Another hidden cost is loaner and shipping fees, which are often not visible to OR nurse managers. These fees, if allowed, can add up quickly and exceed $40,000 or more per year. Shipping fees can also affect the bottom line, reaching $30,000 annually in a rural hospital, for example, when sales reps refuse to keep instrument sets in-house and surgeons are not included in the decision.

Also, non-consignment implants grow out of control when sales reps are allowed to re-stock and re-order their own product line. In addition, replacement costs associated with lost instruments due to poorly managed room turnover procedures can exceed $25,000 annually.

When OR materials management works directly with the orthopedic sales representatives and surgeons, they can streamline inventory and improve outcomes while also reducing expense. For example, tracking and reporting "opened but not used" implants to surgical committees can be an eye opener for surgeons. Reporting this data brings attention to a loss expense that can easily exceed $1,000,000 annually and is rarely visible to them. Once surgeons see the impact they have on the bottom line, their response tends to be more supportive and prudent. In addition, operating expenses associated with hip and knee implants can no longer be ignored because of annual cuts in Medicare reimbursements. Having an OR materials manager available to address implant-related issues and deal with these stakeholders allows the OR nurse manager to maintain a patient-centered focus.

A critical surgical support category that’s often overlooked is the facility’s sterilization and decontamination equipment and the operations supporting instrument turnover. Between the OR and central services (CS), the annual expense for capital equipment, service contracts, repairs and disposable supplies can be in the millions for these functions. The CS and OR often make separate decisions without consulting one another, and the CS manager is typically forced to use the lowest bidder for all expenses regardless of other considerations. This can result in two or more different service contracts with competing vendors, which can increase overall operating expenses for the facility. Furthermore, disposable supplies and repair parts expenses become fragmented in the budget, future buying power is reduced, and standardization is lost.

By standardizing to a single vendor (ours is STERIS Corporation, Mentor, OH) who can supply a complete array of high quality equipment, service, education and long-term consultative support for both CS and OR operations, the OR materials manager can ensure cost reductions in a number of ways. If the vendor’s expertise covers both areas with service and educational support, then all capital and operating expense aspects for OR and CS materials services, OR lights, tables, integration, sterilizers, instrument tracking, endoscope processing, decontamination equipment, disinfection chemicals, sterility assurance, and service can be managed in a collaborative and highly cost-efficient manner.

One-stop shopping for equipment, consumables and services eliminates time and confusion and helps to optimize CS and OR operations. Standardizing to one company also provides a bargaining chip for lowering service agreement costs by committing to multi-year contracts and negotiating for additional early sign-on discounts. Additional savings can also be achieved for OR and CS expansion projects when standardization already exists between the two departments.

OR scrub technician returns stock

With our selected vendor we also were able to add in an instrument tracking system, which allows us even more potential for future negotiations. In my opinion, instrument tracking systems should be mandated for all central sterilization departments nationwide - no exceptions.

Even in today’s advanced surgical suites you can still find instrument count sheets "home-made" by the department in programs such as Microsoft Word and Excel, or (my personal favorite) hand-written count sheets with very little standardization or detail. Often surgical instrument sets have numerous vendors represented on one instrument count sheet, again with little standardization. These methods increase the chance for errors by CS staff and result in tremendous cost to the department in terms of instrument set downtime, additional investment/expense for back-up inventories, increased flash sterilization, and delays to surgery.

It is fast becoming a requirement to use standardized count sheets that have the ability to track instrument sets, employee productivity, biological monitoring, repair tracking, and web-based back-up of computerized records. CMS and the Joint Commission are paying close attention to sterile processing and instrument tracking these days, and FDA has placed additional emphasis on the importance of following manufacturer’s written instructions. In this regulatory environment, we cannot allow untrained individuals to manage sterile processing functions and must be fully accountable for controlling expenses and ensuring patient safety.

Another opportunity for standardization is to select one primary vendor for surgical instruments attached to a repair service. We selected Cardinal V. Mueller with CareFusion On-site Repair, which provides additional instrument support and standardization and improves our instrument management overall. In addition, the education that’s offered by an experienced instrument repair provider is priceless to the CS process.

For optimal instrument management, the operating expense for surgical instruments should be under the direction of the department that assembles, sterilizes, and replaces instrumentation. The CS department should also have the authority to determine how many sets should be maintained in the surgical set inventory, and CS managers need the ability to purchase instrument sets through operating budgets rather than as capital purchases. This financial practice allows them to respond in a timely way to current demands, changes in volume and new surgeons. Unfortunately, even if OR leadership supports this practice, their opinion may be overlooked and devalued by hospital administration who may not fully understand the complex interdependent nature of CS and OR functions. In this case, an OR materials manager can educate administrators and help achieve this type of purchasing authority.

Although operating room environmental services is a challenging function, a service-oriented leadership team can manage this function well. OR EVS staff have the potential to improve the overall cleanliness and sterility assurance in OR suites. From room turnover to patient transportation their impact is significant, so they need to be properly supported and included in departmental discussions.

Properly trained operating room assistants keep OR floors, spaces and some equipment under control, even performing minor repairs on a number of routinely used pieces of equipment. Their scope of service includes room turnover, floor care, terminal room cleaning, waste management, scrub management, mobile equipment management, minor repairs, limb holding, and table terminalization, just to name a few.

They are another element of the OR materials service that OR materials managers, rather than OR nurse managers, should be overseeing.

The charge capture (or data entry) personnel are another often-overlooked group, yet they have the potential to impact the surgical department’s financial accounting. Having charge capture staff directly in the OR with the ability to audit and input billing the day of surgery can greatly improve data capture timeliness and the accuracy of post-case charge analysis. They have the ability to review nursing documentation and correct mistakes, and can review daily billing on the day of surgery, not days later when nursing staff is not available. And a preference card coordinator working with charge capture staff can address corrections to billing and card management more efficiently.

In addition, when preference card management and billing are managed together, the cost per case becomes more credible. Immediate post-case data entry offers the ability to account for what is pulled, used, and wasted for each surgical procedure. This provides data for utilization reports that identify waste and actual cost per case. Combining implant tracking and OR scheduling with the billing function adds even more continuity, accuracy and control to the charge capture function.

When you look at the complexity of the biggest purchasing department in hospitals today, it’s easy to see just how challenging the overall OR management requirements are. Healthcare providers are under fire and looking for ways to restructure their overwhelming expenses. In this case, restructuring management roles and focusing on waste and wasteful practices could make a huge impact on the surgical bottom line.

Convincing today’s hospital administrators of the need for these changes may not be as hard as it once was because of the intense scrutiny on U.S. healthcare costs. However, it will help if you are armed with a detailed understanding of materials processes and service groups, and with the potential savings that can be achieved by restructuring people and budgets.

Making changes to the OR leadership structure can also present some opportunities to enhance positive patient outcomes. Once they are freed from materials management responsibilities, OR nursing leadership can continue to strengthen relations with patients and families by investing more of their time visiting patients pre- and post-surgery.

As things stand today, if you’ve seen one hospital… you’ve seen ONE hospital; no two are alike, nor are their organizational structures. It’s time to embrace a business management model with sound service-orientated practices that provide a consistent standard of care from hospital to hospital. This has the potential to reduce provider costs and ultimately benefit patients, the hospital, and the surrounding communities in many ways.

See Part one, "OR materials management: Building a support structure for best practices" at