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Vendor agreements offer cost savings for cardiac catheterization
Insights
Implementing a prime vendor policy helped St. Joseph's Medical Center control cath lab expenditures. This strategy involved careful inventory management and vendor selection, leading to cost savings through consignment stocking.
Area of Science:
- Healthcare Management
- Supply Chain Optimization
- Medical Economics
Background:
- Hospitals face pressure to reduce costs while maintaining supply quality for clinical staff.
- St. Joseph's Medical Center experienced rising expenditures in its cardiac catheterization (cath) lab despite stable activity levels.
- High-cost items like balloon catheters represented a significant area for potential cost savings.
Purpose of the Study:
- To identify strategies for controlling increasing hospital supply expenditures.
- To evaluate the impact of a prime vendor policy on cath lab supply costs.
- To improve inventory management and reduce waste in a hospital setting.
Main Methods:
- Instituting a prime vendor policy for cath lab supplies.
- Actively involving materials management in supply selection and inventory control.
- Engaging in a consensus-based vendor selection process with physicians.
- Exploring inventory management strategies such as consignment stocking.
Main Results:
- A single prime vendor was selected after a thorough evaluation process.
- The prime vendor policy facilitated the arrangement of inventory stocked on consignment, where payment occurs upon usage.
- Potential for reduced vendor discounts in consignment agreements was noted, emphasizing the need for initial invoice price optimization.
Conclusions:
- A prime vendor policy can enhance vendor commitment and offer advantages like consignment stocking.
- Strategic inventory management and vendor negotiation are crucial for cost containment in hospital supply chains.
- Smaller facilities can leverage partnerships to access larger purchasing agreements and improve their bargaining power.
Abstract:
Hospitals continue to search for ways to save money at the same time they provide their physicians and clinical staffs with the variety and quality of supplies needed to do their jobs. St. Joseph's Medical Center in Stockton, Calif. watched expenditures for its cath lab increase while its activity stabilized. They looked at their high-volume use of balloon catheters, says Gary Boyd, service director. At a cost of $600 to $700 apiece, it made sense to carefully manage their supply. Choosing a prime vendor was the first step in controlling inventory. Materials management, which had previously had a hands-off policy in the cath lab, took an active role in determining choices for this product. Through a lengthy selection process, medical center management and physicians reached a consensus for a single vendor. Having a prime vendor policy may increase the vendor's commitment to the hospital and provide added advantages. For St. Joseph's, selecting a prime vendor has better positioned the hospital to arrange for inventory to be stocked on consignment: the vendor owns the shelved supplies, which the hospital pays for only as they are used. However, some vendors may reduce their discounts when they enter into a consignment agreement. The best way is to get the maximum discount on the invoice price first, and then work with the vendor to manage inventories at the lowest level possible. Smaller facilities have less leverage and less flexibility, but they can often piggy-back onto large bargaining agreements by partnering with a larger institution.