
AHRMM Keys for Supply Chain Excellence
The Keys to Your Supply Chain Excellence
The AHRMM Keys for Supply Chain Excellence are key performance indicators (KPIs) that set the standard for supply chain management in the health care field. AHRMM Keys equip professionals with the information and supply chain metrics to measure performance over time, quantify the value of their organization’s supply chain to executive leadership, and move their supply chain closer to operating from the intersection of Cost, Quality and Outcomes (CQO).
Explore Featured Keys for Supply Chain Excellence
Discover these highlighted key performance indicators and benchmark your performance against standards in the field. Download each KPI individually or access the complete AHRMM Keys to explore all metrics for supply chain excellence.
Data Standards
-
- A hospital’s invoice lines received via an ERP system or e-commerce solution provider with a GTIN is 600,000.
- The hospital’s total invoice lines received via an ERP or e-commerce solution provider is 1,000,000.
- This metric can be utilized to understand trends and performance over time to determine if the hospital or health system’s objectives to increase the use of GTINs are being realized.
- The adoption of data standards provides a method to codify in valid, meaningful, comprehensive and actionable ways, information captured in the course of doing business with all stakeholders within the health care supply chain.
- The GTIN is a globally unique GS1 identification number used to identify trade items, which includes both products and services that are sold, delivered and invoiced at any point in the supply chain. The elimination of customized or proprietary item identifiers can enhance the precision and velocity of supply chain transactions and recalls.
Health Care Supply Chain Key Performance Indicator (KPI): Percentage of Invoice Lines Received with a Global Trade Identification Number (GTIN)
Purpose:
Measure the percentage of invoice lines received from suppliers via an enterprise resource planning (ERP) system or e-commerce solution provider that contain a GTIN.
Value:
Enables the measurement of performance against preset GTIN adoption goals.
Equation:
Number of invoice lines received via an ERP/e-com. provider (or OCR'd) with a GTIN
÷
Total number of invoice lines received via an ERP/e-com. provider (or OCR'd)
=
Percentage of Invoice Lines Received with a Global Trade Identification Number (GTIN)Note: it is favorable to have a higher value for this Key. The higher the value the better.
Example:
600,000 ÷ 1,000,000 = 60% Percentage of Invoice Lines Received with a Global Trade Identification Number (GTIN)
Input Descriptions and Sources:
Input Name Includes Excludes Total number of invoice lines received via an ERP/e-com. provider (or OCR'd) The total number of invoice lines received via the ERP system or e-commerce solution provider, or, received manually but scanned in using Optical Character Recognition (OCR) technology and processed electronically. Invoice lines processed outside of the ERP system or e-commerce portal or received from suppliers manually, unless an organization utilizes OCR technology. Number of invoice lines received via an ERP/e-com. provider (or OCR'd) with a GTIN Number of invoice lines received electronically from all suppliers that reference or use a GTIN to identify line items ordered by the hospital or health system. Class I items, which do not require a unique device identifier (UDI) until 9/24/2022 Points of Clarification:
-
- A hospital’s invoice lines received via an ERP system or e-commerce solution provider with a GLN is 6,000.
- The hospital’s total invoice lines received via an ERP or e-commerce solution provider is 10,000.
- The metric can be utilized to understand trends and performance over time to determine if the hospital or health system’s objectives to increase the use of GLNs are being realized.
- The adoption of data standards provides a method to codify in valid, meaningful, comprehensive and actionable ways, information captured in the course of doing business with all stakeholders within the health care supply chain.
- The GLN is a field-wide, standardized location identifier that replaces custom account and location numbers. The GLN provides the opportunity for increased visibility into on-hand inventory levels (e.g. bulk, each) by location, potentially increasing efficiency in pulling expired and recalled products.
- One root cause of pricing inaccuracy and short paid rebates in multi-hospital systems is location inaccuracy. The elimination of customized location identifiers can enhance the accuracy of item price and rebate administration.
Health Care Supply Chain Key Performance Indicator (KPI): Percentage of Invoice Lines Received with a Global Location Number (GLN)
Purpose:
Measure the percentage of invoice transactions received from suppliers via an enterprise resource planning (ERP) system or e-commerce solution provider that contain a GLN.
Value:
Enables the measurement of performance against preset GLN adoption goals.
Equation:
Number of invoice lines received via an ERP/e-com. provider (or OCR'd) with a GLN
÷
Total number of invoice lines received via an ERP/e-com. provider (or OCR'd)
=
Percentage of Invoice Lines Received with a Global Location Number (GLN)Note: it is favorable to have a higher value for this Key. The higher the value the better.
Example:
6,000 ÷ 10,000 = 60% Percentage of Invoice Lines Received with a Global Location Number (GLN)
Input Descriptions and Sources:
Input Name Includes Excludes Total number of invoice lines received via an ERP/e-com. provider (or OCR'd) The total number of invoice lines received via the ERP system or e-commerce solution provider, or, received manually but scanned in using Optical Character Recognition (OCR) technology and processed electronically. Invoice lines processed outside of the ERP system or e-commerce portal or received from suppliers manually, unless an organization utilizes OCR technology. Number of invoice lines received via an ERP/e-com. provider (or OCR'd) with a GLN Number of invoice lines received electronically from all suppliers that reference or use a GLN to identify the hospital or health system. Points of Clarification:
-
- A hospital’s number of item master items populated with a GTIN is 10,000.
- The hospital’s total number of item master items is 100,000.
- This metric can be utilized to understand trends and performance over time to determine if the hospital or health system’s objectives to increase the use of GTINs are being realized.
- The adoption of data standards provides a method to codify in valid, meaningful, comprehensive and actionable ways, information captured in the course of doing business with all stakeholders within the health care supply chain.
- The GTIN is a globally unique GS1 identification number used to identify trade items, which includes both products and services that are sold, delivered and invoiced at any point in the supply chain. The elimination of customized or proprietary item identifiers can enhance the precision and velocity of supply chain transactions and recalls.
Health Care Supply Chain Key Performance Indicator (KPI): Percentage of Items Stored in the Item Master Populated with a Global Trade Identification Number (GTIN)
Purpose:
Measure a hospital or health system’s level of adoption in populating active item master items with a Global Trade Identification Number (GTIN) identifier for use in supply chain transactions.
Value:
Enables the measurement of performance against preset GTIN adoption goals.
Equation:
Number of active items in the item master populated with a GTIN
÷
Total number of active items in the item master
=
Percentage of Items Stored in the Item Master PopulatedNote: it is favorable to have a higher value for this Key. The higher the value the better.
Example:
10,000 ÷ 100,000 = 10% Percentage of Items Stored in the Item Master Populated with a Global Trade Identification Number (GTIN)
Input Descriptions and Sources:
Input Name Includes Excludes Total number of active items in the item master Total number of active items ONLY in the hospital's item master. Inactive records contained within the item master; use your hospital or health system’s definition of inactive records/items in your item master. Number of active items in the item master populated with a GTIN Total number of active items ONLY in the hospital's item master that have been populated with a GTIN (UDI-DI). Points of Clarification:
-
- A hospital’s number of all ERP or e-commerce PO lines sent out using a GTIN is 600,000.
- The hospital’s total number of ERP or e-commerce PO lines sent out is 1,000,000.
- This metric can be utilized to understand trends and performance over time to determine if the hospital or health system’s objectives to increase the use of GTINs are being realized.
- The adoption of data standards provides a method to codify in valid, meaningful, comprehensive and actionable ways, information captured in the course of doing business with all stakeholders within the health care supply chain.
- The GTIN is a globally unique GS1 identification number used to identify trade items, which includes both products and services that are sold, delivered and invoiced at any point in the supply chain. The elimination of customized or proprietary item identifiers can enhance the precision and velocity of supply chain transactions and recalls.
Health Care Supply Chain Key Performance Indicator (KPI): Percentage of Purchase Order Lines Sent Out with a Global Trade Identification Number (GTIN)
Purpose:
Measure a hospital or health system’s level of GTIN adoption in purchase order (PO) transactions placed through an enterprise resource planning (ERP) system or e-commerce solution provider.
Value:
Enables the measurement of performance against preset GTIN adoption goals.
Equation:
Number of PO lines sent out via an ERP/e-com. provider (or OCR'd) with a GTIN
÷
Total number of PO lines sent out via an ERP/e-com. provider (or OCR'd)
=
Percentage of Purchase Order Lines Sent Out with a Global Trade Identification Number (GTIN)Note: it is favorable to have a higher value for this Key. The higher the value the better.
Example:
600,000 ÷ 1,000,000 = 60% Percentage of Purchase Order Lines Sent Out with a Global Trade Identification Number (GTIN)
Input Descriptions and Sources:
Input Name Includes Excludes Total number of PO lines sent out via an ERP/e-com. provider (or OCR'd) The total number of PO lines sent out via an ERP system or e-commerce solution provider, or, generated manually but scanned in using Optical Character Recognition (OCR) technology and sent out electronically. PO lines processed outside of the ERP system or e-commerce portal or placed with suppliers manually, unless an organization utilizes OCR technology or invoice scanning solutions. Number of PO lines sent out via an ERP/e-com. provider (or OCR'd) with a GTIN Number of PO lines sent out electronically to all suppliers that reference or use a GTIN to identify line items ordered by the hospital or health system. Points of Clarification:
-
- A hospital’s number of all ERP or e-commerce PO lines sent out using a GLN is 6,000.
- The hospital’s total number of ERP or e-commerce PO lines sent out is 10,000.
- This metric can be utilized to understand trends and performance over time to determine if the hospital or health system’s objectives to increase the use of GLNs are being realized.
- The adoption of data standards provides a method to codify in valid, meaningful, comprehensive and actionable ways, information captured in the course of doing business with all stakeholders within the health care supply chain.
- The GLN is a field-wide, standardized location identifier that replaces custom account and location numbers. The GLN provides the opportunity for increased visibility into on-hand inventory levels (bulk, each) by location, potentially increasing efficiency in pulling expired and recalled products.
- One root cause of pricing inaccuracy and short paid rebates in multi-hospital systems is location inaccuracy. The elimination of customized location identifiers can enhance the accuracy of item price and rebate administration.
Health Care Supply Chain Key Performance Indicator (KPI): Percentage of Items Stored in the Item Master Populated with a Global Location Number (GLN)
Purpose:
Measure a hospital or health system’s level of GLN adoption in purchase order (PO) transactions placed through an enterprise resource planning (ERP) system or e-commerce solution provider.
Value:
Enables the measurement of performance against preset GLN adoption goals.
Equation:
Number of PO lines sent out via an ERP/e-com. provider (or OCR'd) with a GLN
÷
Total number of PO lines sent out via an ERP/e-com. provider (or OCR'd)
=
Percentage of Purchase Order Lines Sent Out with a Global Location Number (GLN)Note: it is favorable to have a higher value for this Key. The higher the value the better.
Example:
6,000 ÷ 10,000 = 60% Percentage of Purchase Order Lines Sent Out with a Global Location Number (GLN)
Input Descriptions and Sources:
Input Name Includes Excludes Total number of PO lines sent out via an ERP/e-com. provider (or OCR'd) The total number of PO lines sent out via an ERP system or e-commerce solution provider, or, generated manually but scanned in using Optical Character Recognition (OCR) technology and sent out electronically. PO lines processed outside of the ERP system or e-commerce portal or placed with suppliers manually, unless an organization utilizes OCR technology or invoice scanning solutions. Number of PO lines sent out via an ERP/e-com. provider (or OCR'd) with a GLN Number of PO lines sent out electronically to all suppliers that reference or use a GLN to identify the hospital or health system. Points of Clarification:
Patient Safety
-
- A hospital has 500 expired products for a specific month.
- The hospital’s total number of products on-hand for that specific month is 50,000.
- Actual expired product recorded during periodic Supply Chain review of inventory
- Health Care Supply Chain Key Performance Indicator (KPI): Number of Expired/Obsolete/Wasted Product(s) as a Percentage of Total Purchases2
- Inventory Management, Managing Outdates, Policies & Procedures Manual for the Health Care Supply Chain, 2nd Edition3
- Does not include obsolete and wasted products. However, organizations may want to group expired/obsolete/wasted together as an overall loss.4
- Appropriate removal of a product based on its expiration date may vary by department based on historical usage.
- Expiration dates that appear as month and year (e.g. 11/20) are considered safe to use through the last day of the month.5
- “Total on-hand inventory” is the price determined by the organization.
- It is helpful to report the location or category of expired products to monitor for any trending.
- This Key should be tracked monthly and by department.
- Products for patient care are labeled with an expiration date after which the product is no longer considered appropriate for use. The loss through expiration can be avoided by keeping the next expired product in position to be used with the first expired first out (FEFO) and first in first out (FIFO) methods.
- Monitoring the historical usage rate of the product should be considered when determining the appropriate time to remove the product. Items that are not used daily should be organized and monitored to be redeployed within 90 days of expiration so the likelihood that they will be used next is greater.
- Supply Chain should remove items that are set to expire within 30 days of expiration and attempt to return them to the supplier for exchange or partial credit before accepting total loss.
- Consignment agreements should be used, when applicable.
- Inventory Management, Managing Outdates. Policies & Procedures Manual for the Health Care Supply Chain, 2nd Edition
- Health Care Supply Chain Key Performance Indicator (KPI): Number of Expired/Obsolete/Wasted Product(s) as a Percentage of Total Purchases.
- Inventory Management, Managing Outdates. Policies & Procedures Manual for the Health Care Supply Chain, 2nd Edition
- Health Care Supply Chain Key Performance Indicator (KPI): Number of Expired/Obsolete/Wasted Product(s) as a Percentage of Total Purchases.
- Inventory Management, Managing Outdates. Policies & Procedures Manual for the Health Care Supply Chain, 2nd Edition
Health Care Supply Chain Key Performance Indicator (KPI): Expired Products as a Percentage of Total Number of On-Hand Products in Inventory
Purpose:
Establish improvement targets or measure target achievement of the percentage of expired products within a health care organization’s inventory.
Value:
Minimize the loss of product through expiration date monitoring, which Supply Chain can control, and avoid using product that is no longer appropriate for patient use, thereby improving patient safety.1
Equation:
Number of expired products
÷
Total number of products on-hand
=
Expired Products as a Percentage of Total Number of On-Hand Products in InventoryNote: it is favorable to have a lower value for this Key. The lower the value the better.
Example:
500 ÷ 50,000 = 1% Expired Products as a Percentage of Total Number of On-Hand Products in Inventory
Input Descriptions and Sources:
Input Name Includes Excludes Total number of products on-hand Any medical/surgical supplies and medical devices within Supply Chain control with an expiration date. Products with no expiration date indicated, Pharmaceuticals, Office supplies and Services. Number of expired products All expired medical/surgical supplies and medical devices. Products with no expiration date indicated, Pharmaceuticals, Office supplies and Services. Sources of Data for KPI Calculation:
Points of Clarification:
References:
-
- A hospital’s number of product recall alerts closed is 9.
- The hospital’s total number of product recall alerts received is 10.
- Third part recall management sources
- FDA class ranking
- MedWatch reporting site
- Internal hospital data sources, including but not limited to, materials management information system (MMIS), electronic medical record (EMR), point of use (POU) systems, and others that would serve as references against recall notifications
- This Key assumes that an automated alert system and/or a centralized process exists within the health care organization. If your organization does not have either you should first establish a third-party alert/internal organizational process for recall management.
- This Key uses the FDA classification rankings for recall management (as follows); however, there are no federal mandates for recalls. AHRMM proposes these recommendations as guidelines for practice.
-
Class I recall: A situation in which there is a reasonable probability that the use of or exposure to a violative product will cause serious adverse health consequences or death.
- Example: A situation in which a catheter may kink or rupture during use leaving remnants behind in the patient that will cause serious injuries or death.
-
Class II recall: A situation in which use of or exposure to a violative product may cause temporary or medically reversible adverse health consequences or where the probability of serious adverse health consequences is remote.
- Example: A package defect in which sterility has been compromised and could lead to contamination of the medical device and result in patient complications.
-
Class III recall: A situation in which use of or exposure to a violative product is not likely to cause adverse health consequences.
- Example: Labeling defect where the expiration date does not appear on the product label. A mislabeled package that contains one size of a particular medical device but is labeled as another size.
- By tracking the compliance rate, health care organizations can determine the effectiveness of their recall management processes and how to set best practices/notable practices towards better management.
Health Care Supply Chain Key Performance Indicator (KPI): Recall Management – Closed Volume Percentage Rate
Purpose:
Measure the rate (as a percentage) at which a hospital/system has closed recalls received from the manufacturer and the U.S. Food and Drug Administration (FDA).
Value:
Allows hospitals/systems to assess their effectiveness in acknowledging and responding to recall product notifications. The implementation of such effective processes affects patient safety and care, and liability (both financial and risk) to the health care organization.
Equation:
Number of product recall alerts closed
÷
Total number of product recall alerts received
=
Closed Volume Percentage RateNote: it is favorable to have a higher value for this Key. The higher the value the better.
Example:
9 ÷ 10 = 90% Closed Volume Percentage Rate
Example:
Percent of closed volume: Target 75 percent for Class III recalls, 90 percent for Class II recalls, 100 percent for Class I recalls.
Example Response Rates:
Percent of closed volume: Target 75 percent for Class III recalls, 90 percent for Class II recalls, 100 percent for Class I recalls.
Input Descriptions and Sources:
Input Name Includes Excludes Total number of product recall alerts received The number of active recalls received for the month for products the facility has purchased, or currently has in-stock. These recalls could be notified by a third-party recall management system, or, mailed into the facility from sources including the FDA and manufacturers (Field notices, etc). Include recalls that are notified, and closed immediately because an item was not purchased, and if consignment or vendor “trunk stock”, the product must be tracked through facility tracking processes. Only include the volume found within the facility, as well as implants that will have a record on the patient chart. Product recalls received for products the facility does not have in stock. Number of product recall alerts closed The number of active recalls for the month for products the facility has purchased, or currently has in-stock that have been closed. Recalls received for commodity products that may have been utilized before notification due to a lack of usage tracking. Sources of Data for KPI Calculation:
Points of Clarification:
-
- A hospital’s number of product recall alerts remaining open after 7 days is 5.
- The hospital’s total number of product recall alerts received is 10.
- Closure of Class III recalls within 21 days
- Class II recalls within 14 days
- Class I recalls within 7 days
- This KPI assumes that an automated alert system and/or a centralized process exists within the health care organization. If your organization does not have either you should first establish a third-party alert/internal organizational process for recall management.
- This KPI uses the FDA classification rankings for recall management (as follows); however, there are no federal mandates for recalls. AHRMM proposes these recommendations as guidelines for practice.
-
Class I recall: A situation in which there is a reasonable probability that the use of or exposure to a violative product will cause serious adverse health consequences or death.
- Example: A situation in which a catheter may kink or rupture during use leaving remnants behind in the patient that will cause serious injuries or death.
-
Class II recall: A situation in which use of or exposure to a violative product may cause temporary or medically reversible adverse health consequences or where the probability of serious adverse health consequences is remote.
- Example: A package defect in which sterility has been compromised and could lead to contamination of the medical device and result in patient complications.
-
Class III recall: A situation in which use of or exposure to a violative product is not likely to cause adverse health consequences.
- Example: Labeling defect where the expiration date does not appear on the product label. A mislabeled package that contains one size of a particular medical device but is labeled as another size.
- By tracking the delayed recall rate, health care organizations can determine the effectiveness of their recall management processes and how to set best practices/notable practices towards better management.
Health Care Supply Chain Key Performance Indicator (KPI): Recall Management – Delayed Recalls Percentage Rate
Purpose:
Measure the percentage rate of open recalls received from the manufacturer and the U.S. Food and Drug Administration (FDA) that are at least 7 days past the notice date.
Value:
Allows hospitals/systems to assess their effectiveness in acknowledging and responding to recall product notifications. The implementation of such effective processes affects patient safety and care, and liability (both financial and risk) to the health care organization.
Equation:
Number of product recall alerts remaining open after 7 days
÷
Total number of product recall alerts received
=
Delayed Recalls Percentage RateNote: it is favorable to have a lower value for this Key. The lower the value the better.
Example:
5 ÷ 10 = 50% Delayed Recalls Percentage Rate
Example Response Rates:
Input Descriptions and Sources:
Input Name Includes Excludes Total number of product recall alerts received The number of active recalls received for the month for products the facility has purchased, or currently has in-stock. These recalls could be notified by a third-party recall management system, or, mailed into the facility from sources including the FDA and manufacturers (Field notices, etc). Include recalls that are notified, and closed immediately because an item was not purchased, and if consignment or vendor “trunk stock”, the product must be tracked through facility tracking processes. Only include the volume found within the facility, as well as implants that will have a record on the patient chart. Product recalls received for products the facility does not have in stock. Number of product recall alerts remaining open after 7 days The number of active recalls, remaining open for more than 7 days after the recall notice was received, for products the facility has purchased, or currently has in-stock. Recalls received for commodity products that may have been utilized before notification due to a lack of usage tracking. Points of Clarification:
Sustainability
-
- A hospital’s total office supply expense is $100,000,000.
- The hospital’s total EPP office supply expense is $20,000,000.
- The vendor will need to specify which office supplies are designated as EPP and which are not.
- In many cases the cost of EPP office products is competitive with or even lower than non-EPP products. An indirect cost benefit of some EPP products is the reduced total cost of ownership related to excessive packaging that must be handled, removed, recycled or disposed.
- Environmentally preferable means these products contain recycled materials, are recyclable, have less packaging, use non- or less- toxic chemicals, reduce waste or have other environmental and public health benefits.
Health Care Supply Chain Key Performance Indicator (KPI): EPP Products as Percentage (%) of Total Office Supply Expense
Purpose:
Measures the level of EPP Office Supply expense.
Value:
Identify opportunities to increase EPP Office Supply spend.
Equation:
EPP office supply expense
÷
Total office supply expense
=
Percentage of Office Supply Expense Comprised of Environmentally Preferable Purchasing (EPP) ProductsNote: it is favorable to have a higher value for this Key. The higher the value the better.
Example:
$20,000,000 ÷ $100,000,000 = 20% Percentage of Office Supply Expense Comprised of Environmentally Preferable Purchasing (EPP) Products
Input Descriptions and Sources:
Input Name Includes Excludes Total office supply expense Total office supply expense with all office supply vendor(s), including office equipment or furniture that is purchased with operational dollars. Office equipment or furniture that is purchased with capital dollars. EPP office supply expense All purchased office supplies the vendor(s) have designated as “EPP” including office equipment or furniture that is purchased with operational dollars. Any office equipment or furniture that is purchased with capital dollars. Points of Clarification:
-
- A hospital’s total spend on printing and copier paper is $500,000.
- The hospital’s spend on RCP is $25,000.
- The vendor will need to specify which paper is designed as RCP and which is not.
Health Care Supply Chain Key Performance Indicator (KPI): Recycled Products as Percentage (%) of Total Printing and Copier Paper Expense
Purpose:
Measure a health care organization’s percentage of spend on Recycled printing and Copier Paper (RCP).
Value:
Identity opportunities to increase organization’s RCP spend.
Equation:
Recycled Copier Paper (RCP) supply expense
÷
Total printing and copier paper expense
=
Percentage of total printing and copier paper expense spend on RCPNote: it is favorable to have a higher value for this Key. The higher the value the better.
Example:
$25,000 ÷ $500,000 = 5% Percentage of total printing and copier paper expense spend on RCP
Input Descriptions and Sources:
Input Name Includes Excludes Total printing and copier paper expense Total printing and copier paper spend with all vendor(s) in dollars. Other office supplies, print management fees, etc. Recycled Copier Paper (RCP) supply expense All printing and copier paper spend the vendor(s) have designated as RCP, in dollars. Points of Clarification:
-
- A hospital’s total spend on clinical department medical supplies (Surgery, Cath Lab, EP Lab, Interventional Radiology, Interventional GI) is $100M.
- The hospital’s total spend for reprocessed devices is $20M.
- Health care organizations increasingly recognize that third party reprocessing of medical devices labelled “single use device” or “SUD” is a safe and effective process that can help redirect valuable financial resources back into patient care.
- Most original equipment manufacturer (OEM)-designated single use devices are disposed of as bio-hazardous waste, which further increases the cost of disposal and uses more resources for the environmental processing of this medical waste.
Health Care Supply Chain Key Performance Indicator (KPI): Percentage of Medical Supplies That are Reprocessed
Purpose:
Measure percent of reprocessed medical supplies and devices.
Value:
Establish improvement targets of the percentage of reprocessed single use medical supplies and devices.
Equation:
Reprocessed medical devices expense
÷
Total clinical department medical supplies expense
=
Percentage of Medical Supplies That Are ReprocessedNote: it is favorable to have a higher value for this Key. The higher the value the better.
Example:
$20M ÷ $100M = 20% Percentage of Medical Supplies That Are Reprocessed
Input Descriptions and Sources:
Input Name Includes Excludes Total clinical department medical supplies expense Total medical supply spend for Surgery, Cath Lab, EP Lab, Interventional Radiology and Interventional GI departments, in dollars. Reprocessed medical devices expense Total spend for reprocessed devices from all vendor(s), in dollars. Points of Clarification:
-
- A hospital’s total linen pounds processed this month is 100,000 lbs.
- The hospital’s total adjusted patient days this month is 6,000.
- While differences may exist in each health care organization’s total linen pounds processed, the metric will normalize the differences between organizations through adjusted patient days.
- The audience can set monthly metric targets to understand the organization’s achievement towards reduced environmental impact and operational costs.
- This metric can be especially useful in terms of influencing behavior and practices of environmental services, nursing and clinician staff to reduce overall linen used and processed.
- The metric should be used directionally to determine how the organization is performing relative to peers.
- By managing and reducing the quantity of linen cleaned, processed and delivered, the hospital achieves sustainability goals through conserving water and electricity and reducing greenhouse gases.
- In general, a lower metric suggests that the hospital is effectively managing and reducing total linen pounds used and processed internally or by its external partner. The total adjusted patient day metric ensures that the metric is normalized across institutions, as it serves as a key driver for linen volumes.
Health Care Supply Chain Key Performance Indicator (KPI): Linen Pounds Per Adjusted Patient Day (APD)
Purpose:
Measure the quantity of linen cleaned and processed for the health care organization.
Value:
Identify opportunities to reduce linen pounds processed to lower operational costs and improve profitability for the hospital/system.
Equation:
Total linen processed (pounds)
÷
Adjusted Patient Days (APD)
=
Linen Pounds Per Adjusted Patient Day (APD)Note: it is favorable to have a higher value for this Key. The higher the value the better.
Example:
100,000 ÷ 6,000 = 16.7 Linen Pounds Per Adjusted Patient Day (APD)
Input Descriptions and Sources:
Input Name Includes Excludes Adjusted Patient Days (APD) Total number of Adjusted Patient Days (APD) for the month for your organization. Total linen processed (pounds) All hospital purchased or rented linen used and processed by the Environmental Services department and/or outsourced supplier, in pounds. Points of Clarification:
-
- A hospital’s total monthly copy and print volume is 1,000,000 pages.
- The hospital’s total employees or full-time equivalents is 1,000.
- While differences may exist in each organization’s total copy and print page volume, the metric will normalize the differences between organizations through FTEs.
- The metric can be used to influence behavior to leverage digital platforms and implement print policies (e.g. duplex printing) to reduce print volumes.
- Reducing paper and print volume and related consumables can have a significant impact on lowering the hospital/system’s environmental footprint.
Health Care Supply Chain Key Performance Indicator (KPI): Copy/Print Page Volumes Per Employee
Purpose:
Measure the hospital/system’s annual copy/print volume per full time employee.
Value:
Enables the hospital/system to identify opportunities to reduce total copy and print volume, use of paper, ink and other consumables.
Equation:
Total copy and print volume (by page)
÷
Total number of supply chain FTEs
=
Copy/Print Page Volumes Per FTENote: it is favorable to have a higher value for this Key. The higher the value the better.
Example:
1,000,000 ÷ 1,000 = 1,000 Total Copy/Print Page Volumes Per FTE
Input Descriptions and Sources:
Input Name Includes Excludes Total number of supply chain Full Time Equivalents (FTEs) List total number of FTE's in the supply chain department, whether employed full-time or part-time, with 1 "standard" FTE being based on a 40 hour working week. E.g. Someone working a 50 hour working week is 1.25 FTEs. Anyone who is not employed by your organisation (e.g. the staff of vendors providing "purchased services") Total copy and print volume (by page) The count, by page, of copy and print volume generated through your departmental printers this month. A double-sided print counts as one page. Print shop volume, and specialty print jobs with limited information on page volumes. Points of Clarification:
-
- A hospital’s total monthly waste processed is 100,000 lbs.
- Its APD for the same month is 6,000.
- While differences may exist in each organization’s total waste produced, the metric will normalize the differences between organizations through adjusted patient days./li>
- The audience can set annual metric targets to understand the organization’s achievement towards reducing environmental impact and operational costs.
- This metric can be especially helpful to engage and influence the behaviors of key operational stakeholders, such as Environmental Services, Nursing and Supply Chain staff.
Health Care Supply Chain Key Performance Indicator (KPI): Waste Pounds Per Adjusted Patient Day (APD)
Purpose:
Measures the hospital/system’s waste generation per APD.
Value:
Identifies opportunities to reduce waste generation to lower operational costs and improve profitability for the hospital/system.
Equation:
Total waste processed (pounds)
÷
Adjusted Patient Days (APD)
=
Waste Pounds Per Adjusted Patient Day (APD)Note: it is favorable to have a lower value for this Key. The lower the value the better.
Example:
100,000 ÷ 6,000 = 16.7 Waste Pounds Per Adjusted Patient Day (APD)
Input Descriptions and Sources:
Input Name Includes Excludes Adjusted Patient Days (APD) Total number of Adjusted Patient Days (APD) for the month for your organization. Total waste processed (pounds) Waste including solid waste, regulated medical waste (RMW), recycling, hazardous waste, pharmaceutical waste and food waste for the month, in pounds. Points of Clarification:
Finance
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- An organization’s stance on making partial payments will influence this metric.
Health Care Supply Chain Key Performance Indicator (KPI): Supply Accounts Payable (AP) Days
Purpose:
Measures how effectively the health care organization is managing its payables.
Value:
May be utilized to ensure discounts are optimized, as well as provide greater insight into payment trends and cash flow fluctuations.
Equation:
Firstly, add the opening AP dollars at the beginning of the month and closing AP dollars at the end of the month, and divide the sum by two (2) – this will provide the ‘AP average’. Next, divide the ‘Total supply expense’ by the ‘AP average’ to calculate the ‘AP turns’. Lastly, divide 30.4 days (average day count for a month) by the ‘AP turns’ to calculate the AP Days.
(Opening AP dollars at month start + closing AP dollars at month end) ÷ 2 = AP average
Total supply expense ÷ AP average = AP turns
30.4 ÷ AP turns = AP DaysNote: it is favorable to have a lower value for this Key. The lower the value the better. An increase in AP days over time may indicate a worsening financial condition. An increase in AP days over time may indicate a worsening financial condition.
Example:
The system controller for Sergeant’s Health would like to determine the AP days for the last month. The opening AP balance was $700,000 and the closing balance was $774,000. Total supply expense for the past month was $550,000. The AP days are calculated as:
Opening AP dollars $700,000 + closing AP dollars $774,000 = $1,474,000 ÷ 2 = $737,000 AP average
Total supply expense $550,000 ÷ $737,000 = 0.75 AP turns
30.4 (days) ÷ 0.75 AP turns = 41 AP DaysInput Descriptions and Sources:
Input Name Includes Excludes Total supply expense All medical, non-medical, inventory and direct-ship/on-consignment supply expense. For medical, include expenses for Surgery, Cath Lab, EP Lab, Interventional Radiology and Interventional GI departments. For non-medical, include Office Supplies, Purchased Services, Facilities, Information Technology, Maintenance, etc. For consignment expenses, include freight, standard distribution costs and sales-and-use tax (minus rebates). Refer to AHRMM/HFMA supply categories for further details. Purchased services, labor and labor-related expenses and services (salaries, bonuses), real estate, physician payments, capital, utilities, some tangible items that are frequently provided as part of service costs (e.g. toner that is part of a print contract), taxes, reimbursements to individuals or contractors, insurance, bad debt, depreciation. Opening AP dollars The opening value for your Accounts Payable (AP) dollars at the start of a given month. Closing AP dollars The closing value for your Accounts Payable (AP) dollars at the end of a given month. Points of Clarification:
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- Total supply expense: $1,000,000
- Number of CMI Adjusted Discharges: 96,000
- Total supply expense: $1,000,000
- Gross inpatient revenue: $10,000,000
- Gross outpatient revenue: $8,000,000
- Inpatient discharges: 60,000
- CMI: 2.0
- The adjusted equivalent discharge calculation takes into account net inpatient revenue (which is measured as gross patient service revenue minus contractual allowances, charity care and bad debt) and outpatient revenue. The result of this formula allows outpatient activity to be factored into the volume statistic.
- CMI adjustment gives additional weight to the volume statistics for high acuity patients. CMI is a standardized formula that is driven by diagnostic related group (DRG) mix of inpatients.
- CMI index is not always reflective of the supply utilization patterns for hospitals with a high volume of complex, technology heavy surgical or interventional cases. They would benefit by calculating supply cost per surgical case or procedure in addition to supply cost per adjusted equivalent discharge.
Health Care Supply Chain Key Performance Indicator (KPI): Supply Expense Per Case Mix Index (CMI) Adjusted Discharge
Purpose:
May be used to measure supply expense on a volume basis. Case mix index (CMI) adjusts to account for patient acuity.
Value:
Enables the organization to measure and trend supply expense that is adjusted for volume and patient acuity.
Equation:
Use if you have the Number of CMI Adjusted Discharges available:
Total supply expense ÷ Number of CMI Adjusted Discharges = Supply expense per CMI adjusted discharge
Note: it is favorable to have a lower value for this Key. The lower the value the better.
Example:
Source data, a hospital that has:
$1,000,000 Total Supply Expense
÷
96,000 Number of CMI Adjusted Discharges
=
$10.42 Supply expense per CMI adjusted dischargeEquation:
Use if you don't have the Number of CMI Adjusted Discharges available:
See the previous equation on how to obtain the ‘Total supply expense’. Next, divide your Gross outpatient revenue by your Gross inpatient revenue to derive your ‘Adjustment’. Next, multiply this ‘Adjustment’ by the Number of inpatient discharges to derive your ‘Adjusted discharges’. Then, multiply the ‘Adjusted discharges’ by the Case Mix Index (CMI) to derive ‘Number of CMI Adjusted Discharges’. Lastly, simply divide the total supply expense by the Number of CMI Adjusted Discharges to calculate the Key.
Gross outpatient revenue / Gross inpatient revenue = Adjustment
Adjustment x Number of inpatient discharges = Adjusted discharges
Adjusted discharges x CMI = Number of CMI Adjusted Discharges
Total supply expense ÷ Number of CMI Adjusted Discharges = Supply expense per CMI adjusted dischargeNote: it is favorable to have a lower value for this Key. The lower the value the better.
Example:
Source data, a hospital that has:
Gross outpatient revenue $8,000,000 / Gross inpatient revenue $10,000,000 = 0.8 Adjustment
0.8 x Number of inpatient discharges 60,000= 48,000 adjusted discharges
48,000 x CMI of 2.0 = 96,000 CMI Adjusted Discharges
Total supply expense $1,000,000 ÷ 96,000 = $10.42 supply expense per CMI adjusted dischargeInput Descriptions and Sources:
Input Name Includes Excludes Total supply expense All medical, non-medical, inventory and direct-ship/on-consignment supply expense. For medical, include expenses for Surgery, Cath Lab, EP Lab, Interventional Radiology and Interventional GI departments. For non-medical, include Office Supplies, Purchased Services, Facilities, Information Technology, Maintenance, etc. For consignment expenses, include freight, standard distribution costs and sales-and-use tax (minus rebates). Refer to AHRMM/HFMA supply categories for further details. Purchased services, labor and labor-related expenses and services (salaries, bonuses), real estate, physician payments, capital, utilities, some tangible items that are frequently provided as part of service costs (e.g. toner that is part of a print contract), taxes, reimbursements to individuals or contractors, insurance, bad debt, depreciation. Gross outpatient revenue All gross outpatient Revenue such as Medicare, Commercial Insurance or self-pay that includes all deductibles such as Adjustments, Reimbursements, Rebates, etc. Refer to AHRMM/HFMA supply categories for further details. Contractual allowances, Charity care, Bad debt, Labor-related expenses and services, Some tangible items that are frequently provided as part of service costs (e.g. toner that is part of a copier contract), Purchased services Gross inpatient revenue All gross inpatient Revenue such as Medicare, Commercial Insurance or self-pay that includes all deductibles such as Adjustments, Reimbursements, Rebates, etc. Refer to AHRMM/HFMA supply categories for further details. Contractual allowances, Charity care, Bad debt, Labor-related expenses and services, Some tangible items that are frequently provided as part of service costs (e.g. toner that is part of a copier contract), Purchased services Number of inpatient discharges This is the total inpatient discharges for the month. Case Mix Index (CMI) Case Mix Index (CMI) is a standardized formula that is driven by diagnostic related group (DRG) mix of inpatients. Input the index here. Number of Case Mix Index (CMI) adjusted discharges The total inpatient discharges for the month, adjusted with the Case Mix Index (CMI). Points of Clarification:
Points of Clarification:
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- Total supply expense: $1,000,000
- Net inpatient revenue: $3,800,000
- Net outpatient revenue: $2,200,000
- Changes to this metric may be caused by both supply expense and net revenue shifts. Therefore, a root cause analysis must be completed prior to developing action plans. For example, if revenue reporting is favorable, this KPI may cause the health system to underestimate the potential of supply expense savings opportunities. The opposite is also true, if revenue reporting is unfavorable, supply expense saving opportunities may be overestimated.
- Should there be a fluctuation in supply expense as a percentage of net patient revenue, it may indicate a change in supply consumption or utilization behavior (e.g. adoption of new supplies, emerging or disrupting technologies, change in practice variation, pricing, etc.) with no corresponding increase in patient revenue.
- If using this metric for benchmarking keep in mind it does not take into account regional and national differences in reimbursement rates.
Health Care Supply Chain Key Performance Indicator (KPI): Supply Expense as Percent of Net Patient Revenue
Purpose:
This Key is a high-level metric that monitors the relationship between supply expense and net patient revenue.
Value:
Changes to this metric may indicate a shift in the relationship between supply expense and the associated net patient revenue. If the change is a trend (versus single point of variation), it should trigger an evaluation of the root cause and the development of an action plan. Causes can range from increased supply cost or increased supply utilization, to changes in the patient and/or payor mix that effect net revenue.
Equation:
Total Supply Expense ÷ Net Patient Revenue = Supply Expense as % of Net Patient Revenue
Note: it is favorable to have a lower value for this Key.
Example:
Source data, a hospital that has:
Net inpatient revenue $3,800,000 + Net outpatient revenue $2,200,000 = Net patient revenue of $6,000,000
$1,000,000 Total Supply Expense
÷
$6,000,000 Net Patient Revenue
=
16.67% Supply Expense as % of Net Patient RevenueInput Descriptions and Sources:
Input Name Includes Excludes Net patient revenue All inpatient and outpatient revenue such as Medicare, Commercial Insurance or self-pay. All deductibles such as Adjustments, Reimbursements, Rebates, etc. Total supply expense All medical, non-medical, inventory and direct-ship/on-consignment supply expense. For medical, include expenses for Surgery, Cath Lab, EP Lab, Interventional Radiology and Interventional GI departments. For non-medical, include Office Supplies, Purchased Services, Facilities, Information Technology, Maintenance, etc. For consignment expenses, include freight, standard distribution costs and sales-and-use tax (minus rebates). Refer to AHRMM/HFMA supply categories for further details. Purchased services, labor and labor-related expenses and services (salaries, bonuses), real estate, physician payments, capital, utilities, some tangible items that are frequently provided as part of service costs (e.g. toner that is part of a print contract), taxes, reimbursements to individuals or contractors, insurance, bad debt, depreciation. Points of Clarification:
-
- Total spend actively sourced/managed by supply chain: $600,000,000
- Total supply expense: $750,000,000
- Total purchased services expense: $250,000,000
- E-procurement systems: For many organizations, spend managed by an e-procurement system has gone through an approval process and/or through a catalog (whether hosted or punch-out) and is more likely to be managed spend than other methods of buying.
- Contract management systems: These systems can provide information on which vendors and goods have a contract in place and are therefore likely to be influenceable or managed spend.
- Vendor management systems: They contain additional information about the vendors to help determine which transactions are influenceable and which are not.
- The intent is "sourceable" spend not just "sourced" spend by supply chain professionals. Expenditures on taxes, employee base salaries and bonuses, charitable contributions, organizational memberships, dividends, securities, interest payments and stock repurchases should be excluded from the spend amount.
- Spend actively sourced/managed by procurement professionals refers to spend that the supply chain organization led and/or was involved in the process of supplier selection and pricing.
- Spend under management is not equal to identified or realized savings.
- Spend management of 100 percent is not necessarily attainable or desirable.
- Analyze This: Procurement Metrics That Matter, SIG Global Executive Summit, 2014
- Spend Under Management, Institute for Supply Management (ISM)
- What Is ‘Spend’?—Defining Spend in the Procurement Process, American City & County, July 2013
- Your Definition of Spend Under Management Is Wrong
- “Spend Under Management?” Odds Are You’re Doing It Wrong
Health Care Supply Chain Key Performance Indicator (KPI): Spend Under Management (SUM)
Purpose:
To provide leadership with a measure of the amount of total spend that is being effectively managed by the organization’s supply chain team.
Value:
As the organization’s spend under management increases, the ability to optimize costs and forecast expenses increases. Effectively managed spend gives the organization greater control over the risk of using inappropriate products/services. It prevents the risk of having contracts in place that are in legal conflict with each other. SUM also identifies “maverick” spend in the organization.
Equation:
Firstly, sum Total Supply Expense and Total purchased services expense to arrive at your ‘Total supply and purchased services expense’. To calculate SUM, divide spend actively sourced/managed by supply chain by this ‘Total supply and purchased services expense’, and multiple the result by 100.
(Spend actively sourced/managed by supply chain ÷ Total supply and purchased services expense) × 100 = SUM percentage
Note: it is favorable to have a higher value for this Key. The higher the value the better.
Example:
$600,000,000 ÷ $1,000,000,000 = 0.60 × 100 = 60% SUM percentage
Input Descriptions and Sources:
Input Name Includes Excludes Total supply expense All medical, non-medical, inventory and direct-ship/on-consignment supply expense. For medical, include expenses for Surgery, Cath Lab, EP Lab, Interventional Radiology and Interventional GI departments. For non-medical, include Office Supplies, Purchased Services, Facilities, Information Technology, Maintenance, etc. For consignment expenses, include freight, standard distribution costs and sales-and-use tax (minus rebates). Refer to AHRMM/HFMA supply categories for further details. Purchased services, labor and labor-related expenses and services (salaries, bonuses), real estate, physician payments, capital, utilities, some tangible items that are frequently provided as part of service costs (e.g. toner that is part of a print contract), taxes, reimbursements to individuals or contractors, insurance, bad debt, depreciation. Total purchased services expense All Purchased Services expenses (clinical and non-clinical) such as Facilities, Information Technology, Maintenance, etc. Taxes, Salaries and bonuses, Charitable contributions, Dividends, securities, interest payments, Stock repurchases, Spend actively sourced/managed by supply chain Spend actively sourced/managed by supply chain professionals refers to spend that the supply chain organization led and/or was involved in the process of supplier selection, product evaluations, pricing, etc. Everything not actively sourced/managed by supply chain. Points of Clarification:
Data usually comes from multiple sources. It is extremely important to ensure that all sources are included. The main sources of data are the organization’s accounts payable (AP) system, which may be a module within an enterprise resource planning (ERP) system, and a purchasing card (p-card) system. If payments are made to third parties other than through the AP or p-card systems (e.g. voucher system, direct pay system, or travel and expense system), they should also be included.
If available, a health care organization may find the following systems useful in determining its overall, non-payroll, influenceable and managed spend because they include additional information about the organization’s financial transactions:
Generally accepted accounting principles (GAAP) for health care providers calls for supplies and purchased services as separate expense lines on the income statement. While much of this expense may not be the spend sourced by procurement, it should be the goal of the professional to capture this spend and include it in the denominator of this KPI.
Points of Clarification:
Some content adapted from the following:
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- Total inventory supply expense = $550,000
- Opening inventory dollars balance = $600,000
- Closing inventory dollars balance = $400,000
Health Care Supply Chain Key Performance Indicator (KPI): Inventory Turns
Purpose:
Measures the hospital or health system’s ability to manage its inventory of products to support the delivery of care.
Value:
Allows hospital executives and supply chain leaders to understand the organization’s ability to order, store and deliver its products required for the delivery of care.
Equation:
Firstly, add the opening inventory dollars at the beginning of the month and closing inventory dollars at the end of the month, and divide this sum by two (2) – this will provide the ‘Average inventory’. To calculate the key, simply divide the Total Inventory Supply Expense by the average inventory.
(Opening inventory dollars at month start + closing inventory dollars at month end) ÷ 2 = Average inventory
Total inventory supply expense ÷ Average inventory = Inventory turnsNote: it is favorable to have a higher value for this Key. The higher the value the better.
Example:
$600,000 Opening inventory dollars balance + $400,000 Closing inventory dollars balance = $1,000,000
$1,000,000 ÷ 2 = $500,000 Average inventory
$550,000 Total inventory supply expense ÷ $500,000 Average inventory = 1.1 monthly inventory turnsInput Descriptions and Sources:
Input Name Includes Excludes Total inventory supply expense All medical and non-medical inventory supply expense. For medical, include expenses for Surgery, Cath Lab, EP Lab, Interventional Radiology and Interventional GI departments. For non-medical, include Office Supplies, Purchased Services, Facilities, Information Technology, Maintenance, etc. All direct-ship/on-consignment expenses, purchased services, labor and labor-related expenses and services (salaries, bonuses), real estate, physician payments, capital, utilities, some tangible items that are frequently provided as part of service costs (e.g. toner that is part of a print contract), taxes, reimbursements to individuals or contractors, insurance, bad debt, depreciation. Opening inventory dollars If your opening balances are recorded across multiple cost centers, sum all Opening Inventory Dollar amounts to arrive at this value. This value is for the month you are submitting data for, not a rolling 12 months period.