Healthcare has no shortage of acronyms and abbreviations, from A1C to ZULU (that’s Greenwich Mean Time, according to the Centers for Medicare and Medicaid Services). Here’s a new one you may not know: PIR. That, as coined by Medline Industries, stands for perioperative inventory rationalization. And it’s Medline’s way of helping hospitals better control the supply and storage of products they use in surgery.
Hospitals, after all, are big businesses, and they utilize a significant amount of medical supplies to deliver care. Managing and controlling that supply chain is critical for both the delivery of excellent patient care and for keeping costs down. The PIR program is intended to position the company not just as a provider of surgical products but also as a partner in supply chain management to its customers.
Medline, based in Northfield, Illinois, is the largest privately held manufacturer and distributor of medical supplies, providing products, education, and services across the continuum of care with offices in twenty countries. In 2016, Medline reached nearly $8 billion in overall company sales.
PIR has been in development for two to three years, with several programs implemented across the country. “The timing is perfect,” says Ron Evans, Medline’s market director of sterile procedure trays (SPT) perioperative projects. “There is a lot to gain by attacking the inventory management process, which has taken a back seat, relatively speaking, to a focus on unit price. The purchase price of a product continues to be critical. However, customers are realizing there are significant savings to be achieved when proper focus is placed on the supply management process.”
Robert Jones, director of supply chain services, says that Medline’s supply chain optimization team is about managing people, processes, and technology in the supply chain. “We offer inventory management technology that can support the chain of custody of any product, from loading dock to patient,” Jones says. “This gives visibility into where the product is, what patient it went to, and it automates the billing process. It ensures the hospital is capturing items it uses for procedures and tags it to that patient for proper billing.”
Many healthcare facilities don’t have the internal talent to manage supply chain processes, Jones says. “Medline can supplement their talent with labor or by outsourcing a whole supply chain department. We offer an outsourcing solution to eliminate inventory management as a hospital core competency.”
Product management often starts with the products themselves. Medline distributes thousands of products from hundreds of manufacturers, including its own. So reengineering a product, such as SPTs, can begin the process of inventory control.
“Sterile procedure trays have been around for many years,” Evans says. “Medline has been in that business a long time. We believe strongly that when we analyze hospital operating room practices, our efforts are to help them uncover situations where products are wasted.” Medline will work with its customers to redesign SPTs to eliminate waste and minimize the time required to order, receive, open, and use those products.
When a customer needs a new SPT program or wants to revise its current program, Medline will request a surgical procedure report that reflects the type and volume of surgical procedures performed over a twelve-month period. It analyzes the entire spectrum of perioperative products, including reports on purchase order history and the most recent inventory count.
Through that data, Medline can uncover products usage, not to mention products that are no longer active, move slowly, or are stored in multiple locations without a consolidated approach to inventory management.
The surgical procedure data is transformed into a procedural matrix that groups procedures together with similar product usage. And Medline sends a clinical nurse to the client to dig deeper and find other areas to cut waste and improve product control.
“We sometimes find inappropriate use of certain custom packs. We find very often they pick additional components and, depending on the specialty, they are wasting other components,” Evans says. If the client has sufficient volume, Medline builds a program for that specific category to be more efficient.
“We give our customer, once the new specs are devised, a list of components and the associated volume, so they can lower the volume of inventory they carry. There is still need for some backup, but we can radically reduce shelf stock,” Evans says.
“Some customers believe the answer is fewer packs,” he says. “We peel the onion back and show them how that can also lead to wasted components and a less efficient case-pick process. It impedes their ability to set up and turn over operating room suites, which is a key measure of operating room productivity these days.”
SPTs are a core focus within the PIR process, but the concept applies to the entire perioperative supply universe. Anything from sutures to surgical gowns to drapes to catheters—there are a a lot of different disposable medical and surgical components that may eventually be controlled with PIR, Evans says. Medline’s blend of analytics based on usage, logistical suggestions to improve efficiency, and re-engineered packaging is a “three-way combination that makes a major impact on the daily supply chain process,” he says.
Medline embraced PIR as part of its overall effort to change how it interacts with its customers. “The company made a conscious decision to move our customer relationships to a more solutions-based approach,” Evans says. “That is more beneficial to our customers, and we feel that it is the appropriate response to the pressures our customers face in the marketplace. We can identify cost savings early to make sure it is worth its weight in financial gains. There is a market opportunity there, a pain point there, and the reception has frankly been more positive than we anticipated.”
Jones says that half of Medline’s customer spend now is as a prime vendor. “That is a committed relationship to Medline. We become not just a product provider but their distribution partner,” he says. “The expectations of a prime vendor are significantly higher, and we needed to enhance our ability to support those customers. We want to be their supply chain partner.”