Are hospitals losing money on prosthetics?

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Private hospitals get reimbursed the costs of prosthetics used on patient procedures from health funds. The amount that hospitals pay and the amount that they may reclaim from health funds is governed by the Federal government’s rebate schedule. The nett impact on hospitals ought to be neutral.  This post explores why this assumption is off the mark and how, in fact, private hospitals are losing money.

From the hospital supply chain point of view, prosthetics fall into different categories by the way they ordered, received, stored, used and are returned if not used within a time frame. For the purpose of this post, the categories are:

    • Purchased and stored.
    • Consigned and stored.
    • Received in loan kits.
    • Adhoc receipts.

Purchased and stored

These prosthetic items are regularly used items that are purchased by the hospital and stored in the operating room sterile core. The minimum/maximum par levels are usually managed by theatre clinicians. These goods are paid for in advance of usage.

Consigned and stored

These prosthetic items are consigned to the hospital by the vendor and are, in theory, paid for when the items are used.

Received in loan kits

These are items that are usually requested for supply directly from vendors by the surgeon’s rooms for procedures booked at a hospital.

Loan kits contain a number of prosthetic items of various sizes because the exact size of the item to be used is case dependent. Items not used are returned. The prosthetic items may be supplied in sterile packaging or in unsterile form. Non-sterile items must be sterialised by the hospital.

Along with the prosthetic items, in the loan set, the vendor ships the instruments required to perform the surgery. These instruments are specific to each vendor and are not interchangeable. This is similar to the power cables that are used for many branded devices. The instruments must be sterilised before use. Sometimes, the hospital may also own its own set of vendor specific instruments. It is difficult to tell vendor owned instruments from hospital owned instruments.

Adhoc receipts

Because of the dynamic nature of the procedures done, sometimes items have to be brought in while a procedure is being performed. At such times, if the items cannot be found in the hospital’s sterile core, they have to be borrowed from a nearby hospital or are even brought in by vendor representatives. Such emergency deliveries are not always properly documented. Payment and return of these items depend on the goodwill of the parties involved.

Documenting usage

For hospitals to recover the money they have spent on prosthetics they must document every prosthetic item used. This task falls upon a theatre nurse, who is busy doing several things related to the patient on the table at the same time. This is a situation that James Reason and Don Norman, experts in the causes of human error say put people in a double bind. Such situations are inadvertently designed to cause mental slips resulting in error. This is what happened to me when I went into an operating suite to demonstrate how easy it was to list the items used during a procedure. My task was to list items used, but I got caught up with focussing on the patient and forgetting to list the items used.

Designing for accuracy

In 1997 Kevin Ashton discovered that people focussed on primary tasks cannot input changing information into computers.[1] By providing computers with context-aware sensors to record information instead he saved Proctor and Gamble billions. To help people understand his invention he called it ‘the Internet of Things’.

Touch to Know a startup established by three co-founders with the support of an experienced and knowledgable advisory board has set out to save lives and increase hospital margins. Touch to Know has used Ashton’s insights to build a solution for hospitals. Please contact us to see how this model can work for your hospital. Download a copy of our book, ‘Hidden Hospital Hazards: Saving Lives and Improving Margins’ and ask for a demonstration in your hospital.

[1] ‘Defining and classifying error’, in James Reason (1990), ‘Human Error’’, Cambridge University Press, 32 Avenue of the Americas, New York, NY 10013-2473, USA.
‘Intended actions and mistakes’, in James Reason (2008), ‘The Human Contribution: Unsafe Acts, Accidents and Heroic Recoveries, CRC Press, Taylor Francis Group, Boca Raton, London, New York.
‘Two types of errors slips and mistakes’, in Don Norman (2013), ‘The Design of Everyday Things: Revised Edition, Basic Books, New York.
[2] Kevin Ashton (2015), ‘How to Fly a Horse: The Secret History of Creation, Invention, and Discovery’, Penguin Random House, UK.

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Want to Reduce Harm, Save Lives & Improve Hospital Margins?

Subscribe now to discover how to simplify the tracking, tracing and recording of medical consumables and devices used, in real time. Get your free copy of our eBook: Hidden Hospital Hazards.