Finding and Creating Efficiencies

Shortage of needed surgical supplies, surplus of capital equipment, and inefficient identification of end-of-life items can wreak havoc on a hospital’s finance and operations. Taskedwith reducing costs and improving inventory efficiency, Jyoti Upadhyay, MD, CPE, FACS, FAAP, used the Toyota BusinessPractice Model to develop an effective ordering system and establish an accurate budget at a Norfolk, Virginia, hospital.

You headed up a project in the hospital using the Toyota model of problem solving to address financial responsibility for surgical instruments/inventory. What did that initiative entail?

Many high-dollar capital equipment and consumable supplies remained in stock at the hospital’s main operating rooms. In FY2017, capital inventory of $3 million was recorded in stock. Verification of capital equipment and identification of end-of-life items and service contracts were lacking. This led to inaccurate annual budgets for surgical capital equipment/consumable inventory purchase.

As the elected administrative surgeon team lead, I directed a cohort of 15 people, including nine physicians, to evaluate the capital equipment/consumable inventory in the main operating room (MOR) over a one-year project life cycle. I used the Toyota 8-step model to identify, label, and update all contracts on inventory. This led to the development of a systematic ordering system to stock PAR supplies and used end-of-life service contracts to create a budget for one, three, and five years.

Was the goal of the project to eliminate bottlenecks, use metrics, make smart improvement decisions, or increase cost savings?

The MOR historically has a surplus of capital equipment. Purchases are urgent based on need while other products remain on the shelves unused. The proper inventory is not available at the time of surgery, resulting in surgical cancellations and inefficiencies.

The ultimate goal was to correct the amount of consumable stock/equipment available and to create a standardized system to track/provide items when needed in the MOR. The steering committee wanted to have a cost savings of at least $250,000 annually and a system that indicated how and when to order consumable surgical stock.

Our co-management team was tasked with reducing cost and improving inventory efficiency of surgical capital equipment in addition to surgical consumable supplies. We were given a measurable target to define success.

How did your team engage in the process to determine likelihood of success (or failure)?

The eight steps in the Toyota Business Practice Model are: 1) clarify the problem; 2) break down the problem; 3) set a target; 4) analyze the root cause; 5) develop countermeasures; 6) see countermeasures through; 7) evaluate results and processes; and 8) standardize successful processes.

To clarify the problem (Step 1), the team labeled all capital equipment, recorded all consumable supplies, noted quantity of each supplyitem, and noted the end-of-year contract for all equipment. This information was put into spreadsheets. This data collection/analysis phase required manual work and data interpretation. It became clear that the inventory available was not well-known or documented historically and that an alert system for equipment that needed to be replaced was not in place.

To break down the problem (Step 2), the team began by itemizing all capital equipment and quantifying all consumable supplies. More than 10,000 pieces of capital equipment were identified and labeled. The end-of-life contracts and  total  number of all consumable supplies were obtained, gathered, and analyzed.  We then identified which surgical services used the particular equipment/supplies and researched the frequency of equipment use and product shelf-life.

Through measurable surveys, actual visual observation via Gemba walks (observing the processes like one is a fly on the wall; not saying anything but rather recording all the steps of the ordering processes), and strategic communication, the team got a better understanding of supply issues. The information was divided up by clinical surgical specialties, unveiling which services had the highest cost items so we could undertake more strategic interrogation of the supplies/equipment use/processes.

Immediately, certain high-volume, high-cost items were identified, including cochlear implants, which the ENT specialist rarely used. The most specialized physician for cochlear implants agreed to consider a preferred alternative that was less costly, resulting in considerable cost savings.

Another example was metal bars, which come in a variety of sizes. After interviewing and surveying the general surgery specialists, the team learned that only a certain number of sizes were routinely used. These pectus bars were a high-cost item and decreasing the sizes available would be a sound financial decision.

Many of the end-of-life contracts were not renewable; this allowed us to assess the capital equipment that will need to be budgeted for in upcoming financial cycles for many years.

The stakeholders set targets (Step 3) after presenting the quantitative/qualitative data to the C-suite steering committee. These targets included: 1) decrease MOR inventory by 8% ($240,000); 2) evaluate service contracts for all equipment, specifically to identify end-of-life contracts that will require major equipment replacement with added financial resource allocation; 3) review/standardize the capital equipment ordering process; 4) create a one-, three-, and five-year budget for capital equipment.

What about the integration phase? Were both management and the surgical team willing to embrace the change?

The process continued with root cause analysis (Step 4), development of countermeasures (Step 5), and execution of countermeasures (Step 6). We used the concept of asking the “5 Whys” to better identify the root cause of why there was so much equipment surplus unused on the shelves. We also looked at how decisions were made to buy new equipment and restock consumable supplies. After we did Gemba walks, we determined how to improve the process but still make sure clinically critical supplies are always on hand and replaced in a timely process with cost savings.

The team then provided the new standard process for ordering supplies and evaluated the results and processes (Step 7), then standardized the successful ordering processes (Step 8).

 Overall, the co-management team achieved concrete, measurable results that led to cost savings. All stakeholders embraced the change. Surgeons had the timely equipment critical for patient care without supply delays.

The C-suite personnel were able to see cost savings/financial resource reallocation to other strategic projects. The operating room staff now had a process that was standardized and allowed focused patient care without concern of equipment logistics. The nursing staff/manager and surgical perioperative management had a better understanding of what equipment needed to be replaced in one, three, and five years. This allowed for more accurate budget spread- sheets with foreseen future accumulated cost savings.

Overall outcomes of the project were:

• Verified capital equipment: 86% identified/labeled (65 traded, 111 not located/written off).

• Service contracts: 26% active, 32% at end-of-life.

• Capital equipment ordering process to sustain PAR levels of inventory.

• 120% success: reduced MOR inventory by > 8% ($349,000 with target goal of $240,000).

• One-, three-, and five-year budgets for capital equipment.

From a physician leadership standpoint, what did you learn from this problem-solving project?

Physician leadership requires team-building through active listening, developing relationships, working with and through others, and managing people effectively.

Team-building requires active listening to all viewpoints. It is incredible how much more can be accomplished when all options are heard/considered/evaluated. If any project is undertaken with assumptions of what the results will be, then viable novel opportunities will be missed.

Strong team leaders must have a cognitive understanding of personality differences, individual behavior, interpersonal dynamics, and group process, as well as an ability to empathize with others. In this project, buy-in by all stakeholders, including the various surgical services, mandated developing relationships to achieve the qualitative and quantitative outcomes desired.

To accomplish bigger and more complex tasks than any one person could hope to do alone, effective leaders work with others by soliciting input and sharing decision making, and through others by delegating work and responsibility. This was central to the entire project. People management requires emotional intelligence and an understanding of how individual behaviors affect patient care and services.

Authentic physician leaders can cause a paradigm shift in organizational culture and empower other clinical team members to accomplish strategic projects.