SPONSORED: SUTURE EXPRESS
JHC: Can you identify some of that waste? Istvan: Enormous amounts of inventory are used to support a relatively small amount of product usage. Large manufacturers of orthopedic implants, for example, turn their inventory fewer than three times a year. This compares to 10 to 20 turns per year for other supply categories. Add to that the cost of related supplies that sit on the shelves (and balance sheets) of hospitals, and you see the total U.S. healthcare system turns its inventory fewer than two times per year. This is capital investment, which can be better used on facilities, technology, diagnostics and infection prevention.
Implant costs: Where do we go from here? Journal of Healthcare Contracting: It’s fair to say that most supply chain executives recognize the potential savings in clinical-preference items, such as implants. How big is the opportunity? Jay Istvan: In the United States, medical implants consume twice the amount of spend as all med/surg products. Yet the supply chain for implants – which are predominantly distributed through manufacturers’ sales forces – is one of the most inefficient in all of U.S. industry, based on quantifiable factors such as product loss, expiration, freight expediting and inventory turns. The fact is, there is tremendous amount of waste in the current spend on surgical implants.
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JHC: What’s wrong with inventory, especially in a critical category, like implants? And isn’t it true that much of that inventory is actually consigned? Istvan: Because implant inventory is poorly tracked (a meaningful amount rides around in the trunks of sales reps’ cars), the industry suffers high rates of product loss, expiration and damage. It is not unusual for loss damage and expiration to total 8 to 12 percent of a manufacturer’s sales. That is a cost that everyone in the supply chain bears – manufacturer, hospital system, patients, payers. Despite the excess inventory, shipping and emergency expediting costs are rampant in most implant categories. An effective supply chain can drastically reduce the need for highcost, last-minute transportation. JHC: Some supply chain executives are implementing a “repless” model to reduce costs
August 2017 | The Journal of Healthcare Contracting
