Several factors influencing inventory management for hospitals have remained unchanged for decades. Current industry metrics and usage gaps offer insights using accurate benchmarks to appropriately establish inventory levels and rules for facility department managers to follow. The reality is that older plant operations and layouts unfriendly to users make inventory management harder.

Historic metrics are inventory turns

Inventory turns are the ratio of a department’s purchase spend each year to the inventory-owned asset recorded amount for that same year (spend is the numerator and count amount stated is the denominator). Somehow, facilities adopted a ratio of 10.5 as the benchmark for inventory turns. In the sample data chart provided shows a range of 10-15 turns. This chart is based on aggregated real data for 12 hospitals in a large IDN historically posting the best inventory turns number in that IDN of all of their facilities. Compared to the 10.5 turns metric, this aggregated data shows they are operating at or above target in an efficient manner for that facility.

U.S. benchmarks point to a completely different story. When a suite is running at mid- to full-capacity the goal is closer to $75k per OR suite, $95k per GI suite, and $125k per Cath and IR Suites. These goals place you in the 25th percentile of the amount of stock you should have in total for that department.

Some operating room or cath lab departments are incredibly lean on inventory while being far under goal for inventory turns and vice versa. Why is that? It’s because if a facility has a very high annual PO volume (spend) per year, their turns will show very high regardless of them managing their inventory. If spend is very low, your best inventory management team may be getting the worst inventory turns score. So, it’s important to ensure that teams understand that benchmarks or realistic goals are more important than false metrics and that department staff working to make an impact are given credit for their work.

Look at the graph, and you will see departments showing to be operating at very high inventory levels (far higher than benchmarks at the 25% percentile). These same facilities are also showing to goal for inventory turns masking a very real overstock problem for these actual departments lumped into the hospital inventory turns score.

How do we deal with a department clearly overstocked two to five times the amount they should have on the shelf?

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Author: Charles Taylor