CHAPTER # 3
1. We Really WANT To Save Money - (wink, wink) - Don't We? - "Remember back in the old days of Supply Chain Management when a staff member REALLY wanted to do their job and save as much money as possible for their Hospital because they received personal pride in doing a job to the best of their abilities? They were able to sleep well at night knowing that, in some small measure, they'd done their part for the Hospital. They had excelled in their job and (they hoped) that someone, preferably their boss, would notice how much they've saved the organization and reward them with a raise come annual review time. Do you remember those days?
Well, I'm here to tell you that those days are gone, gone, long gone.
At one Hospital I was in recently, I was told that a lot of the "holdups" regarding cost savings, increasing utilization of the GPO's agreements, existing contract compliance issues, standardization issues, etc. for the Operating Room were due to the Surgery Buyer. I discovered that she was making the bare minimum for a Buyer at my Hospital, yet wielding the powerful sword called OR Supply Purchasing. Yup, that's correct, EVERYTHING went through this Buyer. She was the only one allowed to meet with an OR vendor. She did all the buying herself, to include all receivings of stock & non-stock stuff. All invoices and invoice variances went to her to approve or disapprove (just about 100% of the variances were OK'd). Point of contact to the OR - you guessed it - this Buyer. Think that Materials Management was invited up there to provide any assistance at all? Think again.
My Materials Manager's gut told me that s-o-m-e-t-h-i-n-g just didn't quite add up. This was way, way, way too much control for somebody making as little as this Buyer was making. After all, I reasoned to the VP of Nursing, Materials Management can help the Buyer out with PAR leveling its stock supplies - maybe to the point of stocking the shelves during the night shift. Potentially, we could assist the buyer with contract negotiations or even its annual physical inventory count. "After all", I reasoned, "that's a lot of work for one person to do". "No way", she countered, "she's doing an excellent job by herself - she doesn't need your staff mucking up the waters". Wow - what an introduction!
Not one to be deterred, but one who ALWAYS trusts his Materials Manager's gut instinct, I set up an appointment to meet with the Supply God who goes by the title of OR Buyer. Just doing my job, I reasoned to this Buyer, as the new Materials Manager on the block to meet with all the heavy supply user Departments to find out what their concerns were. The Buyer looked at this meeting as an opportunity to vent regarding recent problems with my Receiving staff and the fact that they don't bring her orders up quick enough. During the simple interview, this Buyer ranted and raved about just about everybody in my Department - from my own incompetent Buyers (her term for them) to the nincompoops in Receiving (again, her term) to the uncertified and untrained Central Supply staff to the lazy Distribution staff (you guessed it) and the poor quality of our stock supplies. I think the only staff member she didn't complain about was my Courier Service. Maybe I caught her at a bad time.
Oh yeah, I almost forgot, our GPO came under fire ("They'll only award contracts to those suppliers who kick them back the most money") as did our Primary Med-Surg Distributor ("They jam the generic products they make the most money off of down our throats" and "They're constantly switching to cheap, off-shore manufacturers to make more money") from this silver-tongued orator.
I listened intently to her spout the venom she's been spewing for many years now, all the time nodding my head, taking copious notes and trying to look as sympathetic as possible to this poor Buyer's overwhelming plight at the hands of so many bad, poorly-intentioned prople. That's when the Buyer tripped up.
We started discussing one particular vendor's business with the OR, since they were a heavy user of the products that this vendor sells. Of course, this vendor wasn't the only one who sold these products, a common commodity. It's just that I was interested in why she chose the current vendor, as this was in direct contrast to the GPO-contracted supplier for that same commodity product line. There were many hundreds of thousands of dollars in compliance rebates at stake here, I reasoned to myself. There's just GOT to be a logical reason why she chose the incumbent over a contracted one - especially one which can save significant dollars for her O.R. (first) and the Hospital (last consideration).
(Insert hook through bait and lower bait into the water)
The OR Buyer thought about my question for a few minutes.
(Fish sees the bait dangling in front of them and swims up to the bait.)
That's when the OR Buyer sealed her fate.
(Fish zeros in on the bait and opens mouth wide enough to swallow the bait whole)
She mentioned to me that the vendor of her choice had provided a personal computer for her to use at home for no charge. This is because (she reasoned aloud) she wanted to place orders to this supplier when she wasn't on site. The vendor was also reimbursing her the cost of her monthly phone bill because (she reasoned) she needed to use her dial-up service to check up on those orders she just placed.
Yup, that's correct, this Buyer had held up the Hospital obtaining significant cost savings and quarterly incentive rebates from the GPO's contracted supplier in favor of using an illegally-obtained personal computer and having her monthly telephone bill reimbursed illegally, too.
We didn't need to look real far for some "low-hanging fruit" cost savings after that momentuous meeting. We started the wheels rolling to make sure that the Buyer not be in such a decision-making role ever again. Oh yeah - we allowed her to keep her job, her "free" computer and demoted her responsibilities in addition to having her report in the future to the Materials Management Purchasing Manager.
Now, normally, you'd think that she'd raise a holy stink about this demotion - after having a free rein in OR Purchasing for so long and wielding as much power as she did. As a matter of fact, she went along with the plan very readily once we read her a few facts in return for her full, utmost and utter cooperation in her downgraded role:
* We agreed to not inform the IRS about her "supplemental income" she received from the supplier to pay her monthly phone bill. This was income for which she failed to pay any related taxes.
* What she did is still illegal in all 50 states, and probably Canada.
* It's immoral and unethical - both contrary to the Hospital's Code of Ethics printed on the back of her ID badge.
* Something about Fraud and Abuse of Power, not to mention money laundering.
* The Hospital was ultimately paying many times more than they should have been for the same product line.
* Medicare would not be happy to learn that their Prudent Buyer Concept was breached - big time!
As a caveat, the guilty supplier admitted complicity in this situation, probably one of the last conversations we had with them before we pulled all their business and went with the GPO-contracted supplier.
Obtaining significant cost savings can be sweet, but Vindication is even sweeter!
2. And It Can Do Your Taxes, Too - "This Cath Lab Manager was adamant that Materials Management stay out of his department. No need to get involved with his purchases - they're all on a GPO contract and he has his own information system to manage it all down to the penny. Oh yeah - I think he OK's his own purchases and invoices, too. Man, if those statements I heard didn't set off a bunch of auditing fireworks in my brain! So, I made some time after lunch one day to stop by his area and pay this guy & his department a visit. He gladly gave me the $1.50 tour - even opening all the storage cabinets and pointing out where his consignment inventory was stored. He's basically had a few year's worth of experience convincing "Them, Up There" that he was doing a damn fine job managing his on-hand inventory. There's no need to count it annually, or even do cycle counts - why? He's doing a damn fine job managing it on his own, without anybody's help - just like he said!
Eventually, I got around to asking him what version of the software he was using to manage his inventory since, like he said, it all appears that he was doing a damn fine job managing it on his own. I asked this because we in Materials Management had just upgraded to the latest version of what I consider to be the hand's-down best Materials Management Information System out there (and there are many systems out there)! I wanted to get him connected to our MMIS and set up some very basic stock & non-stock ordering templates so he would have the ability to click, click, click to create an order and my Buyers would place it for him & handle it from there. We would also use our MMIS to electronically receive the goods, electronically verify pricing, electronically receive the invoice and and electronically match & pay the invoice. What a concept!
This scenario was met with a lot of "Oh no, no, no!" They had their own information system in place and it did a damn fine job managing and reordering their supplies. No need to hook it up to some other department's information system - it was intended to work as a stand-alone. Intrigued, I asked to see their information system in operation - because maybe we needed to replace our "state-of-the-art, multi-million dollar MMIS" with his preferred software. After all, I reasoned with him, if it manages his Departmental inventory as well as he says - managing the rest of the Hospital's inventory will be more of the same processes. Like taking their 650 lines of inventory and multiplying that figure by 20.
The Cath Lab Manager walked me over to the dedicated desk which had "their" software loaded on their pc; I booted up the dedicated pc. The program which came up on the screen, the same one which is touted as being as good as sliced bread, was the same popular program used by millions of pc users to manage their checkbook and perform on-line bill-paying. Basically, an earlier version of this software had been "tricked" into thinking that there were 650 "entries" into its "checkbook" and managed the "in's & out's" of these supply items/inventory as entries in its database. That's it - just a basic checkbook balancing program!
The very next day, I saw a coupon for $50.00 off the newest upgrade of this very popular program - if purchased from this office supply vendor. That made me think to myself - I wonder if he's using the Standard version or the Deluxe?
3. Oh - You Mean We're Supposed Plug Them In? - "One of the hospitals that I'd been consulting to was a big-time early investor in the then-hot, point-of-use supply dispensing cabinet technology. You know the manufacturer - they're pretty commonplace today, but back then these automated supply dispensers were a rare sight in the PAR supply arena. Seems that the hospital executives went nuts then - ordering literally every possible cabinet & option straight out of the manufacturer's catalog. Seems that if the Sales Rep said that they needed a cabinet everywhere - well dang it - we're going to have a supply cabinet everywhere!
One area that always lent itself well to these point-of-use cabinets was the O.R. - since this department, like all Nursing stock & non-stock supply locations, had a lot of spots that would be perfect for a couple of cabinets.
But - as to just how these babies got into the O.R. in the first place, excactly two per Suite, no one had absolutely any idea.
Turn the clock on the wall a magical 6 years forward. I've just started my new job as Director of Materials Management and I'd like to take a tour of the largest (and most expensive) inventory we've got within the four walls of the Hospital. So, being the good little servant, I change from my suit into the pajamas they call O.R. Scrubs and meet the Surgery Director in the sterile core. We're going to take a tour of each Suite so I can determine for myself just how much they have on their shelves and how poorly managed that inventory investment is. You see, the OR Director secretly thinks that her inventory is managed the best that it can be - after all, she's running a busy O.R. ("Which one isn't?") with demanding Docs ("No Kidding!") who want everything NOW ("BIG surprise there!"). So we began our tour at the back Suites and worked our way forward to the heaviest-used rooms. In each Suite, I see that there are the now-famous automated supply cabinets - 2 in fact for each room - and the cabinet's doors are wide open and these supply cabinets don't seem to be plugged in. Seeing these cabinets in each room, unplugged, lead me to wonder just what happened 6 years ago that prompted these extremely expensive supply dispensers to become extremely expensive shelving units:
- Chalk it up to the tremendous amount of paperwork required right after you buy these cabinets;
- Chalk it up to the late night partying the point-of-use cabinet folks did once the ink was dry on the purchase contract;
- Chalk it up to the telephone installation guy forgetting to call the Union electrician;
- Chalk it up to the Union electrician losing the work order and, instead, choosing to change a couple of light bulbs in the Nurse Manager's office;
- Chalk it up to the point-of-use Sales guy forgetting to call the Hospital telephone installation guy in the first place;
Whatever the reason, each O.R. suite had a bunch of point-of-use supply dispensing cabinets dropped off and shoved in any corner the nearest O.R. Tech chose. Each O.R. Suite had its own point-of-use brain, too - just to make sure that the purchase price stayed way up there. And, guess what, after all was said & done, nobody had gotten around to plugging any of them in.
Now, you know these O.R people - they can work under extremely stressful conditions with just about anything. So, these hardy souls just went about filling these empty point-of use supply cabinets chock-full with the usual assortment of stuff they need every day. Yup - just filled them right up. And, we don't want to be slowed down one little bit during a case - so let's keep those cabinet doors wide open. Nope - don't want to perform any extra steps during a case, don't you know.
Now what I saw when I took that tour of the O.R. were these rather shabby-looking supply cabinets crammed to the rafters with lots of stuff. Of course, I knew that these machines could be hooked up to our network & interfaced to our MMIS, but it would entail changing the attitude of the day-to-day O.R. staff - which would be my greatest challenge. After all, I was the first one to come by one of these expensive cabinets, bend down, grab the cord and plug that sucker in. All the while dreaming of the commission check the point-of-use Sales Guy received for suckering just one more, of many thousands of, hospitals into something that they quite clearly did not need.
Can you relate to any of the Horror Stories presented above?
Have any Horror Stories of your own to tell? Send them to us to be included in future Horror Stories columns.
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