Managing High-Volume Inventory: Increasing Efficiency, Decreasing Costs at Florida Hospital

Florida Hospital is the largest heart program in Florida, with 7 campuses and a total of 12 cath labs and 4 EPS labs. In 2003, their 133 cardiologists performed a total of 16,514 cath lab/EPS events, and used 748,969 inventory items. To manage these enormous volumes, Florida Hospital implemented the Apollo Advance cardiovascular data repository and Inventory Module in 2001. Since implementation, Florida Hospital has saved over $3 million. Using Apollo, Florida Hospital has created extensive inventory management reports tied directly to clinical outcomes, provided data and tools to support physicians, and have used utilization reports for successful negotiations with vendors. Sam Braga, Cardiology Materials Manager, and Barry Egolf, RN, Database Administrator, discuss how they use Apollo to manage inventory, support physicians, and negotiate with vendors.

What was your inventory management system like before and after Apollo?

Sam: It is important to note that between the cath and EPS lab, Florida Hospital holds $3.4 million in inventory. Before automation, everything was captured on a manual form. The cath lab inventory was have on hand.

Barry: Sometimes lists were six to eight pages long. Today, the clinical process is completely automated. Products are captured via barcode wand and stored in our Apollo database.

Barry: As an example, when an angioplasty is performed, they typically use an interventional wire. Before Apollo, the problem was that we had approximately one hundred different interventional wires. There was simply not enough room to capture each item individually on our paper charge sheet. So the best we could do was put down PTCA wire as a catch-all. It would be OK for billing because prices on the wires were roughly the same. To document exactly which wire was used and at what volume, we had to rely on the vendors for validation. Prior to reordering, we had to see what was physically on the shelf. There were physical counts daily. It was a painstaking process, probably in excess of a couple hours a day to physically count and look at what the inventory should be, versus what was there. So now with Apollo, the process is automated. A series of reports tracking utilization and on-hand quantities are automatically pulled. Reports are run by vendor or product category, depending on what type of contractual negotiation or term billing we are doing.

How do clinicians track inventory in the lab?

Barry: Basically, when they get into the cath lab, a unique number is assigned to the case. That number is keyed into the Apollo barcode wand. Because we have about 133 cardiologists here, we can t make and then maintain a preference card for each. Instead, we have core preferences for the basic setups. Next, as they open their disposable equipment, they place the packaging, or just the barcode, in a basket. Then they get set up, and when the circulator gets a moment, they simply go over to the basket and scan in the equipment. Scanning items takes, on average, just one minute.

How has the database changed the way you manage inventory?

Sam: We used to carry more inventory in-lab simply due to the lack of a systematic method. Now we are able to make quality and volume decisions based off of product performance and usage. We can remove unused or under-performing product from our shelves and get something in here that we can use. Each month we meet with our co-directors (cardiologists elected to oversee the cath lab). We report any product that hasn't performed well, or has not been used. Based on the Apollo utilization reports, the co-directors make a decision to keep or remove the product from inventory.

Barry: Here s an example from our co-director s meeting. We have been somewhat of an open cath lab, in that we allow all different types of vendors to come in. Yesterday we took a report to our co-directors that showed our guide catheter usage. The volume of one brand and size showed it was not utilized enough to keep it on the shelf. The item was then removed. Based on the co-directors decisions, it stays or goes. This helps minimize storage space and reduce charges due to damaged or lost goods. And, by reducing cluttered inventory piles, our technologists can quickly get the inventory and bring it back to the lab. When we implemented the automated system, we were able to clean the stockrooms for unused and expired devices. The one-time savings was just phenomenal; particularly the conversion of product lines. We were able to save about $250,000 dollars per product line that was successfully exchanged. The key point is that we had to convert product that we scientifically knew, and had Apollo statistics showing, that physicians were not using. You cannot do that type of negotiation or removal from shelves without absolutely knowing that information.

Have physicians changed their use of products based on the Apollo data?

Sam: At Florida Hospital, with 133 cardiologists, you need to offer a variety of products. It s our goal to assist our cardiologists in serving their patients, and do so in an economic fashion. Analyzing what is being used and what is not, allows us to target products. And that can only be done with Apollo. If a wire is elected to be taken out of stock, a physician may argue that he has to have that particular wire for all of his interventions. Well, we can quickly query Apollo and find that 60 other physicians are performing the same intervention with a different wire. Then we prove that their outcomes are successful, because we definitely do not want to sacrifice patient care. Our practice of medicine is based on science, concluding that other physicians use a like product 80% of the time. Based on that data, it is then up to him to make a decision.

Are there other ways Apollo has impacted cath labs?

Barry: The inventory module has been of phenomenal assistance in assessing the clinical data and outcomes tied to products. If a center purchases Apollo without the inventory module, they must rely exclusively on the technologists documentation to track the equipment utilized. You will have to go back and read one hundred percent of the tech notes. For example, with the Apollo inventory system, you can cross reference and find what equipment was used down to the vessel and segment, and then we can compare that to how many items were billed. In turn, this metric shows how much equipment was wasted. We will then investigate for any clinical significance to the wasted product.

How do you decide whether an item needs to be reordered?

Sam: We use Apollo in tandem with vendor-related tools. Cordis website, for example, tells us what products might release and what is available. I can pull my Apollo reports into Excel, then drop in the back orders that we have on hand from Cordis. Then I add the potential release of products from Cordis. From this, I am able to gather the difference and determine what we need to reorder for our facility at this time. It s been a real good partnership, despite being a bit of a challenge to stock drug-eluting stents. Because of the reports I can generate in Apollo, it makes it easier to interface with all vendors.

How are wasted items tracked?

Barry: We have incorporated a field for quantity wasted, and added a drop down box to choose the reason for waste: Doctor wasted Tech wasted Patient refused Doctor cancelled case Device defective Stent will not cross lesion We've found this very useful, considering the cost of our interventional devices, in particular drug-eluting stents. This is important because several companies have no-cross guarantees. For example, you use a 2.50 x 20mm balloon of brand A, but it did not cross the lesion, and brand B does, brand A will replace their product at no charge. Because of this system, we have been able to achieve an approximate savings of $60,000 per month in wasted stent items. Apollo adds another layer of data integrity for vendors because it ties the inventory items to how they were clinically utilized. With the paper system, Materials Management would meet with a vendor and report that 20 products failed to meet the expected need. The vendors would ask, Why did it not cross? Was it defective? With a paper system there s no answer. And without details, the data is challenged. So that s why the clinical is tied to both the wasted item and reason for that waste. Just asking that next question affords us the opportunity to capture that $60,000 per month savings. Sam has created a tremendous rapport with the vendors, and has promoted and proven the integrity of the database.

How do you share reports with physicians, administrators, and staff?

Barry: We have developed what we call the Apollo Mission Control Board. All of the statistics that we produce waste, utilization, and volumes by vender are posted on the board. Funny enough, it is at the same location our vendors set up at when they come in. Our administration has been very open and supportive in sharing product utilization by vendor to help create a real-world view of our operations. We also have staff meetings in which we discuss in more detail product information and performance before the data is posted. This has been very successful.

Has your database helped you manage emerging technologies, such as drug-eluting stents?

Sam: We need to have data to determine our trends. Within two weeks of the release of drug-eluting stents, we evaluated the data. Barry can drill down to the clinical level and determine where stents are placed and where those trends are going. I can look at it contractually and view our splits in the market: 30 days from launch, 60 days, and eventually one year later, etc. With Apollo, we can base our pricing on a stent s historical data. I can t stress enough how important that is. Barry: Without a shadow of a doubt. We already have a 2004 forecast for drug-eluting stents at this facility. And that was driven right out of Apollo. In 2003 this facility deployed over 2,550 drug-eluting stents. Administrators can see exactly when and where these devices are used. Real-time reports are available to administration at any point during the day. This data was particularly important in 2003, when there was a limited amount of drug-eluting stents on the market. Product availability made it very difficult for our clinicians to appropriately gauge which patients received bare metal stents and drug-eluting stents. As a result, we added a pop-up box to Apollo that contained our drug-eluting stent criteria. We were then able to look at specific usage trends, allowing Sam to negotiate with our vendor to replace most commonly used sizes. If it were not for Apollo, it would be very difficult to manage that product line along with everything else. These tools have definitely assisted physicians and staff to provide quality care.

What savings did you realize your first year?

Sam: Overall in 2002, our first year out, our savings were realized in the form of bulk purchases, capitation programs, successful exchange of expired devices, and price reductions based on utilization and market share. Since then, we've embarked on several cost saving programs including cost reductions of CRM (cardiac rhythm management), reduction in stent and balloon pricing, as well as implementation of Cordis VPP (virtual procedure program).

What types of negotiations have you performed using the inventory data?

Sam: Because of the flexibility of the system it allows us to negotiate and actually carve out contracts that are atypical. We negotiate much of the savings and manage contracts locally. Case in point, we have a big issue with mechanical closure. System-wide, we use in excess of 350 per month. Combined with the hemostatic patch, we use in excess of $1.2 million in product per year. That is a big expenditure. And, by the way, I know this data because it is Apollo data. I can also tell you that having to bear that responsibility we come up with creative ways of building some of these contracts. For instance, we rely heavily on additional savings via bulk programs. Essentially we look at prior utilization by month or quarter and then we forecast the future need. This data enables us to negotiate a lower price and bring in products for use in a specific period. As a result, we are able to use the monthly Apollo utilization reports and record expenses in the month that the actual revenues are recognized. These are things we can actually implement to positively impact the system and track expenses monthly. Here's another example that we are working through as we speak. Because of the climate with companies, many do not want to expense product lines through consigned product. Some start-up companies have never consigned product. Florida Hospital, being an atypical environment, we simply ask them to change history. I am working with a company right now that does not normally consign. However, they made an exception due to the commitment we are able to give them, including volume trends, quick turnaround of replenished products, and just-in-time ordering. I assured them that when something is used it is reordered in 24 hours. And that is strictly because of Apollo, because if I don t have utilization data at my fingertips I do not know what was used at any given day.

Do vendors accept Apollo's data?

Barry: It's important that we be able to make vendors comfortable with our system s data integrity and reliability. Building that confidence is difficult, but I can tell you an area we have done it successfully EPS. For example, Sam was able to bring data on EPS to a vendor s national sales manager. With just-in-time ordering we were able to commit to a swift turnaround of catheter product replenishment, and they actually consigned in excess of $80,000.

Sam: We benefit as institutions by not bearing the costs of consigned products and letting the vendors expense it. It is a real positive for us, because if we need to retire a product line or simply return it, they own it, we do not. Vendors come to us because they feel very comfortable that we have the data to support what we say we do here. And I can t stress that enough. It may not seem like a whole lot on the surface, but for companies to be willing to base a contract on your market share and your utilization, which is what I see happening in 2004 is tremendous. Moving forward, I see device industry-wide negotiations based on market share. Not necessarily net sales, but truly what is going on in that lab. We look at product categories, whether it is a balloon, a wire, or a stent. And we've been doing that for some time.

What do you mean, when you say you negotiate by market share rather than potential sales?

Sam: It's negotiation based on a historical snapshot. When we look at bundled packages we will look at drug-eluting stents as one category, for example. I foresee we will base our pricing on what has been done in the last quarter or last month. With the FDA approval of Boston Scientific's Taxus drug-eluting stent, much of the pricing negotiated with an emerging therapy like this will be based on total market share captured. That's where I see all of these talks going. Vendors want to compete, and if they feel that there is a level playing field they feel more comfortable.

Sam: When we negotiate with a vendor, we never lose site of the procedure. You always have to take into consideration all of the components: for interventional procedure we use a guide, a wire, more than likely a balloon, and most likely a stent. There is a myriad of vendors that come into play with each procedure that we perform. Say vendor A has the best price on the balloon, vendor B has the best price on the stent, and vendor C has the best-priced wire. We analyze where our vendors have commonalties. We may find that it s not to our benefit to negotiate a price break for vendor B. In that negotiation, he wants us to use more of his wires. But we have Apollo data showing that we wouldn't benefit from increased volume in his wires.

What's the biggest benefit of using automated inventory management?

Sam: I feel that one of the biggest pluses of this kind of system is that you have all of your data at your fingertips. Good, bad, or ugly it is going to be there. We want to provide real-time clinical and financial information to our leadership.

How will you manage inventory in the future?

Sam: In 2008, as we celebrate our 100th anniversary, we anticipate the completion our $250 million hospital expansion project. This will include potentially 16 new cardiac procedure rooms, expanded cardiac diagnostic services and dedicated cardiac nursing units. We will be challenged to think of new and innovative ways to utilize emerging technology and manage costs. Our Apollo inventory management system will allow us to continue negotiations with vendors for optimal pricing so that we can offer the best modalities and products to our patients.