The Healthcare Hub

Inventory Count Finds $46 Million in Hidden Value at One Hospital

posted by: Rebecca Johnson, Senior Field Manager, Syft, a GHX company
Wednesday, March 25, 2020

Many hospitals underestimate the value of their inventory—by millions of dollars
As part of the inventory services team here at Syft, one of the most rewarding aspects of my job is helping facilities find “hidden value.” In other words, while we are counting inventory, we often find that the value of inventory is much higher than the hospitals anticipated. We identify hidden value during many of our annual inventory reviews, but we find the most hidden value—on average anywhere from two to five times the hospital’s estimated inventory value—when we provide inventory services at facilities that haven’t had annual reviews for a couple of years or longer.

Two recent examples underscore the importance of conducting annual inventory reviews—and show just how large a role they play in helping hospitals identify hidden value. Both of these facilities had not performed annual reviews for many years. At the first facility, located in the Southeast, leadership believed they had about $5 million worth of inventory. When we were done with our count there, we were all shocked to find that they actually had about $51 million. In a less extreme example, in a facility in the Northeast, we uncovered more than $15 million when they thought they had $5 million inventory.

The Root of the Problem
Hospitals underestimate the value of their inventory for many reasons, including hoarding, poor documentation, and disorganization. For example, in one of the hospitals where we uncovered a significant amount of hidden value, we found the same type of catheter stored in five different places. It’s no surprise that this hospital was struggling to quantify its supplies on hand.

It’s also key to note that when hospitals have disorganized inventory, they are less aware of all the inventory they have—and where it is located. As hospitals face the coronavirus pandemic, the importance of having a strong understanding of the inventory on hand is becoming even more clear. Hospitals must be able to quickly determine how many critical supplies (such as face masks and other protective gear) they have, and where these supplies are located.

Trickle-Down Effects
When hospitals are sitting on a lot of hidden value, they also tend to be sitting on a lot of expired products. That’s because these hospitals are less likely to regularly track and monitor their inventory. As a result, they tend to order the same items unnecessarily—because they don’t realize they already have them on hand. That increases the likelihood products will expire before they can use them.

Expired products represent a significant safety problem for patients, but they also impact the bottom line at hospitals. Previously, we shared how we found dozens of expired items that amounted to nearly $200,000 worth of inventory at one facility.

Hospitals should think of inventory services as an annual check-up that leads to a healthier bottom line and healthier patients. Just how much healthier? Most hospitals could reduce their expenses by more than $12 million annually by improving their supply chain practices, according to recent Guidehouse research.

The Inventory Diaries: A multi-part blog series
Each year, Syft’s Inventory Services Team visits more than 600 hospitals and other health facilities. Their work is about much more than providing accurate inventory counts. Often, they shed light on critical information that saves hospitals money and leads to higher quality care.

This blog series, written by the Inventory Services Team, shares those stories: