Larry Teuber, MD, president of Medical Facilities Corp., discusses four common ASC supply chain mistakes that lose centers money.
1. You shelve too much inventory — or not enough. According to Dr. Teuber, many ASCs keep par levels too high, effectively wasting money by keeping too many supplies on the shelf. "Inventory is basically cash sitting on the shelves, and if you're not effectively managing your inventory, you're not effectively managing your cash," he says. "If you're doing a particular kind of case a lot, you need to have enough [supplies] to meet your daily needs and 2-3 days more."
At the same time, you want to keep enough inventory on the shelves to make sure you never run out, as a supply shortage could cause a case cancellation. This doesn't mean overstocking your supply room and letting your supplies expire, but rather figuring out how many supplies you use and then stocking that number.
He says appropriate par levels should be determined and then maintained by a good inventory manager. Give a staff member responsibility for determining how much of a particular supply you need — based on the regularity of use, number of supplies needed per case and time it takes to restock the supply — and then have this individual track your par levels over time to ensure they're neither too high or too low.
2. You pay for implants before you use them. Dr. Teuber says implants should always be held in consignment, meaning implants on the shelves in your facility should be the property of the vendors. "Most people hold implants in equity, meaning the vendor will deliver the implants, then slip in and put five implants on the shelf and bill the facility and book the sale to collect commission," Dr. Teuber says. If implants are held on consignment, the vendor owns the implants until the surgeon uses them in surgery and generates a use slip.
3. You don't standardize pharmaceuticals. Dr. Teuber recommends ASCs standardize pharmaceuticals as much as possible. "In our business, [pharmaceuticals] are a big cost, and you have to standardize to save money," he says. "That doesn't mean esoteric stuff, just basic stuff." As with equipment and implants, the more you can standardize your pharmaceuticals and convince your physicians to accept standardization, the more money you will save.
4. Your vendor representative loves you. If your vendor sales representative likes you too much, you're wasting money, Dr. Teuber says. "I don't want the vendor to control me, and I don't want any of my inputs to control me," he says. He recommends ASCs look at sales from the sales representative's point of view and watch for the relationships that build between surgeons and sales reps. A sales rep wants to get to know your surgeons rather than your administrators because if he or she can convince the surgeon that a more expensive product is better, your facility will pay the price. Since many representatives make money based on sales commission, their number one goal is to make you spend more money.
Use this knowledge in vendor negotiations to make sure you don't acquiesce to unreasonable vendor demands. "There should be a certain amount of tension in that relationship," Dr. Teuber says. Do your research so you can come back at the sales rep with information on cheaper, quality supplies and other alternatives.
Read more advice on supplies and vendor relationships:
-5 ASC IT Considerations for the Next Five Years
-5 Ways to Save Money on ASC Equipment
-5 Ways to Reduce Supply Costs at Your Orthopedics-Driven ASC
1. You shelve too much inventory — or not enough. According to Dr. Teuber, many ASCs keep par levels too high, effectively wasting money by keeping too many supplies on the shelf. "Inventory is basically cash sitting on the shelves, and if you're not effectively managing your inventory, you're not effectively managing your cash," he says. "If you're doing a particular kind of case a lot, you need to have enough [supplies] to meet your daily needs and 2-3 days more."
At the same time, you want to keep enough inventory on the shelves to make sure you never run out, as a supply shortage could cause a case cancellation. This doesn't mean overstocking your supply room and letting your supplies expire, but rather figuring out how many supplies you use and then stocking that number.
He says appropriate par levels should be determined and then maintained by a good inventory manager. Give a staff member responsibility for determining how much of a particular supply you need — based on the regularity of use, number of supplies needed per case and time it takes to restock the supply — and then have this individual track your par levels over time to ensure they're neither too high or too low.
2. You pay for implants before you use them. Dr. Teuber says implants should always be held in consignment, meaning implants on the shelves in your facility should be the property of the vendors. "Most people hold implants in equity, meaning the vendor will deliver the implants, then slip in and put five implants on the shelf and bill the facility and book the sale to collect commission," Dr. Teuber says. If implants are held on consignment, the vendor owns the implants until the surgeon uses them in surgery and generates a use slip.
3. You don't standardize pharmaceuticals. Dr. Teuber recommends ASCs standardize pharmaceuticals as much as possible. "In our business, [pharmaceuticals] are a big cost, and you have to standardize to save money," he says. "That doesn't mean esoteric stuff, just basic stuff." As with equipment and implants, the more you can standardize your pharmaceuticals and convince your physicians to accept standardization, the more money you will save.
4. Your vendor representative loves you. If your vendor sales representative likes you too much, you're wasting money, Dr. Teuber says. "I don't want the vendor to control me, and I don't want any of my inputs to control me," he says. He recommends ASCs look at sales from the sales representative's point of view and watch for the relationships that build between surgeons and sales reps. A sales rep wants to get to know your surgeons rather than your administrators because if he or she can convince the surgeon that a more expensive product is better, your facility will pay the price. Since many representatives make money based on sales commission, their number one goal is to make you spend more money.
Use this knowledge in vendor negotiations to make sure you don't acquiesce to unreasonable vendor demands. "There should be a certain amount of tension in that relationship," Dr. Teuber says. Do your research so you can come back at the sales rep with information on cheaper, quality supplies and other alternatives.
Read more advice on supplies and vendor relationships:
-5 ASC IT Considerations for the Next Five Years
-5 Ways to Save Money on ASC Equipment
-5 Ways to Reduce Supply Costs at Your Orthopedics-Driven ASC