Mankato Surgery Center was noticing variables in the year-end physical inventory counting, inconsistencies in product nomenclature, inaccuracies in identifying consignment inventory, and inaccuracies of the physical counts that lead to significant over-valuation of inventory and difficulty in determining profitability.
A newly created multi-disciplinary Inventory Efficiency Workgroup identified the general assumptions and developed a project scope. The objectives for the project were to eliminate the duplication of labor that occurred during the annual physical inventory of correcting entry counts and to eliminate the erroneous inventory valuation during the annual financial audit. After thorough auditing, benchmarks were created. The multi-disciplinary workgroup team approached and solved the issues from different focal points.
It was determined that the Item Master List was the pinnacle of the overall issues. Seven percent of products on the Item Master List were identified as inconsistent nomenclature and product misidentification. Staff spent more than 60 hours correcting the Item Master List. Further, the annual financial audit showed inventory was overstated by 94.4% and by removing vendor-owed inventory from the Consignment List, the correct inventory value was calculated. It was also found that the Implant Inventory was set at an artificially high quantity to save computer key strokes, so this was eliminated, thereby, eliminating the artificial high-value of inventory.
ABOUT MANKATO SURGERY CENTER
Mankato Surgery Center, accredited by AAAHC, is a multi-specialty, physician- owned ambulatory surgery center located in south-central Minnesota. Mankato Surgery Center focuses on providing the highest quality ambulatory surgical care with state-of-the-art surgical equipment and technology, and highly skilled and trained staff.
Check out the project video and view the Mankato Surgery Center page in the 2018 Intalere Best Practices Compendium.
An Intalere Consulting Services Assessment of Crystal Run Health’s entire supply chain processes identified areas of best practices as well as areas that needed improvement, one of which was the method in which pharmaceuticals were supplied to caregivers. The process was very fragmented, undertaken manually, had a high incidence of waste and a duplication of inventory across all facilities. It also did not provide a method of accessing more valuable pharmaceutical contracts.
After reviewing the assessment findings, Crystal Run began implementation of a Central Pharmacy. The first step was to identify what was to be achieved through this initiative and then locate adequate space that was close to being centrally located. An ROI strategy, which would be presented to the executive team, was prepared with the assistance of the Intalere Pharmacy Specialist Team, as well as the pharmaceutical supplier. Discussions were held with internal stakeholders to gain their insights on what was needed in order to simplify their processes in obtaining pharmaceuticals.
After only three months following implementation of the Central Pharmacy, Crystal Run noticed an immediate 10% reduction in inventory being held on hand, with a 15% reduction in inventory levels expected throughout the organization. This has resulted in a monthly savings of approximately $62K. The cost to fully implement the Central Pharmacy was approximately $48K and the annual cost increase will be approximately $50K. However, total annual savings in acquisition and inventory cost reductions, as well as decreased waste, is estimated to be $1.8M, therefore, a savings of $1.3M annually is expected through the implementation of this program. In addition, caregivers have embraced the new program and no major issues have been reported.
About Crystal Run Health
Crystal Run is committed to improving the quality and health of the communities it serves. Crystal Run’s multi-specialty medical practice has evolved to more than 450 providers and more than 50 medical specialties. With more than 25 locations, Crystal Run provides the best healthcare to New York’s Hudson Valley, lower Catskill region and Manhattan.
Check out the project video and view the Crystal Run page in the 2018 Intalere Best Practices Compendium.