Controlling Inventory

Quick: how many boxes of cotton balls does your practice go through every month? Ballpoint pens? How well are you managing your flow of sample drugs - and the flow of pharmaceutical reps through your office?

Controlling inventory and managing the purchasing process efficiently is a problem for many small practices, but new tools are emerging to make it all simpler. Chief among these is barcoding technology, which is being aggressively adopted by hospitals and large healthcare systems, and may soon become the next big thing in private practices.

Meanwhile, some old Web-based tools, including online purchasing, continue to gain favor among practices.

And here's the kicker: some of these tools are free.

Take, for instance, PreferredTime, a Boston-based service that coordinates sales rep visits online. "It has worked great for us," says Denise Tanner, administrator of Anthony Medical Clinic, a small group in Gastonia, N.C. "The front-office personnel love it because it saves them so much time each day. We are a busy, thriving practice, and we would have sales reps in here all the time. Sometimes, we would have six or seven of them waiting to see the doctor. It just took a lot of time to manage it all."

Anthony Medical provides PreferredTime a list of times when it would like to see reps, and the reps sign up for those times through the service. As a result, there's never a backlog of reps in the office waiting to see the physicians - and the doctors have a better idea of who they will see and when. Typically, the pharmaceutical reps pay to use the service.

Tools such as PreferredTime are among those that streamline the process of stocking the shelves for practices large and small, while reducing costs of ordering supplies and managing inventory.

Barcode technology

Is barcoding technology right for a small or medium-sized office like yours? Varnessa Pontius of Milwaukee-based KDA Consultants, a healthcare materials management consulting firm, thinks it might be.

She says barcoding is being adopted quickly by hospitals and large group practices to control inventory and cut costs, and while smaller practices have not yet jumped aboard in significant numbers, many such groups will likely consider barcoding technologies once they realize the advantages.

"I think the smaller practices could be overlooking potential cost savings," she says. For example, practices might be losing money due to excess inventory sitting on the shelves or due to lost or stolen supplies.

Still, your volume of supply purchasing may be too small to make barcode technologies worthwhile, Pontius says.

What's more, some practices might be ordering additional supplies simply because staff members don't know where to look for what they need.

Here's how a barcoding system might help: all supplies and patient charts are coded. Then, staff members scan items as they take them off the shelves, making it possible to link the number of supplies used to individual patients, procedures, or physicians. 

"These systems let you know where your resources are going," Pontius says. "With a barcoding system in place, for instance, you are able to tell if certain physicians are underusing or overusing supplies. You are just able to have a better handle on what is going on."

Steve Fiore of Hayes Management Consulting in New Center, Mass. agrees that private practices could benefit from barcode technologies, but advises them - especially smaller ones - to carefully weigh the costs against the benefits.

"I don't see this being used with Band-Aids and syringes and other relatively low-cost items," Fiore says. "Barcoding, however, is very valuable with the higher-end inventory. For instance, I could envision systems being used in oncology practices, where there is a lot of high-end inventory and expensive medications."

Online ordering

By far the most common tool for inventory management among private practices is online supply ordering, something more practices are doing than ever before. Even so, plenty of practices continue to make purchases with pencil and paper. 

If you're in that late-adopter group, it may be helpful to consider some advantages of switching to a Web-based system.

For one thing, it's cheaper. The average administrative cost per purchase order, from requisition and approval through generation of the purchase order, ranges from $75 to $150, according to research cited in Harnessing E-Procurement to Reduce Costs, a white paper published by Denver-based Omnicell, which offers Internet procurement products to the healthcare industry.

E-procurement systems can reduce these costs to as low as $6 per purchase order by:

• automating the purchase requisition, approval, and order process;
• reducing errors and the time it takes to rework orders;
• providing online access to multiple suppliers, thereby facilitating price comparisons;
• saving administrative time by streamlining the purchasing process; and
• providing aggregated data, enabling the practice to negotiate better prices with suppliers.

Women's Health Inc. in Cincinnati is one medical group that has bought into the e-commerce promise.

"We were looking to improve efficiency in the office all-around - and to come up with a better way to do our supply ordering," says administrator Pat Webb, recalling the seven-physician OB/GYN group's decision to switch to an Internet-based ordering system five years ago. "So I naturally started looking at Internet options and solutions."

When a company called Esurg came calling, Webb realized that she had found her solution. Esurg offers online access to medical and surgical supplies, pharmaceuticals, equipment, and office supplies.

Like other online services, ESurg signs up manufacturers, distributors, and suppliers to list products on their site. Physicians and practice administrators go to the online source to compare prices and place orders, eliminating the task of calling suppliers one at a time.

Since signing on with Esurg, Women's Health has realized many of the Internet's promises. Instead of having a medical assistant walk around the practice with a clipboard noting what supplies are needed and then calling distributors to get the best prices, the entire process is automated.

Supplies are ordered based on usage patterns that are computed by Esurg. And instead of searching for the best prices, Webb can see everything that is available online - and easily determine the best deal. The ordering process is streamlined and the practice has better access to supplies, Webb says.

Webb has a better overall picture of supply usage at the practice. She routinely prints reports and compares what is being used to the procedures performed at various locations. This way, she is able to pinpoint where clinicians are either overusing supplies or are not using less-expensive alternatives.

"We can easily do a comparison of ... the volume of patients coming through and what we routinely order to figure out what we will need," Webb says. "We can also see our inventory at a glance, whereas we had no idea what we had before."

It's common for practices to be in the dark about their own inventory status. Yet that makes it next to impossible to know how much of anything to purchase.

"We would order too much or forget to order some things that we really needed. Before, we would go into supply areas and find boxes of supplies that we really didn't need and we would have to return them," Webb says. 

Cutting out the inefficiencies and getting the best pricing netted $30,000 worth of savings during the first year the practice used the service. Since then, the group has reduced its medical supply bill by about 10 percent to 15 percent annually.

While Women's Health and other medical groups have been reaping the benefits of online purchasing for some time now, if you're on the sidelines, you might want to take a second look at the online purchasing services offered by e-commerce companies, group purchasing organizations, and suppliers - and consider jumping into the fray.

John McCormack has been working as a healthcare journalist for 15 years. He has served as associate editor for Materials Management in Health Care and as managing editor for Health Data Management. He can be reached via editor@physicianspractice.com.

This article originally appeared in the July/August 2005 issue of Physicians Practice.