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10 Ways to Save on Supply Costs
If you know where to look, you can find big money hiding out on the shelves in your supply room.
Otto Griffin
Publish Date: May 13, 2008

When you look to reduce annual expenses in your facility, do you focus on identifying items that can save $10,000 or more? Reality is that it's rare to find a single item that can reduce your expenses by that much. Over the years, I've had better luck rooting out the small things hiding out in the supply room that can save you $1,000 each. It may not be as glamorous, but at the end of the year you'll have the same result, or better. Here are 10 tips to help reduce your annual supply costs.

Use generic drugs. Review the drugs you order and identify ones that have a generic equivalent. The generic is always offered at a lower price. Buying generic propofol rather than Diprivan can save you as much as 20 percent. Substituting sevoflurane for Ultane can save you about 15 percent. Make it a habit to keep up with new generics coming on the market. Group purchasing organizations often send out alerts when generic versions of drugs become available.

Sign letters of commitment. GPOs offer tiered pricing for members who commit to buy high percentages of certain products. Some require an 80 percent or 90 percent commitment to obtain the best price and a lower commitment for mid-level tiered pricing. A lot of facilities miss out on these discounts because the GPO's sales rep hasn't mentioned the tiered pricing.

Look at what you're buying and who's supplying it. You may already be eligible for top- or middle-tier pricing. Then all you'll need to do is tell the rep that you want to sign the letter of commitment.

Ask about shipping. How much are your vendors charging you for shipping? Some vendors have deals worked out with shippers that let them charge you a higher price for shipping than what you'd normally pay with the same shipper. Look at all your invoices to see how much you're paying. Often you can get a better rate if you ask the vendor to ship the order under your facility's account number with FedEx, UPS or DHL, instead of the vendor adding shipping costs to the invoice.

Also, look for vendors that don't charge anything for shipping. Make it a point to use these companies. Finally, ask the vendor to ship your order once all the products are in stock and ready to ship. Otherwise, you may pay for shipping several times, as each part of the order is shipped separately. This can double, triple or quadruple the shipping cost of an order.

Switch inhaled anesthetics. Encourage your anesthesia providers to use sevoflurane rather than desflurane as much as possible. Sevoflurane may cost more per bottle than desflurane, but anesthesia providers end up using less sevoflurane per case. Approach anesthesia providers and explain how switching anesthetics can save money. Show them the formula for calculating the cost differences in inhalation anesthesia per minimum alveolar concentration hour. Once you do this, it's usually an easy sell. For facilities that don't use any inhalation agents, cost benefits lie in decreased incidences of post-operative nausea and vomiting and faster discharge from PACU.

Use a circuit guard on breathing circuits. Start using a breathing circuit protection unit. This FDA-approved device prevents cross-contamination and lets you reuse a breathing circuit all day, instead of throwing it away after each case. It saves you between $4 and $6 per case. It also reduces the amount of medical waste you produce each day.

Require purchase orders. Don't get stuck with a big bill from a device manufacturer who convinced a surgeon to trial a new implant. Develop an in-house policy that says your center won't pay for any item used unless a PO was issued before its use. Give copies of the policy to the physicians and sales reps. This will stop the reps from getting surgeons to try a new costly item before you agree to pay for it. This can save you thousands of dollars because the reimbursement for procedures usually doesn't change when the surgeon uses a more expensive implant.

Look for mistakes. Just like with bills at home, I've always been able to reduce expenses by routinely checking invoices for correct pricing. Mistakes happen more often than you'd expect. If you don't find them, they'll cost you money over and over. Once you find a pricing error, ask the vendor to credit you the amount of overcharges.

Standardize as much as possible. It's not cost-effective to stock a dozen different kinds of gloves, masks, suture or other items. Having a wide variety increases your inventory costs, which is like leaving money on your storeroom shelves rather than in the bank. Work with your surgeons and staff to whittle down the variety on your shelves.

Avoid procedure packs. Try to stay away from procedure packs, especially those manufactured for one surgeon. Not only are they more expensive, but if the surgeon leaves, you may be stuck with buying all the packs that have been produced or paying a breakdown charge. A better alternative: Buy generic packs made for specific procedures, then add any additional items your surgeons may need.

Turn off the gas. Assign the OR supervisor or a recovery nurse to turn off the oxygen, nitrous oxide and nitrogen from the main shut-off valve at the end of each day. Most gas outlets have some leakage. Leaving the gases on is like leaving the lights burning all night. This can reduce your gas bills by $300 or $400 per month.

Keep going
Surgical supplies will always be one of your biggest expenses. Don't stop at these 10 tips. Look for other small savings to be had around your facility. Remember, there is no such thing as insignificant savings. They all add up.