Conditions Which Prompted the Study

Medical Supply Operations

     LRMC operates a traditional supply system for both pharmaceuticals and medical supplies.  Supplies are physically inventoried in each inpatient, outpatient or ancillary storage area and medical resupply orders are keyed directly into the Defense Medical Logistics Standard System (DMLSS) system.  Costs are not captured at the point of use and are only tracked via DMLSS and the financial system.

     One of the challenges in the daily medical supply operations at LRMC is the fact that neither the Logistics Division nor the Material Management Section is located within the hospital facility.  The medical supply warehouse is located in a separate building across the street from the main hospital building.  Landstuhl receives medical supplies from the United States Army Medical Material Command Europe (USAMMCE) located 32 km away in the town of Pirmesans, or receives supplies through local purchase or supply contracts.

     The Logistics Division has limited visibility on medical supply items purchased with the government credit card, and this visibility is only obtained through an itemized review of all division credit card purchases.  Personnel constraints normally preclude consistent review of hospital purchases.  These constraints decrease management’s ability to thoroughly review and control purchases, which in turn increases the likelihood of higher prices for the organization. The constraints also limit managerial ability to support the customer and identify items that could be procured through normal supply channels. 

     In addition, efforts to reduce medical supply costs through standardization of supplies across the European theatre of operations are ongoing.   A point of use system can provide increased utilization visibility and aid in this standardization of medical supplies in the organization. 

     Because Landstuhl Regional Medical Center operates eight health clinics throughout Europe, the medical resupply operations are completed individually.  The health clinics are unable to maximize savings through the use of higher order quantities and the reduction in cost achieved through volume discounts and reduced frequency of orders.  Automation through POU would reduce expenses.  Current conditions merit a system wide analysis of supply costs and purchasing patterns to determine what, if any, savings can be achieved.  The opportunity to achieve significant savings is small due to the purely primary care services provided at all eight clinics.

Pharmacy Operations 

     Similar conditions exist in the pharmacy service.  LRMC operates a unit-dose system with resupply of wards occurring at least once a day.  In addition, each ward maintains a supply of bulk issued drugs that can be used as needed, depending on patient medication orders.

     With the implementation of outpatient itemized billing in October 2002, and the planned implementation of inpatient itemized billing, hospital leadership realized that current information systems do not capture individual medication and supply costs for pay patients.  Capturing these costs is necessary in order to generate an accurate bill and collect money for these services. 

     As part of my research, I reviewed the resource management results from fiscal year (FY) 2002 and determined Landstuhl Regional Medical Center collected over $4.1 million from pay patients and third party collections.  These funds account for approximately 10% of Landstuhl Regional Medical Center’s annual operating budget.  As the hospital transitions to itemized billing, the ability to accurately track usage and charge patients will become increasingly critical to the organization’s fiscal health.  Although the hospital has successfully increased its annual collections from third party insurers each year, itemized billing could significantly reduce the amount of money collected and decrease the hospital’s collection rate on accounts receivable. 

     A point of use system is one means to automatically capture supply and pharmaceutical consumption at the patient level, and tie these costs directly to the patient.  The ability to capture costs is highly contingent on staff’s willingness to use existing technology to achieve desired results. 

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