by Rosalind Parkinson, administrative director, Materials Systems, The Ohio State University Medical Center
When the hospital bottom line is threatened, most CEOs respond by negotiating better reimbursement from payers and fine-tuning the revenue cycle.
The next step is to ask supply chain leaders to contain costs by reducing the prices hospitals pay for supplies. This drill is repeated frequently. Nevertheless, the proportion of supply spend in some hospital budgets has grown to 35% within a steadily growing expense for healthcare overall. Are we being blinded by looking at supplies separately rather than as a part of the whole patient care experience?
Are supplies always a “cost?” In retail, supplies are seen as units of potential revenue. In hospitals, supplies are also tied to revenue, but our systems and culture do not currently treat them as a critical piece of the “billable event.”We usually know the prices paid for high end supplies and this data moves to charging specialists who establish codes to record their use. However, charge codes do not always fluctuate in response to changed prices for high end supplies. Finally, supply charges in the patient record may or may not figure prominently in the final claim for reimbursement depending on the terms of the contract with the payer.
This series of hand-offs serves to obscure understanding of how specific supplies contribute to patient revenue and outcome. When we view supply purchases only as “cost” to be recovered, we unconsciously remove awareness of the specific role they play in outcomes either in a single episode or continuum of patient care. If everyone knew how specific bundles of supplies contributed to “billable events,” we all might think more proactively about how supplies contribute to each patient care situation and move more nimbly to revenue enhancing alternatives and the choices associated with better outcomes.
Some of our colleagues are finding ways to shake this tree by showing clinicians supply prices for every item at the point of use. If price information is totaled as a ”bundle” associated with quality outcome, end users could be continually aware of how the cost of supplies they are using compares with the optimal profile. When clinicians are able to scan standardized supply identifiers into the electronic health record, the resulting information could create a culture of supply cost awareness from the bedside to the billing office.
When the electronic health record is meaningfully used and the FDA mandated Unique Device Identifiers are in place, this visibility will be possible and innovation can proceed quickly. There will no longer need to be a “hazy” buffer between knowing the cost of a supply and the revenues and outcomes directly associated to its application. As supply chain experts, it is our responsibility to develop goals for supply chain integration with the patient experience and revenues associated with it. We bear much of the responsibility for allowing our function to remain separate from the mainstream. We need to actively promote an alternative vision.
Rosalind Parkinson is administrative director, Materiel Systems, The Ohio State University Medical Center, and serves on the Leadership Team for GS1 Healthcare US.