Introduction

Health care operations is a complex topic, encompassing many aspects including (but not limited to) service locations, personnel, policy, leadership, finance, strategy, and quality. While the industry is generally viewed as a service industry, its systems are faced with complex operational challenges including supply chain, strategy, quality and project management, and service delivery. Given the changing landscape from a health reform and financial perspective, health care organizations must focus on improving their operations and improving efficiencies to remain competitive. A component of the health care delivery process is the procurement, stocking, and dispensing of supplies. Within this process, opportunities exist to add value, reduce waste, and create standardization throughout the organization (Kros & Brown, 2013). Effective management of health care operations creates value for all stakeholders.One way to potentially create value in operations is through inventory management. Whether you realize it or not, you are most likely familiar with the concept of inventory. For example, when you visit the grocery store perhaps they are out of your favorite ice cream, or, before you left home, maybe you took stock of your cupboards to determine what items you need to pick up on the grocery store trip. Both of these are everyday examples of the concept of inventory. In health care, inventory management is vital for many reasons, including regulatory compliance and investment protection. When we think about the inventory of a health care organization, we must take into consideration items ranging from pots and pans to medical devices and surgical instruments (Kros & Brown, 2013).Finance and accounting principles in health care operations and supply chain management are key concepts to understand, at least at a foundational level. At a minimum, health care professionals should be familiar with the basic components of financial statements and financial ratios utilized by health care organizations, as well as concepts related to the value of money. Over the years, the health care industry has been subject to several changes in reimbursement methodologies. Each methodology was implemented with the intent of addressing the concerns facing the industry at the time (fraud, quality, utilization, et cetera). Current methodologies regulate the payment amount or payment rate that organizations will receive in return for treating each patient. Changes to these payment methods have had major financial implications for health care organizations (Kros & Brown, 2013). To remain fiscally responsible, health care professionals must streamline operations to ensure costs are managed, productivity is maximized, and resources are optimized (Kros & Brown, 2013). Outside of payroll and benefits, supplies and materials are close contenders for health care organizations’ highest expenses. Regardless of whether you work in a clinical or non-clinical unit, it is imperative to understand how to read and understand the organization’s financial statements. In addition to financial statements, each department operates off of an annual budget. These budgets are established as financial guidelines for the department’s operations and always contain line items for materials and supplies.

Reference

Kros, J. F., & Brown, E. C. (2013). Health care operations and supply chain management: Operations, planning, and control. San Francisco, CA: Jossey-Bass.

Demonstration of Proficiency

By successfully completing this assessment, you will demonstrate your proficiency in the course competencies through the following assessment scoring guide criteria:

• Competency 1: Describe when and how the senior leader would directly impact health care operations.
  • Analyze leaders’ responsibilities in addressing the identified inventory recommendations.
• Competency 2: Analyze the impact of the various success factors of a health care organization.
  • Explain inventory control.
• Competency 3: Analyze the concept of competitive strength by considering efficiency and effectiveness of organizational processes.
  • Describe options for inventory ordering.
  • Analyze the implications of having inventory control.
• Competency 4: Apply management concepts to lead an efficient health care system.
  • Present findings based upon review of the EOQ and organizational data.
• Competency 5: Communicate in a manner that is scholarly, professional, and respectful of the diversity, dignity, and integrity of others and is consistent with health care professionals.
  • Write following APA style for in-text citations, quotes, and references.
  • Write clearly and logically, with correct use of spelling, grammar, punctuation, and mechanics.

Preparation

This assessment is based on the Vila Health: Pacemaker Inventory media simulation, which is linked in the Vila Health: Pacemaker Inventory section of Assessment 1. Go to that section to complete the scenario at this time. You will use the information you gather in this scenario, in which you assume the role of an inventory analyst, to provide context and information necessary for the assessment.If you have questions about or would like to review tips on using PowerPoint, the following resources may be useful as you prepare to complete this assessment:

• Guidelines for Effective PowerPoint Presentations [PPTX].
• Microsoft Office Software Tutorials.

Instructions

Based on the media simulation you completed, one of the directors has asked you to examine the the ordering, stocking, and use of pacemakers at the Peta King Heart Institute at St. Anthony Medical Center. In addition to your inventory investigation, you have been encouraged to research additional topics, such as inventory management, inventory control, inventory ordering systems, economic order quantity (EOQ) calculations, and inventory stocking techniques. As you research, consider industries outside of health care, as techniques utilized in other industries may apply. After you have concluded your investigation and research, you have been asked to prepare a PowerPoint for the director to help them communicate with other stakeholders the basics of inventory control, the importance of having inventory control strategies, and the current state of the Peta King Heart Institute’s pacemaker inventory.Your PowerPoint needs to address the following criteria. (Note: The questions under each criterion are there to help you think through each.)

1. Explain what inventory control is.
   1. Why are EOQs conducted?
   2. What is impact of the heart institute’s volumes (past, present, and projected) from a strategic perspective (related to pacemaker use) on the overall success of the organization?
2. Describe options for inventory ordering.
   1. What are quantities to order?
   2. What are potential inventory ordering systems?
   3. What are the pros and cons of the identified systems?
   4. When should other products be considered?
   5. When should alternative stocking be considered (ordering inventory vs. consignment)?
3. Analyze leaders’ responsibilities in addressing the identified inventory recommendations.
   1. What should leaders address related to inventory?
   2. What are the consequences of leaders not addressing inventory needs?
   3. What are the implications of not adhering to the recommended inventory purchase?
4. Analyze the implications of having inventory control.
   1. How does efficient inventory control impact the organization’s effectiveness?
   2. What are the implications for an organization’s effectiveness if inventory control is absent or sub-standard?
5. Present your findings based upon your review of the EOQ and organizational data.
   1. How does product use this year compare to that of the previous year, as well as the projected budget year?
   2. What are your finding and recommendations?

You might want to (but do not have to) organize your presentation using the following outline:

• Slide 1: Title of the presentation.
• Slide 2: Overview of inventory control.
• Slide 3: Review of EOQ purpose and data.
• Slide 4: Recommendations for inventory ordering.
• Slide 5: Leadership.
• Slide 6: Implications.
• Slide 7: Conclusions.
• Slide 8: Reference list.

General PowerPoint Guidelines

• Keep the design simple. Use Arial or Verdana font, size 24 point, at minimum.
• Keep the slides concise. Use 5–7 bullet points per slide and 5–7 words per bullet. Use speaker notes to explicate the bullets.
• For best color contrast, use light text on dark background (for example, yellow on black, white on dark blue).
• Use the proper slide layout. For example, if a slide has a title and text, create it using the correct Title and Text layout.

Write clearly and logically, with correct use of spelling, grammar, punctuation, and mechanics.

• Apply the principles of effective composition.
• Determine the proper application of the rules of grammar and mechanics.

Write following APA style for in-text citations, quotes, and references.

• Determine the proper application of APA formatting requirements and scholarly writing standards.
• Assess the relevance and credibility of information sources.

Additional Requirements

Your presentation should consist of:

• Length: A minimum of 7–10 bulleted slides.
• Notes: Speaker notes that fully explain each slide.
• References: A minimum of three scholarly references.
• APA formatting: Appropriate APA citations and peer-reviewed references on each slide, as well as a reference list slide at the end, as necessary. Refer to the APA resources in the NHS Learner Success Lab (located in the courseroom navigation menu) if you have questions about APA style or formatting.

• Vila Health: Pacemaker Inventory Scoring Guide

  CRITERIA	NON-PERFORMANCE	BASIC	PROFICIENT	DISTINGUISHED
  Explain inventory control.	Does not explain inventory control	Explains a few aspects of inventory control but does not provide a full explanation.	Explains inventory control.	Explains what inventory control is and supports the points discussed with specific reference to evidence or best practices.
  Describe options for inventory ordering.	Does not identify an option for inventory ordering.	Identifies an option for inventory ordering.	Describes options for inventory ordering.	Describes options for inventory ordering and provides pros and cons for the proposed options.
  Analyze leaders’ responsibilities in addressing the identified inventory recommendations.	Does not list leaders’ responsibilities in addressing the identified inventory recommendations.	Lists leaders’ responsibilities in addressing the identified inventory recommendations.	Analyzes leaders’ responsibilities in addressing the identified inventory recommendations.	Analyzes leaders’ responsibilities in addressing the identified inventory recommendations and includes the consequences for the lack of leadership in addressing inventory options.
  Analyze the implications of having inventory control.	Does not identify the implications of having inventory control.	Identifies the implications of having inventory control.	Analyzes the implications of having inventory control.	Analyzes the implications of having inventory control and includes the effect on the organization lacking it.
  Present findings based upon review of the EOQ and organizational data.	Does not present findings based upon review of the EOQ and organizational data.	Presents some findings based upon review of the EOQ and organizational data, but the connection is not clear.	Presents findings based upon review of the EOQ and organizational data.	Presents findings based upon review of the EOQ and organizational data and strengthens findings with support of the literature.
  Write following APA style for in-text citations, quotes, and references.	Writes without following APA style.	Writes following APA style for in-text citations, quotes, and references, but there are lapses in style use.	Writes following APA style for in-text citations, quotes, and references.	Writes following APA style for in-text citations, quotes, and references without errors and uses current resources.
  Write clearly and logically, with correct use of spelling, grammar, punctuation, and mechanics.	Writes with many errors, making text difficult to follow; errors involve spelling, grammar, punctuation, and mechanics.	Writes with few errors, making text difficult to follow at times; errors involve spelling, grammar, punctuation, and mechanics.	Writes clearly and logically, with correct use of spelling, grammar, punctuation, and mechanics.	Writes clearly and logically, using evidence to support a central idea, with correct use of spelling, grammar, punctuation, and mechanics; the presentation contains supporting examples for the main points.

• Vila Health ® Activity:
  

  Pacemaker Inventory

  • Introduction
  • Problem
  • Research
  • Demand
  • Calculations
  • Conclusion

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  Introduction

  As the health care industry continues to evolve, organizations routinely seek innovative ways to remain competitive, improve efficiency and quality, and meet consumer demands in a fiscally responsible manner.One way to do that is to keep a careful eye on the organization’s inventory.

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  Pacemaker Problem

  You are an inventory analyst at St. Anthony Medical Center. You monitor the hospital’s inventory purchase, use, and quality for the Peta King Heart Institute at St. Anthony Medical Center. It’s part of your role to communicate information regarding inventory that is no longer meeting the needs of the organization, not being utilized per projections, is costing the organization, or is routinely out of stock or in short supply.

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  Email from Bernadette Holt, Director Peta King Heart Institute

  Subject: Pacemaker Inventory??Good morning. I’m not sure what else you’ve got on your plate today, but I need some numbers on our pacemaker inventory. Can you do an EOQ calculation and get back to me with some recommendations for the next fiscal year?
  Thanks!––Bernadette

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  Research

  You check with a couple of people to find out what you need to know in order to do the EOQ calculation.

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  Pacemaker Usage Data

  Prior annual use: 2,500Budgeted use for next fiscal year: 2,750

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  Kenneth Dunn’s Desk

  You stop by Kenneth Dunn’s desk to talk about supplying pacemakers for the hospital.Hi, Ken, can you tell me how many pacemakers we’ve used so far this fiscal year?Kenneth Dunn: Let me check. Okay, we’re 11 months into the fiscal year and we’ve used…2,109.And how many do we order at one time?Kenneth Dunn: 400.Okay, now, I know we pay $35 for each pacemaker, but I don’t know what our holding cost is.Kenneth Dunn: It’s 5 percent. So on $35, that’s $1.75 each.Okay. And the setup and ordering costs?Kenneth Dunn: Setup is $300, ordering is $175.

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  A Question About Demand

  Your research prompted Kenneth Dunn to alert Bernadette Holt about pacemaker demand for the next year.

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  Email from Kenneth Dunn

  Subject: Pacemaker Inventory??Hello Bernadette and team,I just talked with our inventory analyst, and we talked about how many pacemakers we’ve gone through. It got me to thinking… I think by this time last year, we had gone through way more than 2,100, which is why we raised the demand to 2,500. But based on this year’s patterns, the demand might be more like 2,300.Then again, the last month of the fiscal year was our heaviest month for pacemakers last year. And I don’t know what surgeries have been scheduled already; those wouldn’t be part of my numbers yet. So it’s possible it could go as high as 2,600.
  Anyway, I just wanted to let you know. I’ve attached an EOQ Calculation Worksheet in case it’s useful.––Ken

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  Calculations

  Use the EOQ Calculation Worksheet to determine the total annual cost and EOQ. You should see different results for each if demand rises, falls, or stays the same.

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  EOQ Worksheet

  Please download the EOQ Worksheet.

  Please answer the following questions.

  Question 1: Why is it important to understand organizational demand when ordering inventory?Your response:Feedback: Some potential reasons are:

  • Reducing ordering costs: Ordering the appropriate number of inventory items based upon use and demand will reduce overall ordering costs as the organization will be placing fewer orders resulting in fewer administrative costs.
  • Allowing for accurate ordering: Predicting organizational demand will allow inventory management professionals to place orders that will (at their best) be accurate to accommodate the anticipated need.
  • Allowing for alternative stocking methods to be considered: One consideration for when to seek alternative stocking methods is product demand. If the organization is uncertain about their demand, they may wish to consider alternative stocking methods as they do not wish to tie up their capital in product that may never be consumed.

  Question 2: What are some of the key pieces of information needed to determine how much of a given product to order, and why are they important?Your response:Feedback: Some potential key pieces of information are:

  • Demand: Organizations must understand the quantity of a good demanded and the factors that will affect the use of the product. For example: forecasting the demand for a given medication to ensure it is in-stock and available when requested.
  • Holding cost: Holding costs are the additional costs involved in storing and maintaining inventory. It is important to know what the holding cost is as unused inventory may result in higher costs for the organization if they are not used.
  • Ordering cost: Ordering costs represent the total cost of preparing an order and the costs associated with receiving the good ordered. Costs will increase for the organization as the number of orders increase.

  Question 3: What are some of the benefits of utilizing a software system for managing, tracking, and calculating the appropriate amount of a given product to order?Your response:Feedback: Some potential benefits are:

  • Cost savings: Software systems utilized for inventory management help manage the organizations costs related to inventory and supplies. These systems allow the organization to monitor use therefore reducing the potential for surplus ordering (over stock), being understocked, and products expiring before use.
  • Increased efficiency & productivity: Productivity and efficiency may be increased through the use of barcode scanners which will reduce manual workloads in addition to performing recounts of inventory.
  • Improved patient satisfaction: Meeting customer demand is an important consideration for health care organizations including patient satisfaction. As demand changes, the organization will rely upon their inventory software management to ensure the rights products are on-hand when customers need them.

  Question 4: Ineffective leadership over supply chain and inventory management can have negative impacts on an organization. How might an organization be negatively impacted by ineffective leadership?Your response:Feedback: Some potential negative impacts of ineffective supply chain leader ship are:

  • Poor vendor relations: Management of the supply chain relies upon both internal and external collaborative stakeholder relationships. Leadership works towards creating relationships with vendors that understand the business strategy, goals and culture of the organization.
  • Loss of competitive edge: Should leadership fail in their responsibilities to oversee and manage the supply chain, the organization may suffer from a lack of competitive edge due to their inability to meet consumer needs.

  Question 5: How can proper inventory control benefit an organization?Your response:Feedback: Some potential benefits are:

  • Reduced cost: Costs are reduced with proper inventory control as systems are managed effectively, ordering is seamless and systematic, and management of inventory ensures the department is aware of product flow.
  • Proper medical device tracking: Organizations are held to strict regulatory standards regarding medical device tracking. Inventory control process can help ensure that medical device tracking is carried out appropriately. This ensures that the organization knows which medical device was utilized on which patient. This can streamline communication and interventions if a device ever needs to be recalled or re-calibrated.
  • Maintaining stock levels: Maintaining adequate stock is an implication of proper inventory control as robust supply chain procedures will prevent stock from becoming critically low or potentially out of stock all together.

  Question 6: Why do organizations and economic professionals calculate Economic Order Quantities (EOQs)?Your response:Feedback: The purpose of calculating EOQs is that the help to determine the order quantity which is ideal to order for inventory. it is designed to minimize ordering and carrying costs.Question 7: What are holding costs?Your response:Feedback: Holding costs represent one component of total inventory costs. These costs are associated with holding inventory that remains unsold, cost of storage space, labor and insurance.Question 8: Why might an organization seek to utilize consignment as an alternative stocking method?Your response:Feedback: Some potential reasons are:

  • The organization wishes to have less money tied up in inventory: Organizations who wish to have less money tied up in inventory costs may pursue consignment as an alternative stocking method as this method relieves the organization of costs associated with purchasing the inventory in advance. Consignment inventory is housed at the organization however it is not paid for until it is consumed.
  • The product is very expensive: Similar to having less money tied up in their inventory, organizations may consider consignment as an alternative stocking technique when the product is very expensive and demand is questionable.

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  Conclusion

  Conclusion: Activity complete!How could patient-provider collaboration improve the health and wellness of the individuals and groups you saw in this activity?