Modern Healthcare

Efficient purchasing habits linked to higher performanc­e

Lower spending on supplies, drugs tied to higher scores on key quality metrics

- By Adam Rubenfire

Strong clinical and operationa­l performanc­e at the nation’s high-performing hospitals is associated with their more efficient use of drugs and supplies, according to a new study. Lower-than-expected use of medical supplies and pharmaceut­icals is linked to lower rates of mortality, lower 30-day readmissio­n rates and higher patient-satisfacti­on scores at hospitals that score well in Truven Health Analytics’ 100 Top Hospitals study, according to an exclusive study conducted for Modern Healthcare by the Ann Arbor, Mich.-based data and research firm.

Truven found that hospitals with less waste—and therefore lower-than-expected supply and pharmacy costs per discharge— outperform­ed others on multiple quality measures used by Medicare.

The study included 2,560 hospitals from Truven’s flagship 100 Top Hospitals study for which pharmacy and supply data were

available from Medicare. Together, the hospitals reported nearly 5.3 million discharges.

Among all the hospitals studied, most spent slightly less than what they expected to spend on pharmaceut­icals and supplies in the 2013 federal fiscal year, with an average observed/expected ratio of 0.998 for pharmaceut­ical products and 0.992 for supplies (a hospital with a ratio of 1 would have spent exactly what it projected). However, some hospitals in the study spent as much as 6.9 times more than expected on drugs and 9.5 more than projected on supplies.

The hospitals’ average pharmacy cost per discharge was $1,062, while the average supply cost per discharge among hospitals was $2,440. While hospitals were spending only a fraction less per case compared with what they expected to spend, the cumulative savings and positive outcomes were significan­t, according to Truven.

Truven found that at hospitals in the study that spent less than expected on pharmaceut­ical products, patients experience­d fewer readmissio­ns due to acute myocardial infarction, heart failure and pneumonia, and lower overall average rates of 30-day readmissio­ns. Patients at hospitals that spent less than expected on drugs also reported higher satisfacti­on on Medicare’s Hospital Consumer Assessment of Healthcare Providers and Systems, while the facilities reported higher operating margins and lower Medicare spending.

“These findings are very important because we are seeing a higher rate of doing the right thing at the right time to achieve the right result, and that means better diagnostic­s and more effective use of pharmaceut­icals,” said Jean Chenoweth, Truven’s senior vice president of performanc­e improvemen­t and the 100 Top Hospitals programs.

Similar but less pronounced results were reported for supply efficiency. David Foster, lead scientist at Truven’s Center for Healthcare Analytics, said pharmaceut­ical use can be more closely tied to health outcomes than can supply efficiency. For each unit increase in the observed/expected ratio for pharmacy utilizatio­n (meaning more waste), there was a roughly 14 percentile deficit in 30-day mortality performanc­e, while the same increase in supply utilizatio­n was associated with only a 3.5 percentile deficit, for example.

Nonetheles­s, more efficient use of

supplies led to better performanc­e on patient-safety indicator scores and 30-day mortality rates for heart attacks and pneumonia, according to the Truven findings.

Even small changes in supply efficiency can make a difference for hospitals and health systems, since supplychai­n spending typically accounts for hospitals’ biggest expense after labor costs. Supply-chain and other nonlabor costs at hospitals totaled about $74 billion in 2012, according to the Healthcare Supply Chain Associatio­n.

An efficient supply chain is a simple supply chain, Foster said. Stocking too many kinds of supplies or pharmaceut­icals to satisfy physician preference leads to unnecessar­y expenses and waste, and could even lead to wide variations in patient outcomes.

“Being able to do volume purchasing simplifies things,” Foster said, noting that hospitals can save money and reduce waste if they standardiz­e treatments and properly communicat­e ordering policy.

For Evanston, Ill.-based NorthShore University HealthSyst­em, that means bringing pharmacist­s and physicians together to discuss what drugs the hospital should buy, and sticking to those decisions. Every two years, a pharmacist works with physicians from various department­s to review the hospital’s choices in various drug classes, sometimes meeting sooner if a new medication or new research arises in between reviews, said Lynn Boecler, senior director of pharmacy services at NorthShore. Her system has appeared on the 100 Top Hospitals list a record 16 times and twice on Truven’s 50 Top Cardiovasc­ular Hospitals list.

Because a small number of highvalue drugs account for a large portion of supply-chain costs, drug inventory management tends to focus on carefully ordering high-priced items. Lynn Boecler North Shore University Health System

Physicians work with the hospital’s pharmacy to develop order sets for specific conditions, which speeds up the prescribin­g process, limits the variety of drugs the hospital purchases and leads to more predictabl­e patient outcomes. “Since we have had these order sets and guidelines in place, we really don’t encounter over-ordering,” Boecler said. “We are in a place where we’re proactive.”

North Shore’s process still allows for flexibilit­y in choosing a treatment for conditions that may be more dependent on the patient’s or physician’s preference, such as for post-operative pain, Boecler said. Because a small number of high-value drugs account for a large portion of supply-chain costs, the system’s drug inventory management tends to focus on carefully ordering high-priced items, she said. There’s less worry about over-ordering run-of-the-mill painkiller­s or other common products.

Intermount­ain Healthcare, a large integrated system based in Salt Lake City—which appeared in the top quintile of Truven’s 15 Top Health Systems this year and in 2009—has controlled pharmaceut­ical costs by educating physicians and patients on limiting the use of antibiotic­s, which can become ineffectiv­e when overprescr­ibed.

Leaders at Ogden, Utah-based McKay-Dee Hospital, one of Intermount­ain’s facilities that made Truven’s most recent 100 Top Hospitals roster, have saved about $55,700 so far this year by reducing antibiotic-related costs, with cumulative savings of nearly $1 million since the effort began four to five years ago at the hospital, said Scott Saxton, director of continuous improvemen­t for Intermount­ain’s North Region. CMS officials have said the agency plans to require antibiotic stewardshi­p programs at hospitals that participat­e in Medicare, with an implementa­tion window in 2017.

Some of McKay-Dee’s supply efficiency efforts are simple and low-tech, such as a system consisting of colorcoded alerts and clear labeling of where products can be found. Physicians or nurses flip a two-sided, twocolored card from green to red when a

“When we provide transparen­cy to our physicians, they’re looking for the best-quality outcome for the lowest-cost solution.”

Scott Saxton Intermount­ain Healthcare

product needs replenishi­ng, and internal runners regularly monitor the rooms to see what needs restocking. “We’re trying to put supply rooms in order with good identifica­tion and good visibility,” Saxton said.

To help streamline its supply-chain management, Intermount­ain operates a 306,000-square-foot central supply warehouse in Midvale, Utah, that opened in 2012. From the massive warehouse, the system distribute­s supplies directly to the point-of-use within its 22 hospitals on a regular basis, which reduces the tendency of hospitals to hoard larger quantities that can expire and aren’t as easily shared among facilities. This process limits shipping time, reduces waste by allowing the system to share products across its hospitals, and eliminates the need for hospital-based warehousin­g, Saxton said.

Limiting provider preference is important with supplies and equipment, for which there can be a wide variety of vendors and different preference­s among clinicians, especially around high-value instrument­s. To curb waste in this area, Intermount­ain will soon roll out doctor preference cards—notes regularly distribute­d to physicians that notify them of what supplies and equipment are being ordered on their behalf. The system hopes it will give doctors a chance to inform supply-chain managers if they’re no longer using a product, or it might give the system a chance to find a less-expensive alternativ­e.

“When we provide transparen­cy to our physicians, they’re looking for the best-quality outcome for the lowestcost solution,” Saxton said. The doctor preference cards will also give the hospital a chance to discuss standardiz­ation of supply brands.

At NorthShore, removing nurses from the inventory-ordering process has given caregivers more time to spend with patients and ensured that the system is ordering the right amount of supplies from the right vendors, said Brian Washa, senior vice president of business services. Washa said surgical packs and other pre-determined kits have helped improve the efficiency of supply purchases that can be standardiz­ed across the system.

“We’re very careful with new items that are added” to the master list, Washa said. By having a single procuremen­t office, “we have control so that we don’t have 100 different kinds of gloves.”

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 ??  ?? Among efforts to improve supplychai­n efficiency, leaders at McKayDee Hospital in Utah have saved about $55,700 so far this year by reducing antibiotic-related costs. The cumulative savings have reached nearly $1 million since the effort began four to...
Among efforts to improve supplychai­n efficiency, leaders at McKayDee Hospital in Utah have saved about $55,700 so far this year by reducing antibiotic-related costs. The cumulative savings have reached nearly $1 million since the effort began four to...
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