Managing Inventory: A Monthly Challenge

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Providing patients with high quality dialysis services requires a delicate balance between revenue and expense. And because revenue is limited under the current composite rate system, controlling expenses effectively is vital to the viability of any dialysis unit.

Salaries and disposable supplies can consume between 75 percent and 85 percent of composite rate reimbursement, which is approximately $128 per treatment. With many of the remaining expenses fixed, inventory is one expense that can be managed.

Therefore, an inventory management program is crucial to the financial success of the dialysis facility. K/DOQI guidelines set standards for the provision of quality dialysis services, which have raised the bar for many dialysis facilities. Higher KT/V’s required longer treatments, more supplies and larger, more expensive dialyzers. Although the overall cost of therapy increased, common sense dictated the need for better pricing and higher quality goods.

An effective inventory management program requires ongoing assessment of facility needs, routine monitoring of supply use, written policies and procedures—which include accurate counting of supplies, monitoring of credits or returns, efficient ordering mechanisms and ongoing staff education.

Assessing facility needs requires an ongoing review of quality indicators and an accurate evaluation of supplies on hand in addition to projections of census growth. Monthly reviews of patient labs require the need to determine whether increased time or a larger dialyzer will improve adequacy. The medical benefit of each must weighed and evaluated. The ability to maintain an adequate amount of supplies on hand is crucial to ongoing success. Growth in patient population requires more supplies on hand to meet the increased demand for treatments.

Monitoring the use of supplies requires counts of most supplies at the end of each month, as well as the accounting of all incoming supplies. Although all supplies contribute to the overall cost of the treatment, six routine supplies can account for more than 75 percent of the total cost. These large ticket items include dialyzers, blood tubing, saline, needles/ catheter caps, acid concentrate and bicarbonate powder/liquid. A simple spreadsheet (see example below) can calculate the cost per treatment of these major items on a monthly basis.

The completion of this worksheet at the end of each calendar month will not only allow you to quickly analyze your supply costs, but give you an idea of how much is used on an average per treatment, thus providing you a base in which to calculate your future needs.

To estimate the needs of future treatments, you will need to determine trends over the previous months. This includes looking at hospitalization rates, incidence calculations of the number of required shifts for the future month, and a collaboration with your medical staff to estimate the number of chronic kidney disease patients that might require dialysis in the future.

The ongoing evaluation of monthly supply usage will allow you to calculate par levels necessary to provide the needed treatments while keeping your on shelf inventory to a minimum.

Care must be taken to account for unforeseeable delays in delivery, as well as backorders. A safety stock of at least two weeks for dialysis-specific items is imperative, as well as a back-up plan for the provision of basic supplies. The back-up plan may be an agreement with a local hospital or a nearby dialysis facility.

It’s also important that staff know the value of the shelf inventory and strive to keep it as low as possible. Any item on the shelf at the end of the month is money not in the bank. It is not unusual to have between $30,000 and $50,000 worth of supplies on the shelf at the end of the month. If you manage more than one clinic, multiply the inventory by the number of clinics, and your “money out of the bank” could be in excess of $100,000 per month. The smaller the number of supplies the greater the capability of leveraging the cash on hand. If at all possible, use all of one supply before changing to another, as supplies that are no longer available will only sit on the shelf and eventually become unusable. Always maintain a first in, first out policy to prevent the expiration of supplies and the use of these expired, or old supplies.

Written policies and procedures must be in place to provide the responsible staff with the tools necessary to successfully regulate usage, account for losses, and maintain an adequate amount of the necessary supplies. Policies should cover what, when and how to count supplies, as well as what can be ordered, how to substitute for backorders, and how to get credit for returned or defective supplies.

The use of a defined shopping list and a listof approved vendors with available products, will help eliminate the ordering of unnecessary or unproven supplies. Timeframes for deliveries as well as well as specific ordering days will help maintain effective supply deliveries. Supplies should not be ordered near the last day of the month if you are trying to allocate costs and purchases to the current month. You will be billed when they are shipped, but you won’t be able to account for them in shelf inventory until they are received. Purchasing at the beginning of the month allows you to pay the bill in a timely manner, and will allow for recovery of any early payment discounts.

Staff are crucial to the containment of supply costs. A dedicated, responsible party for maintenance of all supply accounting, usage and ordering is recommended, as the buy in for accountability is well established. Clinical staff must be educated as to the cost of supplies used, as well as ways to best use these costly resources.

All staff must be held accountable for usage. The use of large supply carts in the treatment area is not only expensive but also inefficient, as counting is difficult and contamination is always possible. No more than one to two days of supplies should be out in the patient area. Staff should not hoard or hide supplies in cupboards or drawers, as in the end these will usually not be accounted for and eventually will be discarded as old or outdated.

Supply inventory is one major cost that can be managed and controlled by the facility staff. The effective management of inventory will give the facility the ability to provide high-quality, safe and cost-effective treatments. Any savings that can be achieved can be used to further improve patient care and outcomes. RBT


Melinda Martin-Lester, RN, BA, CNN, has been involved in the management of dialysis facilities for almost 30 years. Her experience ranges from staff nurse in a hospital based unit to vice president of operations for a large dialysis organization. Martin- Lester is currently Director of Regulatory Compliance for Renal Ventures Management LLC. She is responsible for all clinical education, policies and procedures, as well as oversight of facility compliance in regards to state and federal regulations.

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