“Give me what I need, not what I ask for!” or so the saying goes…but if we are talking about supply chain efficiency, we should tweak it:
In Preference Card Optimization 101: The Basics, we learned what a preference card is, what it is not, and that the preference card influences:
Surgical Cost Containment
OR Operational Efficiency
In Preference Card Optimization 201: Introduction to Surgical Supply Cost Containment – Part 2, we learned that increasing cost transparency and systematic, item-level review of preference cards by surgeons in and of itself reduces surgical supply expense.
The degree of this expense reduction typically falls within a range of 3% - 5%.
I am here to tell you that we can do better, and we shall.
To do so, let’s continue from Tier I to Tier II up the Preference Card Optimization Pyramid to which we were introduced in Preference Card Optimization 201: Introduction to Surgical Supply Cost Containment – Part 1.
Preference Card Optimization Pyramid
In Tier II we are going to gain additional cost savings by:
Optimizing item quantities
Exchanging current items for those meeting specific supply chain objectives (e.g. lower cost, contract-compliant, etc.)
Let’s dive deeper into the optimization question for the current post. We will tackle the question of exchange in the next post.
Item level utilization intelligence
Hang with me here…
Item level utilization intelligence starts with an understanding – at the procedure and preference card level – of:
How many items are being used
How many items are designated as “Open”
How many items are designated as “Held”
What is the procurement cost for each item?
Pause: what do we mean by “Open” and “Held”?
“Open” items are those preference card items picked, brought into the operating room and designated to be opened at the beginning of the case with the presumption that they will be used during the procedure.
“Held” items are those preference card items picked, brought into the operating room and held in a bin with the presumption that they might be used during the procedure. After the procedure, unused held items are restocked and returned to the “shelf”.
Now that we understand Open and Held items, we can understand the flow of surgical supplies through procedural environments. The diagram below illustrates the Surgical Supply Life Cycle.
Key opportunities for expense reduction occur with respect to preventing Open items from being “Wasted” and Held items from being repeatedly "Picked" and“Restocked” as illustrated in the appended Surgical Supply Life Cycle below. We want to minimize the magnitude of these transitions and eliminate them if possible.
Now it’s all coming together.
We can see why “Open” and “Held” designations are so
One way would be to simply eliminate all Held items. This has been done. The sky did not fall.
Schmidt et al., in their 2019 publication, “Reducing Waste in the Operating Room Through Inventory-Based Supply Chain Optimization”, achieved a volume-adjusted 9.1% real savings in disposable supply cost per case by eliminating all “held” items from being picked. The annualized savings of $1.45M for the Level I trauma center in which the project was executed.
In addition, not only was there no observable increase in case length (e.g. from nurses having to “run” to get needed supplies that should have been “held” at the ready), but there was a documented 0.4% decrease in case length. So concerns that chaos would erupt because surgeons wouldn’t have what they needed intraoperatively were simply not justified, and this was a trauma center!
How about we use an algorithm to decide what should be eliminated?
Pick a target surgical specialty (e.g. orthopedics)
Gather item level utilization intelligence, particularly with respect to held items
Identify high-cost items with low utilization %
Engage in surgeon review of high-cost, low utilization items selected for elimination
Eliminate items approved by surgeons
But OK. Time out.
In our experience, such an approach can yield a 6% - 12% reduction in surgical supply cost on a per case basis, 2x – 4x that achievable with general item review alone. Typically, a targeted, item level utilization intelligence driven approach would be combined with a general review to reach maximal savings.
And finally, take it from an experienced, confident surgeon:
I have practiced orthopedic surgery for the better part of two decades, and I can tell you that the last thing I want to do after a long, stressful day in the operating room or clinic is have an administrator ask for my time to discuss surgical supply cost.
Stay tuned as in our next installment we will discuss item exchange to achieve additional savings!
Dr. McCarty is a practicing orthopedic surgeon in Minneapolis, MN, former team physician for the Minnesota Twins, Fuqua alum, healthcare leader and entrepreneur.