Supply Chain Management with Cost-Containment & Financial Sustainability in a Tertiary Care Hospital

Abstract

Financial crunch in present recession results in non-availability of right materials at right time in large hospitals. However due to insufficient impetus towards systems development, situation remains dismal even when funds are galore. Cost incurred on materials account for approximately 1/3rd of total recurring expenditures. Systems development for effective and efficient materials management is tantamount to cost-containment and sustainability. This scientific paper perspicuously describes an innovative model, Hospital Revolving Fund (HRF), developed at Sanjay Gandhi Post Graduate Institute of Medical Sciences (SGPGIMS), Lucknow, India, a pioneer research institute in Asia. The main idea behind inception of HRF was ?Mission Supply All?. The model was conceptualized in background of non-availability of hospital supplies in the hospital leading to sub-optimal treatment. Patients were dependent on external vendors and touts for these materials. They used to charge at higher rates leading to exorbitant treatment costs. Objectives: To study and evaluate HRF system with special reference to its supply chain maintenance, cost-containment and financial sustainability. Methodology: A retrospective study of HRF structure, functioning, revenue generation, expenditures and sustainability was carried out in February 2011. Results: The institute catered approximately 300000 outpatients, 35000 inpatients and 7000 surgical procedures with bed occupancy rate of 78% in 2009-10. Hospital supplies have been divided into two parts, approximately 3250 unit items and 1750 miscellaneous items. Division is based on high/low cost, common-utility and case- specific utilization. 0.1 Million USD seed money, separated from non-planned budget of SGPGIMS in 1998, had already revolved more than 300 times. HRF procures supplies from reputed firms on concessional rates (8-25%) and make them available to patients at much lesser rates vis-�-vis market rates, levying minimal maintenance charges. In 2009-10, total annual purchases of 14 Million USD were made. The balance sheet reflected 1.4 Million USD as fixed deposit investment. Minimal maintenance charges levied on the patients along with interest income were sufficient to pay for recurring expenses related to HRF viz. manpower salary, securities, stationery etc. Even after these expenses, HRF boosted of 0.2 Million USD as cash-in-hand in financial year 2009-10. Implications: HRF is self-sustainable and viable supply chain mechanism to ensure availability of right materials at right time at reasonable cost. Thus innovations like HRF will prove robust in rendering quality healthcare at an affordable cost.