference cards been updated to reflect supplies actually being used? Reviewing preference cards routinely prevents staff, especially those new to your facility, from opening everything that’s reflected on the card without first checking if the supplies being used have changed. In some cases, the physician no longer uses what’s on the card resulting in opened supplies going to waste.
- Have deleted items been moved out of inventory? When items need to be removed from inventory, try to recoup some of the expense. Ask your materials manager to see if your vendor will buy those items back from your ASC or trade in unused items for commodities that continue to be stocked. If your vendor isn’t willing to work with you, determine if other ASCs in the area are interested in purchasing your unused inventory. When all else fails, donate the goods to charity as a tax-deductible contribution.
- Are you capturing all the current month’s expenses on your financials? Have materials management personnel look at their purchase order accrual log. If they have not received an invoice for an item that has been ordered and received, the expense can be accrued on the current month’s financial statements. Matching your expenses with your income allows you to more accurately identify financial trends and make sound business decisions.
Knowing what questions to ask about your ASC’s materials management practices not only helps determine where money is being spent but provides insight into the total operation. It can serve as a springboard for discussion with your physician investors about supply use and how best to achieve medical supply standardization. It can create efficiencies that optimize your facility’s operations. Having a thorough understanding of best practices is a great first step toward achieving your goal of a prosperous ASC.
Kelli McMahan – Vice President of Operations