How to reduce hospital material/resource spending by 25% in 1 year

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MARS

The Hospital Materials Allocation & Requirement System (MARS)

Or

How to reduce hospital material/resource spending by 25% in 1 year

By

Ian Kano, P.Eng., MBA, APICS, IISE, CILT

Introduction

Hospitals are not similar to any other production or service system. They are a multi-disciplinary interactive society. Hospitals are where many disciplines work together in harmony to deliver the best possible remedial solution for patients. Essentially a hospital is where an ailing person will enter as a patient, and be treated for an ailment, or for a healthy pregnant woman to enter and give birth.

Between these two totally different services lie thousands of procedures that are provided daily, and they are as varied as diagnostics, chemotherapy, radiotherapy, surgery, nutrition, rehabilitation, psychiatry and all the supporting services that work together to assure that the tip of the lance, the physician, is given every possible resource to treat their patients successfully.

This article will present the case of an MRP system, that was initially developed back in 1989 in Hadassah University Hospital and was (still is) the only patient-related hospital MRP system.

This is the worlds only patient allocated comprehensive hospital MRP system that reduces costs by 25% and raises optimization and automation of many processes.

It is the This system provides the following advantages of current healthcare ERP systems:

 

  1. A comprehensive MRP system that records all stock movements and levels within a multi-storage facility.
  2. Allocates “kits” of resources used in every defined action.
  3. Links all resources to a patient with specific ICD, DRG and clinical trials.
  4. Generates accurate inventory levels, and locations.
  5. Generate accurate inventory usage per patient, department, ICD, DRG and Clinical Trial.
  6. Generates seasonal usage data.
  7. Creates accurate tables for forecasting resources usage based on scheduled incoming patients and a high statistical probability for resource usage in emergency medicine.
  8. Enables “kitting.”
  9. Enables resource comparison of different items with similar or identical usage in different departments.
  10. Generates an inventory movement map, allocation map, levels map for optimization.
  11. Generates automatic ordering based on minimum stock levels as well as forecasted usage within pre-specified parameters.
  12. Links with the ERP systems
  13. When combined with medical, pharmaceutical, HR and operational data will create a comprehensive cost per patient (CPP).
  14. The CPP database will eventually enable hospitals to generate accurate costs for the most common situations and high integrity of statistical probability for all clinical trial patients.

To sum up, this system will create the data sets that will lead to accurate decision making, optimizing hospitals to reduce resource usage costs by a minimum of 25%.

The Hospital as a Modular Construct

To fully comprehend any hospital, it is important to deconstruct it into specific headline modules, these are:

Medical

  • Non-Invasive Treatment
    • Radiotherapy
    • Chemotherapy
    • Physical Rehabilitation
  • Invasive Treatment
    • OR Surgery
    • Clinic Invasive
  • Gynecology/Obstetrics
  • Emergency Medicine & Trauma Unit
  • Psychiatry

Diagnostic

  • Radiology
  • Fluid and Solid Sample Diagnostics
  • Electro-Magnetic & Nuclear Diagnostics

Bio-Medical Engineering

Pharmacology

Administration

  • Outpatient/Inpatient Staff
  • Finance
  • IT
  • Communications
  • Legal
  • HR
  • Procurement & Logistics
  • Sterile Supplies
  • Laundry Services
  • Nutrition & Catering
  • Security
  • Cleaning
  • …and more

Maintenance

  • Electricity
  • General maintenance
  • Gasses
  • Construction
  • Carpentry
  • Vehicle Mainteance
  • Heating & A/C
  • Parking and Roads
  • …and more

Module Explanation

Medical; the medical modules are treatment specific; I will not go into the depths of specialty since the list is very long, as an example, there is internal medicine, cardiology, oncology. Just these three specialties have totally different approaches to treatment for different issues. When we consider obstetrics and child birthing, it is the exact opposite of dealing with illnesses. However, what all these modules have in common are the following:

They all require a bed

They all require staff to treat the patient or expectant mother

They all require access to gasses, nutrition, medicines, invasive and non-invasive treatments, and a plethora of other functions.

Essentially, each person entering a hospital for whatever reason and by whatever means is entered in the IT system, given an initial categorization (ICD) and the physicians must then decide how to treat them (DRG) based on their diagnostic findings and inter-disciplinary discussions.

Medical treatment is the core of the MRP system, It the reason why everything is in place, and as the core of the system, is also the most complicated to cost estimate.

Now let’s discuss diagnostics.

Diagnostics

There are three basic diagnostic groups; these are the removal of a liquid or solid for testing in a laboratory. There is the scanning of the body using various techniques, and there is questioning. The two diagnostics we are interested in are the ones that use materials and resources to provide a result.

Diagnostics are less interested in the patient and more interested in either the medium used for diagnoses, such as blood, urine, stool or genetic material. Imaging diagnostics use various radiation techniques to review the inside of the body, be it  X-Ray, CT, US, etc.

Diagnostics is similar to any production process; raw material is introduced into the system, a number of utensils and other reactive materials are used to record the outcome through a machine. With imaging, the process uses recording media, power sources, and in some instances injecting the patient with a contrasting liquid.

Diagnostics are the easiest processes to estimate costs and forecast resource usage.

Bio-Medical Engineering

In a hospital the biomedical engineering department performs two functions, the first is the development and optimization of new technologies. The second and more banal yet important service is managing the maintenance of medical devices. All medical devices that require maintenance will go through the bio-medical engineering department.

Equipment downtime is a major issue in any industry, and in a hospital, it is one of the reasons why costs are so high. Essentially there is a lot of machinery that requires multiple instances to assure a fluid flow of treatment and data. So, hospitals need to buy more than is required to make sure that all patients receive optimum access to technology.

The larger diagnostic devices are included in this category, and usually, the more expensive diagnostic devices and equipment come with a supplier’s referent.

Estimating resources for maintenance is always an issue, these are termed indirect costs, however, in a hospital, diagnostics is a direct cost. So, we have two layers of maintenance, the direct and the indirect. No matter what the maintenance involved, devices and equipment that fail too many times have to be replaced, or their downtime ripple effect will lead to more failures, costs, strains on the system and worse.

The MARS system takes into account all these materials and resources and allocates them like any other resource within the system.

Pharmacology

Pharmacology takes over all the medicines and toxic substances that are used in a pharmacological expression. The ordering of these materials is usually handled by a pharmaceutical specialist, and their storage is separate from general stores, including medical devices.

Allocating these materials to specific patients is defined by each department medical staff. It only gets “hairy” when we factor into the equation registered clinical trials (Helsinki approved), and the materials need to be ordered directly from the supplier. The reason this is considered to be tricky is the cost factor. Clinical trials are free for patients, so there is no cost within the system. However that’s not so true, the whole administration process around deciding and ordering these materials is on hospital time, and as such they must be factored in. This gives the material a based price, an administrative cost that the system has to factor. Add to this the importance of collecting accurate data, where the treatment is established, and all relating costs are included within the whole patient resource cycle. This data is then used to create a comprehensive timeline feature.

The MARS system uses this data to prepare accurate estimations of cost, once the new trial drug has been approved and is a standard form of treatment.

Administration

Photo of emergency department lobby at Laurens County Memorial Hospital

A hospital is more than a treatment clinic; it is a complex hybrid of the hotel, leisure center, traffic zone, high-security area, radiation and toxic waste processor, multiple disease vector, restaurant, sports, and rehabilitation center. In essence, a hospital is a micro-city.

The many different administration units are all allocated within the MRP system, and MARS basically states this fact:

What specific resources does each unit consume, for what actions, how to decide minimum inventory levels and where are specific resources stored. For instance, paper, there are many forms of paper, ranging from toilet paper to office letterhead stationery. Now add to this pens, pencils, tissues, cleaning liquids, printer cartridges, the list goes on into the hundreds of items.

MARS takes all these resources and breaks them down, allocating them to specific departments. It then states this; how much is the monthly overhead of that department in terms of material resources and uses this figure to generate the departmental focused costs per month, which can then be allocated to each and every patient that was treated within the month.

Take into account that is there is one administrative unit that is patient allocated, and that is catering services. This unit has a list of nutritionists whose job it is to define what each and every patient will receive while in the hospital. These specific meals are allocated per patient, and the MARS system performs this process.

Maintenance

Maintenance, like the administration, is a general unit, it is broken down into multiple sections, and each section is in charge or a specific professional set, such as gas delivery systems, air conditioning, cleaning and general maintenance, construction, road maintenance.

Each unit has its resource requirements, and like administration units, these are made into monthly overheads, and then allocated across the system to different patients. The difference with maintenance is that you can directly relate a cost to a specific departmental maintenance call, and this will provide you with control over equipment and structural failures that cost the hospital more money to maintain and would be worthwhile replacing.

Summary

The MARS system is the most comprehensive hospital MRP system that leads to total optimization and will automate many functions within all hospitals that deploy the system.

The costs of creating the MARS system is low, and it integrates onto any MRP or ERP system employed by the hospital. In some instances, it is worthwhile creating a bespoke version that will deliver a more intuitive approach, integrating AI algorithms to develop seasonal learning forecasts.

This system is also blockchain friendly, and would actually produce even more accurate real-time results on a blockchain framework.

Reduce your expenditure by 25% in 1 year!

The MARS system was developed by Ian Kano and is ready for immediate deployment in any hospital. The pricing is extremely budget friendly.

For a 1 hour free consultancy to discuss MARS deployment in your hospital, and reduce your spend by 25% within the first year:

Contact: Ian Kano at ian@scmopex.com or ianpkano@gmail.com