Sheridan Memorial Hospital continues work to reduce supply expenditures
Date posted: August 28, 2014
By Hannah Sheely
The Sheridan Press
SHERIDAN — Every little bit counts, even in large organizations like Sheridan Memorial Hospital.
Chief Human Resources Officer Len Gross told the board of trustees Wednesday that the hospital has reduced expenditures on supplies in the last couple years by having a team of department heads evaluate supply expenditures to determine if the right supplies are being purchased in the right quantities and if the hospital is getting the best price possible on every purchase.
In February 2013, the hospital spent approximately 20.18 percent of its net revenue on supply expenditures. In December of that year, Gross and his team of department heads set a goal of reducing supply expenditures to 18 percent of net revenue by year-end 2013 and to 16 percent of net revenue by July 1, 2014.
As of Wednesday, Gross reported that supply expenditures for the organization as a whole, including the Welch Cancer Center and the large amount of supplies needed for chemotherapy, were at 17.4 percent of net revenue. He said with the needed supplies for chemotherapy, the hospital would be unlikely to drop below the 16 percent mark.
Gross reported supply expenditures for the hospital alone at 13 percent of net revenue and said he’d like to get that percentage down to 12.5 percent.
Over the last year, the hospital has used a program called VHA Price Lynx to compare its supply costs to those of 1,600 other hospitals. When Gross first started using the program, SMH was in the 62nd percentile for what it was paying for supplies, meaning it was paying above average. After using the information from VHA Price Lynx to negotiate better deals and prices on supplies, the hospital is now at the 52nd percentile, with hopes of dropping below the 50th percentile in the next year.
Gross noted that a smaller hospital that can’t buy as much in bulk will likely always pay more for supplies than larger hospitals.
Examples of supplies on which the hospital has been able to negotiate for better prices include a $59,500 reduction in yearly expenses on catheter lab supplies, a $150,000 savings in expenditures for spine implants per year and $377,500 in savings on orthopedic total joints, which were being purchased in the 85-90th percentile and were negotiated to a price in the 50-55th percentile, Gross said.
“Price Lynx is a great negotiation tool,” Gross said.
In other business, CEO Mike McCafferty announced in his adminstration report that a new compliance officer and an interim chief financial officer have joined the team.
Juliette Stancil was hired as the hospital’s compliance officer and brings a juris doctorate in law and a master’s degree in health law to the position. She will do trainings in how to protect medical information guarded under the Health Insurance Portability and Accountability Act, as well as other work to make sure SMH is compliant with all laws and regulations.
“Compliance is a huge part of what we need to have our arms around as a health care organization,” McCafferty said. “There’s a lot of regulation and laws associated with providing care. Whether it be protected health information or HIPAA laws and security for patients, there’s a lot of things that we need to pay attention to.”
McCafferty said relational issues addressed by the “Stark Act,” an amendment to the Social Security Act which prohibits physicians from referring patients to other entities that could lead to direct or indirect financial benefit for the physician or an immediate family member, and anti-kickback laws also need to be monitored on an ongoing basis.
Alan Dow also joined the hospital staff as interim CFO, a position he held at SMH for about five years in the early 2000s. McCafferty pulled Dow out of retirement to fill the interim position while the hospital continues to search for a permanent CFO.
Facilities Supervisor James Rader also announced at the meeting that he will be leaving at the end of the month to pursue other opportunities, so that position will be open as the hospital moves ahead with work on a hospice facility and renovations to the intensive care unit.