CHAPTER # 5
1. WHAT AM I BID? You knew, eventually, that something like this was going to happen. Apparently, the market for Medical Supplies is huge on EBAY and that represents a major opportunity to make some real money. And - oh yeah - all that supplemental cash is not reportable as taxable income to the IRS. So, you never need to tell the Feds how much you're actually earning on EBAY, just so long as you don't have a storefront or sell the stuff full-time.
It just so happened that an enterprising Materials Management worker from the Storeroom got in cahoots with another enterprising Materials Management worker up in the O.R. to sell instrument trays on EBAY. Yup - the whole tray. Just took a digital picture of a tray and shot that sucker up to EBAY after writing the sales ad. One of the big sellers was an amputation tray - complete with saws! It probably didn't matter that the top of the tray had the words "Property of Hospital XXXX" or that it also said that it was a "Custom Tray". None of the buyers really noticed, just as long as the tray they purchased was as advertised.
Another hot commodity was leather restraints. They sold a lot of those around Halloween time. The old glass syringes were another fast-seller. After all, who'd want to pay a princely sum for one of those cheap, plastic jobbies when an actual glass syringe will do the job quite nicely?
As if noticing the Hospital's name on a tray wasn't enough to do these two creative gentlemen in, the Storeroom guy actually used one of the Buyer's computers to check on his active auctions while he worked the weekend shift. Stupid him, he accidentally left the computer on when he went home for the day. Did they get fired then? Not a chance.
What really did the duo in was when one of them was at a local garage sale, looking through another guy's junk. One of them mentioned the name of his web site to the guy holding the garage sale. This whole conversation was overheard by a nurse, who happened to also be at the same Garage Sale and who also happened to work at the same Hospital XXXX as the big mouth. First thing Monday morning, she trounces down to the VP of Nursing's office for a little web site browsing. Sure enough - there were some surgical trays for sale on EBAY with the Hospital's name prominently displayed in the tray.
Both gentlemen were promptly led out of the Hospital in handcuffs."
2. YOU MEAN I CAN'T TAKE CREDIT FOR THIS SAVINGS? "The Cath Lab has been managing their inventory - meaning maintaining it on their shelves, reordering up to the PAR that they established, receiving their own goods and putting them away. Not the best of scenarios, but it was the ship that ran itself. They never ran out of supplies, the Docs never complained and Administration's phone never rang with a supply headache.
I was the new Interim Director of Materials Management and wanted to do a physical inventory in the Cath Lab, with the intention of turning that stock from being expensed to sitting on the General Ledger as a booked asset. That way, I'd have to maintain a balance of these goods & count them every year. The increased asset may also help our books and our asset position one-time.
So, I sent my Assistant Director to see what they had on their shelves. She came back with an armful of expired catheters & guide wires - nearly a quarter of a million dollars of expired products. Finance freaked out, because this inventory wasn't on consignment - we'd have to eat the expense. Also, the Sales Rep wouldn't take any of this old stock back. After all, they'd gotten their free trip to someplace warm for the sale; all sales are considered to be one-way.
About two weeks later, I heard that the Director of the Cath Lab got a raise to significantly more than what his peers received. I was puzzled, so I asked around the mahogany halls of Administration what he did to deserve such treatment. He was quoted as telling his boss, the VP of Operations, that he had reduced his on-hand inventory $250,000 - nearly four times what his annual target called for. He was a hero in the eyes of Administration, and Materials Management even helped verify the amount! Some guys just NEVER get it, do they?"
3. INCREASED INVENTORY + OUT-OF-CONTROL COSTS = HAPPY DOCS
"I was called in to do my typical Supply Chain Operations Analysis in a small Hospital in the East. I usually collect data then follow up the data with a few questions so that I make sure my assumptions are correct and my recommendations are applicable & implementable. The Pharmacy Department seemed in order: inventory was on par with my benchmarks, turns were reasonable and the GPO for Pharmacy seemed to be doing a pretty good job saving them money. Their P & T Committee met monthly with good financial results and their Formulary was relatively closed and available on-line and printed on little cards each physician could carry in their lab coat pockets. The link to the pharmacy wholesaler was complete for on-line ordering and the Department met every-other week with a Sales Representative, who also handled their relatively small amount of returns. Hmmm - weekly cycle counts, bi-annual physical inventories with minimal exception variances. All pricing handled within their Pharmacy Information System. Daily double-checks on the vault which holds their Schedule 2 narcotics. Overall, it seemed like Pharmacy's Supply Chain was in order.
Same thing with Diagnostic Radiology, Materials Management warehouse, Lab and some of the diagnostic modalities of CT, MRI, Nuclear Medicine & Ultrasound. Surgery's on-hand inventory was out of whack with reality, but which Surgery's inventory isn't? Overall, their turns were just O.K. - leaving some room for improvement. The Cath Lab was another thing still. Their turns were way less than 1.0 - meaning that they had over a year's worth of stuff on their shelves. Their on-hand inventory was well over $9 million dollars. Again, this was a teeny, tiny Hospital! This amount of inventory in the O.R. was, hand's down, the most I'd ever seen for any O.R. - in any Hospital - of any size! It was criminal to keep that much on their shelves. When I asked the CFO why the inventory was so high, he mentioned that the Cardiologist & Vascular Interventional Docs were thinking of buying a local struggling Clinic and using it as a Surgi-Center for their procedures. This act would spell death for the Hospital Cath Lab's business, so, in return, they were allowed to get & use whatever they wanted at this Hospital. When I pointed out the cost of maintaining that physician satisfaction, I was told by the CFO that this was the cost of doing business with these Docs. Sometimes, the devil you know is better than the devil you don't."
4. SOUR GRAPES "As I was starting my new job as VP of Materials Management, I wanted to see what "Major" contracts had been signed by the Hospital in the last year. That way, I'd get a feel where the facility was committing their capital and consumable dollars in the next fiscal year's budget. I was given the usual assortment of capital agreements and lease-rent deals signed by Finance and reagent rental agreements (with "Free" capital equipment attached) signed by the Lab. I found a replacement CT scanner purchased by Radiology and the usual assortment of PT equipment, Anesthesia machines, ventilators, replacement beds and other stuff. That's when I came upon the Dietary contract. Not only was it an agreement to provide management of the department, but some select staff, training and the use of the vendor's GPO. Hey - wait a minute! The hospital uses its own GPO and our committed use of that Dietary Program has always equaled ZERO. A detailed review of this Vendor's agreement identifies that they (the vendor) are entitled to receive and KEEP any and all incentives, rebates, special pricing discounts, etc. that they would receive by using their own GPO's agreements for purchases made on behalf of the Hospital. I figured that the amount of these "lost" rebates could be huge, based on the annual amount of purchases the vendor makes for us. After all, we'd be the ones who'd be losing out on all those rebates! After much dilly-dallying with the vendor and many calls to Vendor Corporate, an addendum to the contract was drafted and forwarded to the Vendor Regional Vice-President to sign. In return for signing the addendum, Vendor Regional Vice-President wanted to - are you ready for this - bill us $93,000 annually for the rebates and incentives they'd lose (meaning NOT going back to them) by us pulling away from their GPO in favor of us using our own GPO. Imagine that! We'd be charged something for receiving nothing! How did we get around that stubborn and greedy Vendor Regional Vice-President and the stubborn and greedy Company? I called Mr. Regional Vice-President and mentioned that I was prepared to delete his 7-year contract and that he can go ahead and bill us for his "lost" incentives & rebates but that we're not going to pay them anyway. The nerve of some people! Score at the end of the phone call: Hospital = 1, Greedy and Stubborn Vendor = 0. Have a nice day!"
5. SOUR GRAPES (and I mean that literally!) - PART 2 "I've always said that it's important to never trust an outside contractor in your Hospital, whatever their ultimate job to be performed is. I, once again, proved myself correct during a recent incident with our outside, contracted Food Service Company. They were responsible for creating the menus for specialized & regular patient meals, special functions and ordering for the Cafeteria and Coffee Shop. It seems that they liked to use the Hospital to "dump" products, because, after all, we would eat anything and we had such deep pockets that no one would notice when junk crossed their plates. They may have even been in cahoots with the local food service provider, who was preparing to move to a much larger distribution facility and needed a place to offload all his "junk" and marginally-outdated food instead of transporting it to the new DC. We're talking common, every day staples that probably nobody would ever notice that the expiration date was last week. Well one day, the Big Cheese wanted to hold a meeting and his Secretary filled out the usual paperwork to have the breakfast catered by our Food Service Company. This was a meeting with select surgeons set for early in the morning, so the food had to get to the Conference Room well ahead of the meeting to allow for proper set-up and presentation to occur. About 15 minutes after the food was to arrive - and didn't - the Secretary called down to the Food Service Supervisor wondering where the catered food was. After scrambling through some papers, the Secretary announced that the request was misplaced (hint - that means that this request was lost) and that the order would be filled "right away". Double Hint = this was problem #1. Would the Secretary be coming down to pick up the tray and serving it herself? They were short-staffed and could not spare anybody to fulfill that function. Double Hint = this was problem #2. "Sure" the Secretary said, so she came down, picked up the tray and laid it out for the surgeons to feast on. Double Hint = this was problem #3 and the last straw. Apparently, the carrots were desiccated to the point that they had shriveled and turned brown. The broccoli was wilted. The Melba toast to dip into the dip had turned soggy and the dip itself had a fine green layer on top that even the head of Pathology couldn't figure out what spores were growing there. What a mess! Turns out that Food Service apologized profusely and even offered to cater their next function for no charge. This solution was too little, too late as the Secretary had put into place plans to use a local service for catering their next function. After all, she had faced 34 angry and hungry surgeons and didn't want to see any of their masked faces staring down at her if she was ever unlucky enough to require surgery."
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