Vol 21 Issue 101 Mumbai, November 2013 1Pages: 841 Price ~100

ea careEXECUTIVE

RNI NUMBER: MAHENG/2013/48750

stockedwith IT?

Materials Managementdepartments benefit

immensely from IT,asthere are 2000-2500 itemsstocked in most hospitals

BRICK ANDMORTAR

esigning Storagems for Hospitals

Pg22

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One look andthe differenceis clear.

Are you stockedwith IT?

While some are apprehensive of the IT invasion into healthcare, others are quitehappy to embrace it. Material management is surely one department that has

benefited from IT. Chandreyee Bhaumik finds out why ...

The credit for a well-stageddrama or a well-mademovie often goes to

the main actors but little doesone ponder about the back-upsupport that makes the showa success. Similar is the casewith the material managementdepartment of a hospital thatdetermines the performance of

a hospital. Clearly, the function-ing of the material managementdepartment and the hospital as awhole are very much dependenton each other. This departmentis in direct touch with the userdepartments (Operation Theatre,wards, specialty clinics, units, re-fraction departments, admissiondepartments, registration, etc) in

its day-to-day activities.The management of materi-

als involves planning, purchase,stores and inventory control, careand preservation, issue of materi-als, accounting and disposal ofscrap, etc. The efficiency of thedepartment depends mainly onhow successfully the materials aresupplied by stores department to

them.In other words, the material

managementdepartrnentass~that essential supplies are kept[stock and equipment is purchasein a timely and cost effectivemanner. Further, this depart-ment is instrumental in workingout strategic plans in assuranceof quality through preventive

32 I ovember 2013 Healthcare EXECUTIVE

mintenancefor biomedicalftjUipmentmanagement. Further,

materialsmanagement depart-rentperforms the functioning

furnishingof sterile and non-iterilesupplies to the differentthe!rlionsof the hospital.Prof.Krishnendu Sarkar,

ill1llerscientist CSIR, Edward deIbnoMaster Educator and Direc-'i, NSHMCollege of Manage-rent& Technology, Kolkata lists

essential factors in materialsmnagement.He says that the~intsto be remembered are (a)Itploymentof best businesspracticesfor zero-error compli-ance,(b)continuous update

Itemmasters, (c) item-wisespplierratings, (d) priority basedmersequencing, (e) supplierjminerships and management, (f)rontinuousimprovement and totalqualitymanagement and finallynuseIT as an enabler for all theaOOvepoints.

InventorymanagementThegradual but the pressingneedto slash costs, withoutrompromising the quality ofthepatient treatment, has madematerialmanagement significant.Thoughprocurement and supplychainmanagement have not beenthefocus of hospital administra-torsin the past, it is now beingrecognizedas vital. Accordingtoseveral research reports, guid-anceregulations were issued toimprovethe procurement processandthereby propose actions forefficiency.The key areas of im-provement emphasised the needlorchange.

With billions of dollars be-ingspent and prices spiralingupwards constantly, costs poseundoubtedly the toughest chal-lengefor the healthcare manag-ers.Thus, in efforts to controlthe situation, several forms oftechnology have been introduced.However, whether the develop-ment level at the public hospitalsis at par with the private onesis still a matter of contention.Therefore, it is the perfect timeto incorporate the best practices

from the private hospitals intothe public institutions. Agreed,changes are taking place but therate of change is extremely slow.

Considering the cost of sup-plies, the way in which health-care inventory is acquired, storedand managed is business critical.

observes, "Different types of re-ports and documents are requiredin material management. Nothingcan be done without IT. Marginscan be calculated and according-ly, the stocks can be increased ordecreased. With IT, materials forsurgery and different medicines

As far as inventory is concerned, thegeneral store of a major hospital will

possibly have 2000-2500 itemsThere are different aspects tomaterial management rangingbetween being over-stockedand under-stocked. Further, fullvisibility of the inventory is es-entia I as it enables the tracking

of products as well as identifica-tion of the user. It helps in givingspecific date and time. Withtime, it is possible to forecast thedemand for supplies as opposedto basing calculations on histori-cal data.

Discussing the relevance ofIT in material management es-pecially inventory management,Hemant Patadia, Owner, OmdeoMedical and Surgical Store,

can easily be procured. However,efficient IT software profession-als should form a strong base.This will help in better analysisin the inventory control."

Talking about inventorycontrol in particular, Patadiaadds that with IT support,previous consumption can beunderstood, thereby determin-ing the minimum and maximumlevels required to be maintainedin the stores. He emphasises, "Itis a difficult and tedious job tokeep manual registers. Thus, it isonly the IT assistance that helpsin determining the requirementsof each department. Secondly,

the process of calculation is alsomade much easier now. There isno need of performing endlesscalculations repeatedly. Thecount on medicines bought fromthe pharmacy is also calculated."

Dr Satyadeo Malik, MedicalSuperintendent and Head, LegalCompliances, [aslok Hospital,says, "As far as inventory isconcerned, the general store willhave 2000-2500 items. Moreover,to keep a check on this largevariety of items by any specificperson will be a tedious task.The hospital makes an ABC&VED matrix, a check on AV&AE items is kept by the Medi-cal Superintendent and checkon others by stores. Further, wehave maximum, minimum andreorder level and as soon as theitem comes to the reorder level,we place it in the purchase order,which is then followed by thesubordinate staff."

Storage space is an importantconsideration. Matters shouldbe organised in such a way thatthere is no gap in understandingand communication. However,

Healthcare EXECUTIVE November 2013 I 33

the most important factor thatchanges the dynamics of a mate-rial management departmentis the optimum utilisation oftechnology.

Vendor managementThe best companies around theworld are discovering a power-ful new source of competitiveadvantage. This encompasses allthose integrated activities thatbring a product to a hospital andcreate satisfied customers. It isjust as important to communicatewith the suppliers and vendors,as it is to communicate with yourpatients. Talking about vendormanagement, Vinod Kumar.P,Asst. General Manager- Opera-tions, KIMS Hospitals, elaborates,"Establishing the proper commu-nication channels and informa-tion flows between you and yoursuppliers can lead to increasedefficiencies, reduced costs andbetter customer service. Thissegment will cover the simplecommunication methods (online,telephone) and other ideas thatwill allow your company to builda win-win relationship with thesuppliers and vendors. A goodrelationship will lead to a goodservice."

According to several reports,some objectives that determine

the KRA of the vendor man-agement of a hospital can besummed up as follows:• Establishing an effective and

optimum sourcing capacity for

the hospital• Increasing closer relationships

with the suppliers and develop-ing an atmosphere that wouldeliminate inefficiency andwaste

• Establishing a strong link-age between various userdepartments and the materialsmanagement functionjaslok Hospital has its own

way of vendor management. DrMalik says, "Considering severalmarket survey reports and otherrelated reports, we try to assessthe vendors as they form an im-portant link of the material man-agement. Vendors are selectedas per a competitive tenderingprocess, ability for supplyingitems on time, after sales service.Their bills need to be paid ontime. There has to be a penaltyclause too." Asked about the 10most critical items that a hospitalconsumes daily, Dr Malik says,"There are various departmentsand several stores. Thus, list ofcritical items varies from storeto store. Critical items usuallyare consumables, pressure bags,dial flows, ventilators, multi-paramonitors, defibrillators, etc.

Thus, the vendor managementof the hospital will ensure thatit is improving the materialsprocurement and management

processes of the hospital. Dis-cussing the role of IT in vendormanagement, Patadia explainsthat IT has paved the way forabetter analysis and understanding. With IT systems in place,acomparative picture of differenlmaterials emerges, and this offan advantage in bargaining widvendors. Thus, he says, "Sincewith IT proper data is obtainedit helps in finance billing ofproducts, which ultimately hell'in purchasing materials."

IT is the key area in material,management after vendor rela-tionship. It can help the health·care organisation for assessing.Kumar mentions that one shoulcchoose vendor to provide fewbenefits through IT. They areinthe following order:• Goods tracking system• Average time consumption fiX

good delivery• Online financial transactions• Online invoices• Acceptance of digital signa

tures• Online goods receipts and

returns alin

Separate and new alitems isMore than once, purchase man ssagers have been confused with S{

material managers. However, feboth functions are distinct wilh dclearly defined roles and perfor dmance parameters. The materi SI

als manager is accountable for rrpurchase of items from the inp nchain side, which is outside his If

her hospital. The nature of thejob is such that even one small herror in order placement and/or y'order tracking and/or delivery ccoordination etc can invite big arisks - legal, financial, goodwi hor otherwise. On the flip side- Hone small innovation in such j 0

processes can bring big benefis So

to the organisation. dWhen asked whether the ap a

parent number of 800 separale aitems required in the operation cof a fully functional secondary IIcare hospital is correct, Dr Mal nresponds, "Personally, I believe dthat 800 is a small number

-----------------------------------------------------------------------------------------------------4. -341 November 2013 Healthcare EXECUTIVE

andthe number is graduallyincreasing.Thus, if we considerallthe departments, currently itisapproximately 2000." Kumarsays,"It has increased in everysecondary care hospital in pastfew years. Awareness on differentdiseases, rapid change in thediagnostic equipment, advancedsurgical procedures and treat-ments, increased material compa-niesare the common reasons toincrease the items."

Several new items of inventoryhavebeen added in the last fiveyears. Some of them are in thecritical departments such as leUand OR. Naming the items thathave been added in his hospital,Kumar mentions, "Different typesof catheters, drains, central linesets, surgical blades, urobags,disposable gowns and manyare added in past few years. Inaddition, there are many commonconsumable items used in both[CUand OT. Few are sterillium,micro shield, gloves, jelly, ban-dages, etc."

The critical items in the

hospitals are narcotic drugs,costly medicines and disposables,surgical implants, surgical grafts,valves. All these items should bestored in the pharmacy store indifferent cupboards with labels.Without narcotic drugs, onecannot run a multi-specialty hos-pital. In addition, even one cannotperform any surgeries withoutany of the above.

example, linen, trolleys and gur-neys, stretchers, IV infusion sets,suction machines, etc. Discussingthe size of the total inventory ofa multi-specialty hospital and thedepartments like Central SterileSupply Department (CSSD) andcentral pharmacy, Kumar replies,"The size of the total inventoryfor a multi specialty hospitalmay be 10-15 per cent of the total

The materials procurement teamshould be empowered to offer a

proactive service to the cliniciansWhen asked about instances

where the existing supplychain or some other arrange-ment breaks down and howthe problem has been solved,Kumar highlights, ''Always havecontacts with vendors/ suppliersand nearby hospitals. If at all, asituation needs any of the above,one may have to contact them onemergency basis and procure therequired items."

There are certain items thatare required in every ward, for

cost. We may need to procure theinventory for the period of twoto four weeks. It can be managedwhen there is delay in deliver-ing goods from the vendors/suppliers due to late payments/other unknown reasons. This isapplicable to central pharmacyand CSSD also."

Smart procurementToday everything that is ordered,be it a scalpel or any otherthings, is automatically captured

by the IT backbone. The use oftechnology leads to operationalefficiencies, thereby facilitat-ing a streamlined approach toprocurement and supply chainmanagement. Further, purchaseorders should be raised for repeatitems. Again, for new or special-ist items, details are submitted toa procurement board made up ofclinicians, finance and procure-ment staff. In turn, the boardwould grant approval dependingon whether there is a financial orclinical need for the product.

Procurement is usually coor-dinated and optimised to reapthe best value for money withoutcompromising the quality ofpatient treatment. In addition,the procurement team should beempowered to offer a proactiveservice. Therefore, clinicians willno longer be caught up with theadministrative duties. Thus, theyhave more time to concentrateon their own KRA. Therefore,working relationships need tobe improved. Thus, improvingand developing the procurementand supply chain practices willoffer scope to reorganise theorganisation. Discussing thepurchase department of thehospital, Patadia explains thatafter considering 3-5 quotations,the lowest rate requirement isviewed. He elaborates that intheir pharmacy usually there arethree brands for one molecule.The first category is for thecorporate clients, who have theirhealth insurance policy. Usually,in these cases there is high MRPso that there are high margins.The second category consists ofproducts with lower MRP and thethird category consists of marketrepresentatives, that is, thosewho have sponsorships. Thus,considering several factors, likeprice rates of different compa-nies, quality check, etc a productis selected for the pharmacy andtherapeutics department andthen there is a freezing on theprice. Different organisationshave different policies in place.

jaslok Hospital has a policy topurchase and make available the

Healthcare EXECUTIVE November 2013 I 35

best items at the best price fromrenowned companies, to have astock of items for about 21 daysand make sure that no item runsout of stock. The right item ismade available at the right timein the right quantity and rightpnce.

Maintaining EOQEOQ as base concept is in prac-tice since the past many decades.Smarter ICT-backed hospitalshave well tuned ERP software tovalue-add the 'economic' premiseof EOQ that is based on certainassumptions, like pre-distributionof the rate of demand of a par-ticular item throughout the year,pre-fixed production cost andlead time of individual materialitems, etc.

Discussing EOQ as a baseconcept and how it is maintained,Prof Sarkar explains, "The 21stcentury offers a promise on aconsistent increase in competitiveB2B transaction options in thesupply side. And, value additionis achieved using computer-aideditem-wise analytics that helps inoptimisation of the total materi-als management costs by way ofa 'just in time' approach underpriority based ordering sequenceacross the entire supply chainfrom the production to inven-tory."

An inventory-related equationthat determines the optimumorder quantity that a companyshould hold in its inventory givena set cost of production, demandrate and other variables. This isdone to minimise variable inven-tory costs. The full equation is asfollows:Where:

S = Setup costsD = Demand rateP = Production costI = Interest rate (considered an

opportunity cost, so the risk-freerate can be used).

Kumar says, "The EOQformula can be modified to deter-mine production levels or orderinterval lengths, and is used bylarge corporations around theworld, especially those with large

supply chains and high variablecosts per unit of production."

Despite the equation's relativesimplicity by today's standards,it is still a core algorithm in thesoftware packages that are soldto the largest companies in theworld.

Role of ITThe use of IT for material man-agement purposes can be dividedinto factors like transaction pro-cessing, supply chain planningand collaboration, order trackingand delivery coordination, etc.Discussing the significance of ITin material management, VilooWilliams - CIO & Head IT, [aslokHospital, says, "IT definitelyplays a major role to moderniseand streamline processes throughproper automation especiallyin a hospital where stores aredistributed in nature." Shesays that applications such as

management control.jaslok Hospital has already

implemented the above using afully customised & integratedHIMS. Williams says, "As for doc-umentation, as explained above,all documentation is trackedeffectively as all transactionsare electronically maintained.Further, as purchase functions areintegrated with finance, trackingof payments is not a problem atall."

A typical 'requirement-to-availability' scheduling cycle of amaterial necessarily shall demandthe fulfillment of three objectivefunctions: a) Minimum time-delay,b) Minimum cost and c) Maxi-mum purpose-fulfillment. ProfSarkar opines, "It can only bethrough IT that item-wise consid-ered values of objective functionscan be best achieved. Here, one ITsolution can fit all. But, the broadIT infrastructure should be akin

The complexity of a tertiary-careecosystem calls for customised IT

solutions just like the banking sectorpurchase management, storesinventory management, supplychain management ensure allend-to-end transactions coveringtendering & purchases to stockinventory and stock valuation areautomated effectively reducinghuman error, improving humanresource productivity in termsof effort & time and enhancing

to ERP, where two-way bottom upand top-down information flowcan be encouraged within theintranet and also ensure the inclu-sion of its extranet (demand andsupply chain) with the variousintranet levels like transactions,managerial, executive for timelyand effective decision making."

Various research papers show

Inter-organisationalinformation sharingInter-organisational information sharing is not a new concept buthas been widely researched over the past few years. Accordingto Kumar, some advantages of inter-organisation systems usedin hospitals for information sharing are:• Data retrieval for top management• Electronic medical records• Online investigation reports• Integration with vendor information system by SCM• Patient discharge time would be decreased• Satisfaction of experience of the patient can be increased• On time emergency resuscitation• Minimal human errors• Avoidance of malpractices• Analysis of key performance indicators

361 November 2013 Healthcare EXECUTIVE

that there is a lack of research or.

the IT aspect. Responding to theabove point, Prof. Sarkar explairuthat in India, the visibility ofprivate participation in health-care has been majorly a Y2Kphenomenon - the time when ITassimilation in healthcare delivecosystems had been compara·tively very low vis-a-vis otherindustry sectors. The complexirof a tertiary-care ecosystem cal~for custom-specific IT solutionsjust like the banking, finance aneInsurance industry. However,unfortunately hospitals in gener.have been a very late mover ining a 'engineered-process' drivenorganisation."

IT helps in online invoices andpayment process. In this regardVinod Kumar.P Asst. Gen-eral Manager- Operations, KIMSHospitals, says, "One can nowge'

the estimates online with digitalsignatures from the vendors,analyse it and send an acceptanceletter with digital signature tothe vendor company." An invoicewould be sent through an onlinemechanism by vendor with digitalsignature along with paymentoptions. Then, one can now com-plete the payment process onlinethrough the software integratedwith HIS and Vendor InformationSystem. This is a rapid change inhealthcare sector.

Cost saving factorOn the issue of whether IT offersopportunities for cost-saving,Williams remarks, "Advancesin high performance hardwareand network systems, very highquality of software products andcustom applications, mobil-ity devices like Wi-Fi-enabledhand-held scanners enable savingcosts in the long run by improvedproductivity, reduced man-powerand higher accuracy in manage-ment control towards monitor-ing wastage and unnecessarypurchasing. Further, buildinglean processes through automa-tion is mandatory; redundantand repetitive functions arestreamlined and paperwork isreduced. Williams reiterates, "Ifproperly designed workftows

• Timely delivery of goods

From the other sideAfter ana lysing the private hospi-tals, let us see what the publichospitals of our county have tooffer. Dr Subhranshu Chakrab-arti, CMOH, Bankura, says thatthe procurement of medicine andequipment are web-based. Theorder is placed online and thegoods are also received onlinewithin a fortnight. The paymentis also done online. However, thisis only at the district and subdistrict level. Beyond that, it is allabout manual level. Discussingthe problems that the material

Since most large hospitals havemany stores, the precise legal

implications vary from store to storeare set in the software systemswith e-authorization built, allunnecessary procedures can beeliminated easily."

Other than direct ways of costreduction, the incurring cost cannot only be reduced but also savedin several indirect ways. Elaborat-ing on the cost reduction factor,Kumar lists the following factors:• Reduced inventory carrying

cost• Decreased of time consumption• Minimum human resources• High speed retrieval of data• Error free system• Paperless process• Minimal transport cost

management department ofthe hospital usually faces, hesays that initially there was nopenalty. Thus, the supply wasirregular. Talking about how theIT has brought about changes,he explains that initially therewere teething problems. He says,"We are still at the initial stages.However, definitely the qualityhas improved a lot. Also, in thesehospitals, since the vendors arejust one or two, a monopolisticenvironment is created. If thenumber of vendor increases thesituation will definitely improve.

However, it is a unanimousopinion, whether in a public or

Legal complicationsSince most large hospitals havemany stores, the legal impliestions vary from store to store.lrMalik says, "One must haveallthe required trade licenses pertaining to the respective department, store for retail sale. Thusfor the pharmacy, a narcoticslicense is mandatory. In additifor certain biomedical equip-ment - a sonography machine,Radiotherapy, Nuclear MediciaCT, MRl, approval from AERBmay be required." There are 0

legal implications too but theseare some of the common ones.

Commenting in this regard,tadia says, "Legal implicationsimportant for material management. For narcotics, authoriseddocuments are required. Further.there are certain temperaturespecific products where thetemperature has to be maintaiaccordingly. In addition, in orde-to avoid duplication, there hasto be authorised dealers for theproducts."

There are legal imperativesto safeguard the actions on bothclinical and non-clinical fronts,where records management fol~standard practices mandatedunder its quality accreditationframework. Prof Sarkar avers,"Such imperatives are particu-larly so, in the case of purchaseand inventory management ofhazardous and single-use items.'Discussing the major legal complications, Prof Sarkar explains"Here the major issue concern'.the hospital stakeholders at oneside and patients on the otherers around the reuse aspects ofsingle-use devices, given thecoocontrol imperatives."

Hurdles on the waySeveral materials are comingfrom different departments andvarious types of documents aremandatory in this regard. Elalxrating in this regard, Patadiaremarks, "Sometimes, internaldocuments pose problems andthis, in turn, affects the relatioship with the departments. Therelationship between various D...------------------------------------------------------------------------------------------------~I

381 November 2013 Healthcare EXECUTIVE

private hospital, IT helps in re-moving unnecessary procedures.With IT there is a straight moni-toring and it provides a check onthe unnecessary stock. Usuallyeven when there was immensestock, materials were reorderedagain. Thus, IT provides a check.However, the block level is yet toexperience the online dealings.