OR Business Management

Building Structure for OR Materials Management

As hospitals enter the era of a more demanding CMS, added government regulation, and reduced reimbursements, the need to follow a business oriented structure in surgical services becomes essential. To support these changes, specifically in the OR, trends, fads, and archaic organizational structures must be eliminated. More importantly answering the question as to what role CS/SPD plays in the surgical service line answered. Various attempts to solve the issues of contracts, billing, and revenue capture provided for the creation of the OR business manager - a small attempt to unite the fragmentation of services. CS/SPD however continues to receive mixed support resulting in continued frustration for the industry.

On the other hand OR nurse managers rarely receive the essential support required in the management of supplies, equipment, instrumentation and resources. The tendency is to have OR staff fill-in part time when possible to manage sections of the inventories rarely keeping in line with standard inventory practices. This attempt generally results in higher inventories and stock outs when assigned staff leaves or go on vacation. This is more evident in small to medium hospitals where budgets are small and administrative has limited knowledge of the area. With CS/SPD fragmented between to managements the problems for the OR managers only increase.

Establishing the OR materials management to include both sterile supplies with surgical instrumentation is the first step resolving this issue. However, there is more to the service then most recognize or understand. Surgical services encompass the largest and most diverse set of inventories and services which no other department in a hospital must manage. The following list provides the foundation of just how enormous the infrastructures for surgery procedures are. This list also has hidden sub-categories requiring additional knowledge and management skills to insure safe and positive outcomes.

Sterile Supply Inventory Management
Mobile Equipment Inventory Management
Instrumentation Inventory Management
Consignment Inventory Management
Anesthesia Equipment Management
Surgical Table Inventory Management
Disinfection and Sterilization
Case Cart Systems Management
Charge Capture
Environmental Service Management
Waste Management
Budget Reporting
Surgical Value Analysis
Capital Budgeting
Preference Card Management
Vendor Management
Repair Management
Hospital Mobile Equipment Management

In today’s hospitals there are two staffing groups driving services in surgery. Once you understand the two and how they function in their specialty you’ll see how the separation of management responsibilities becomes so critical. Let’s take a quick look at their respective roles.

Patient Care Providers: This first group is composed of nurses, scrub techs, anesthesia techs, first assist, and depending where you live, a number of other licensed or certified professionals. Their expertise is driven by direct patient contact and outcomes. Communication and teamwork with one another is critical in this group to insure positive out-comes. They however rely on a second group for service and material related support. They participate in room turnover more importantly focusing on room set-up which in itself requires specialization. Knowledge in this group is much more technical with little room for error requiring them to be one step ahead at all times ready to respond to change in an instant.

Service Providers: The second group consists of some certification, but their education largely requires hands-on and/or on-the-job training. They may at time assist in patient transport, but are not directly responsible for patient outcomes. Their expertise requires specialization in the materials service line which provides a supporting role to direct patient care givers. OR materials management service providers insure the proper flow and steady delivery of goods and services from cleaning the floors to delivery of sterilized instrumentation. The second group also must think ahead planning in supporting roles so as not to cause delay to group one. Now that we’ve looked at the division in roles of the surgical services providers, let’s look at the roles of the management that would support a materials management structure.

OR Nurse Manager: The split allows OR Nursing management time to develop and manage perioperative service lines; more importantly freeing up time to build relationships with surgeons, anesthesiologist and staff. Additionally OR nurse management must build relationships with services outside the OR, in departments such as: PAT/POH, PACU, Radiology, Lab, Surgical Floor, ICU, PEDS, and the Emergency Room. Also, OR nursing leadership and staff are not completely eliminated from dealing with materials related services. There involvement should be with assigned serivce line supply support. Managing mobile cart support, suture and helping completed simi-annual inventories just to name a few.

OR Materials Manager: The experience required for OR materials leadership must include a strong materials, business, service, and production background. OR materials management is a non-nursing role based on extensive understanding of multiple materials computer systems including the OR scheduling system and preference card management.

Building Relationships: Relationship management is key to the success of the OR nurse manager due to dependency of so many services throughout the hospital. Their time should not be spent dealing with daily materials functions, budget variances, instrumentation/supply issues, and vendor management.

Once established both OR managers must collaborate as a team to attend as many of the same committees and meetings involving surgical services as possible. Department meetings must include both managers and staff uniting the entity rather than separating the two services. OR leadership will attend surgeon committee meetings, present budget, block utilization, waste, and turnover reports.More importantly, the OR Nurse Manager and OR Materials Manager must directly support each other in a homogeneous relationship.

The exposure provides valuable education necessary to support care givers for both leaders. By attending such meetings as Department of Surgery and Anesthesia physicians will put names to a faces and an understanding will begin to develop of their needs and answer to misconceptions. The medical staff of most if not all hospitals have little understanding and knowledge of hospital operations until you educate them. The relationship gained here is invaluable resulting in higher levels of trust and understanding.

OR Materials Leadership: The OR materials manager like the OR nurse manager will have supporting relationships outside the department with hospital materials management and various other patient care areas. This means the OR materials manager must work with the hospital materials manager to insure compliance with contracts and vendors. The hospital purchasing department will continue to provide purchase order placement, contract compliance with GPO, along with warehouse receiving/delivery, and primary vendor compliance.

It should not be the intention of OR materials management to create a second purchasing department; there are controls that need to stay in place to support accounting and accountability to the CFO. However, you will need a purchasing agent who will require extensive knowledge of the purchasing processes, supply ordering, capital equipment processes, contract compliance, vendor management, and inventory management.

Hospital materials management is reliant on large scale delivery systems institution wide requiring its own set of skills. Throw in an off-site warehouse and you really get an understanding of what their role is in dealing with supply logistics. Their focus is high volume low dollar hospital wide supply delivery with additional non-warehoused deliveries to the Lab, X-Ray, etc. Whereas OR materials manages focus is high dollar low volume dealing with a much more volatile supply system with additional supporting inventories and high expense.

OR materials management focus is the entire perioperative service division supporting the largest resource consumption department in today’s hospitals. CS and SPD provide additional support to other hospital patient care givers such as the ER, X-Ray, RT, and ICU with low volume specialty supplies, equipment, and sterile instrumentation.

This is where the confusion generally comes in with CS and hospital materials management. Centralized sterilization and decontamination supports all patient care areas with small scale instrumentation and large scale cleaning and disinfection of mobile patient care equipment; IV pumps and code carts to name a few. Decentralizing this process adds cost and reduces the specialization required to manage this extensive hospital- wide-used reusable medical equipment inventory.

It may sound like a lot, but it becomes second nature when you look at the bigger picture. As hospitals grow so do hospital material issues. The separation allows both managers to focus on the overall supply chain system. For OR materials this requires a more focused specialized approach due to the vast amount of resources required to operate a successful OR materials program.

OR Materials Management: As indicated earlier OR materials management encompasses a number of disciplines associated to several supporting functions and inventories. We start by looking at the surgery operating budgets and inventory values; in a small to medium hospital they can exceed ten million dollars. The number of sterile disposable supplies hovers around three-thousand individual items with an average inventory value of two-million in your typical 350 bed hospital. Surgical instrumentation set inventory will be anywhere from six to one-thousand sets totaling over five million dollars.

Additionally, inside one-thousand instrument sets lives some 25,000 or more single instruments with QA and repair requirements that rarely receive any attention until something goes wrong. Implant purchases will easily exceed five million dollars in a 350 bed hospital completing 11,000 surgeries annually.

Your average OR can support five or more different surgical tables each costing over $50,000.00 having numerous set-ups and attachments. There can easily be 100 different mobile electrical medical devices with cables and cords that require staff and surgeon education, along with bio-medical support and storage; adding an additional one million dollars or more.

Inventory Management: There are four types of inventories: disposable sterile supplies, implantable supplies, surgical instrumentation, and mobile/fixed equipment. Each of these inventories has sub-categories with additional requirements and regulations; storage conditions, recalls, BI monitoring, tracking, billing, outdates, QA, and preventative maintenance.

In an OR materials management model the four inventories are supported by staff in four service areas; central sterilization/decontamination, supply processing, OR environmental services, and supply inventory management. Additionally these inventories are supported from in-house bio-med, contracted services for repairs, and preventative maintenance. As your hospital grows so will these expensive inventories resulting in the need for specialized management and greater attention.

Surgical Supplies: Disposable sterile supplies require the OR materials manager to establish the OR value analysis with reports going to both the Department of Surgery and Anesthesia. There are eight different supply categories supporting their respective service lines. The OR materials manager will work directly with vendors to standardize supplies and ensure surgeon satisfaction. Opportunities to streamline supplies greatly improve when the sales representatives are provided a liaison between them and the surgeon whose primary goal is to eliminate waste and improve out-comes.

This development removes the OR nurse manager form the never-ending interruptions allowing surgeons to become aware of contract compliance and best practice. A good example for standardization is disposable laparoscopic trocars and supplies. Currently there are four companies producing these products. Each has niche items; however, their entire product line is often incomplete. This makes contract compliance seem impossible to meet when surgeons pick-and-choose resulting in higher inventory management cost and staff confusion.

By working directly with an endo-surgical sales representative OR materials management will able to identify significant savings while educating surgeons to the latest technology. Supply savings are not just made by buying the lowest priced item but rather looking at all the associated costs. The relationship gained from having the ability to work directly with the sales representative and surgeon provides support to a very expensive and growing endo-surgical service line to name just one.

Implant Inventory: Implant inventories pose numerous challenges in that there are several categories: orthopedic, electronic, stents (vascular & urological), uterine slings, mesh, adhesives, etc. Each requires billing and tracking along with recall and product alerts. There are two types of orthopedic implants, consignment and purchased requiring additional attention with a number of costly pitfalls associated to supporting reusable instrumentation.

All consignment instrumentation sets require sterile wrap for packaging resulting in costly disposable operating expense easily exceeding $50,000.00 annually. This somewhat small chunk of operating budget gets larger when not properly managed. Poor handling of in-house sterilized consignment instrument sets by sales representatives and staff results in re-sterilization adding to the problem while increasing room turnover and flash sterilization.

The consignment orthopedic implant inventory alone will be in the millions of dollars supported with surgical instrument sets numbering in the hundreds. Non-consignment implants grow out of control when sales reps are allowed to re-stock and re-order their product line. Replacement costs associated to lost instruments due to poor room turnover procedures can exceed a $25,000.00 annually if not properly managed.

Loner and shipping fees often hidden from OR nurse managers can add up quickly exceeding $40,000.00 or more annually if allowed. Shipping fees can also affect the bottom line hitting $30,000.00 annually in a rural hospital when sales reps refuse to keep instrument sets in-house and surgeons are not included in the decision. Once established, OR materials management works directly with the orthopedic sales representatives and surgeons to streamline and improve out-comes while reducing expense.

Tracking “opened but not used” implants can be an eye opener with losses easily exceeding $1,000,000.00 annually; tracking and reporting minimizes these losses. Reporting this at surgical committees brings attention to an expense rarely addressed directly to surgeons. Once surgeons see the impact they have on the bottom line their response tends to be more supportive and prudent.

The possibility for standardization with orthopedic implants greatly improves when surgeons are made aware and administration takes a more proactive role in dealing with the large number of implant companies. Operating expense associated to hip and knee implants can no longer be ignored with annual cuts in reimbursements of Medicare tax dollars. Once you bring all three parties to the table savings are made in a number of ways associated to direct and indirect handling costs. OR nurse managers do not have the time necessary to address this let alone deal with directly.

Surgical Operating Equipment: An inventory often overlooked is the sterilization and decontamination equipment supporting instrument turnover. Between the OR and CS, the expense for capital equipment, service contracts, repairs, and disposable cost will be in the millions. Routinely CS is forced to use the lowest bidder separating them from the OR resulting in two or more different service contracts with competing vendors increasing overall operating expense.

Disposable supplies and repair parts expense becomes fragmented resulting in higher operating costs. Future buying power is reduced and standardization is lost. By standardizing to the STERIS Corporation an OR materials manager can insure cost reductions in a number of ways. Their expertise covers both areas with service and educational support. Here you have a company that covers all capital and operating expense aspects for OR materials services, OR lights, tables, integration, sterilizers, instrument tracking, endoscope processing, decontamination equipment, disinfection chemicals, sterility assurance, and service.

Included in their offered services is the ability to web-link sterilization equipment to computerized corporate services allowing for faster response to equipment failures before you even know you have one. The future of this service can only improve and expand reducing downtime and future service calls. One vendor for one source eliminates time and confusion while supporting a service group. Standardizing to one company provides a bargaining chip for lowering service agreement operating expense with multi-year contracts providing additional early sign-on discounts. OR and CS expansion projects provide additional savings opportunities when standardization between the two are present.

Instrument Management: With STERIS comes the ability to add in Censis computer instrument set tracking system allowing additional potential for future negotiations. Instrument tracking systems should be mandated for all central sterilization departments nation wide - no exceptions.

Even in today’s OR’s you can still find count sheets written in Word and Excel, (or my personal favorite) hand written count sheets with little attention to standardization or detail. Often surgical instrument sets have numerous vendors represented on one instrument count sheet with little standardization.The enormous cost of this practice increases errors by CS staff resulting in instrument set downtime; additional back-up inventories requiring on-going operating expense, increased flash sterilization, and delays to surgery.

Having standardized count sheets with the ability to track instrument sets, employee productivity, biological monitoring, repair tracking, with web-based back-up of computerized records is fast becoming a requirement. CMS and JCAHO are paying close attention to sterile processing and instrument tracking as well as the FDA adding additional attention to following manufacturer’s written instructions. We can no longer ignore or allow untrained individuals to manage sterile processing with the upcoming challenges to control expense and insure patient safety. Another example is the ability to support one primary vendor for surgical instruments attached to a repair service.

Combining Cardinal V. Mueller with Care Fusion On-site repair provides additional instrument support and standardization improving instrument management overall. The education one receives from an experienced instrument repair provider is priceless to the CS process. Management of the operating expense for surgical instruments needs to be under the direction of the department that assembles, sterilizes, and replaces instrumentation.

The same holds true for making the determination for how many sets support the surgical set inventory. CS departments need the ability to increase the instrument set inventory through operating budgets, not capital purchases, having the ability to respond to current demands, changes in volume, and new surgeons. OR leadership support for this is often overlooked and devalued due to lack of administrative understanding with the service. OR materials management however gain knowledge and have the ability to correct this when they are properly structured.

OR Environmental Services: Operating room environmental service is challenging to say the least, yet under the leadership of a service oriented team the functions are easily managed. OR EVS staff require serious support given their ability to improve the overall sterility assurance associated to OR suite cleanliness. These employees are often not included or supported in the manner they require.

From room turn-over to patient transportation, their impact is greatly under appreciated.Properly trained operating room assistants keep floor maintenance under control performing minor repairs on a number of routinely used pieces of equipment. They are one more part of the OR materials service that OR nurse leadership should not be spending time with.

Shift reporting is essential OR EVS staff; communications with one another between shifts address daily needs, including additional maintenance requirements often overlooked until CMS shows up. Included in their scope of service is room turnover, floor care, terminal room cleaning, waste management, scrub management, mobile equipment management, minor repairs, limb holding, and table terminalization just to name a few.

Charge Capture & Preference Card management: An additional service group routinely ignored is the charge capture or data entry personnel. Having charge capture staff directly in the OR with the ability to audit and input billing the day of surgery greatly improves data capture and accuracy. They have the ability to review nursing documentation correcting mistakes and reviewing daily billing on the same day of surgery, not days later when nursing staff is not available.This small group of OR materials management staff directly impacts charge capture allowing for accurate post case charge analysis. Add in a preference card coordinator working with charge capture to address corrections to billing and card management. Again, another area often overlooked due to poorly structured perioperative surgical services.

When preference card and billing is managed together cost per case becomes believable and reportable. Post case data entry offers the ability to account for what is pulled, used, and wasted for each surgical procedure providing utilization reports identify waste and cost per case. Implant tracking can also be added allowing added continuity. Additionally, the scheduling office combined with billing adds even more stability.

The Big Picture: When you look at the overall needs associated to managing the largest expense consumption division in hospitals today one can see just how diverse management requirements are. Healthcare is under fire and much in need of re-structuring to address the overwhelming expense. The need to focus on waste and wasteful practices associated to out-dated management structures simply cannot be ignored.

Patient care departments must be structured in a service orientated manner supporting a standard of care from hospital to hospital - not distracted by out-dated poorly structured historical practices.As it stands today if you have been in one hospital…then you have been in one hospital, no two are alike; nor is their structure. It’s time to embrace a business structure encompassing sound service orientated support to patient care givers and their families. Selling this to OR leadership, more importantly hospital administration may not be as hard as one thinks with the up-coming challenges’. However, you will need extensive knowledge of materials processes and service groups, it can be done.

To see this management structure visit Yuma Regional Medical in Yuma Arizona. OR Materials Manager Tim Brooks is supported by the VP of Patient Services Karen Jensen with direct support from the Administrative Director of Peri-Operative Services Kay Haywood and co-partner Julie Lubecki Director of Surgery. Together they support the structure and process put into place fives years ago.

Lastly, with changes to the OR leadership structure come opportunities furthering positive patient outcomes. One overlook yet valuable group is our patients and family members, pre-and-post-case. Contact with this group can have positive outcomes for the hospital and community. OR nursing leadership will greatly improve relations with family simply by randomly spending a small fraction of their time visiting patients both pre-and-post surgery once freed from all materials functions.