A Capital Expenditure: A Pyxis Supply Station
A Capital Expenditure: A Pyxis Supply Station
Kathleen Edwards
HCS571- Financial Resource Management
March 2, 2015
Ronald Sugar
A Capital Expenditure: A Pyxis Supply Station
A Pyxis Supply Station is a large capital purchase, however the benefits of this purchase strongly outweigh the cost. A Pyxis Supply Station is a large automated dispensing machine for patient supplies, much like a medication dispensing machine. Purchasing enough supply towers for each unit in the hospital will be expensive, but will improve productivity, help boost revenue, and will be more efficient than the current bar code sticker method currently in place. The current method is ineffective, inconsistent, and revenue is being lost on patient …show more content…
supplies. A new system is necessary to maintain an adequate budget for each department and the organization as a whole. “CareFusion” (2015), the manufacturer of the Pyxis Supply Station, claims that their products “provide a measureable return on investment, while helping to increase the charge capture, streamline workflow, improve case costing, facilitate regulatory compliance, and enhance data analysis” (Pyxis Perioperative Solutions).
In fast paced areas, such as the Emergency Room (ER), operating room (OR), and cardiac catheterization laboratory, supplies are often grabbed quickly. The patient leaves these areas to return to their floor, and the charge of that equipment or supply is lost. “CareFusion” (2015) claims that Pyxis has previously reduced lost charges by 97% in one facilities OR (Pyxis Perioperative …show more content…
Solution). Investing in a Pyxis Supply Station will support many management goals. A few of these goals include boosting revenue from patients, increasing productivity, and improving patient care. To take a look at the benefits of a Pyxis Supply Station and how purchasing one will reach management goals, it is easiest to study how the OR tracks and charges for supplies. It is important to understand that the OR accounts for 50% of a hospital’s expense budget and can generate up to 42% of all patient revenues (Smith, 2011). South Georgia Medical Center (SGMC) recently implemented a Pyxis Supply Station in their OR and reported an increase in revenue, a reduction in spending, and a transform in workflow as well as a return on their investment after several years (Smith, 2011). Patient revenue is generated from services provided while the patient is admitted in the hospital.
These services include physician consultations, diagnostic tests, laboratory values, medications received etc. When the task comes to assign costs to certain departments, the hospital needs to know which of these department to assign these costs to. Patient supplies and equipment storied in a Pyxis Supply Station can be defined as a direct cost. “Direct costs are directly linked and assigned to products or services” (Cleverley, Song, & Cleverley, 2011, p. 315). In order to provide each unit with the reimbursement for their direct costs, the cost must be traceable to that specific unit. Purchasing a Pyxis Supply Station for the OR and each unit will trace these supplies to their proper
origin. Aside from tracing costs and assisting with reimbursement, a Pyxis Supply Station will help boost revenue. The current method of tracking supplies is barcoding or the use of stickers on certain supplies. A paper trail, like so, can result in lost charges and mistakes, especially if the nurse is in a hurry. Lost charges equals lost revenue for the hospital. A Pyxis Supply Station is an automated dispensing machine for patient supplies and equipment and is much like the automated medicine dispensing machine. As patients are admitted to the hospital, they are programmed into the machine. Every different type of supply is programmed into the machine, from shampoo to pleurovac’s. To retrieve these items the nurse must sign in and pick the patient they wish to withdraw supplies on. The supplies are selected and each door or drawer opens and the nurse is able to withdraw the supplies they need. Unlike the current method of searching for supplies on a shelf, or going to central supply to select items that are out of stock, the Pyxis Supply Station is a guaranteed way to save time. Investing in a Pyxis Supply Station can enhance the economic environment of the organization in many ways. By cutting the time spent searching for supplies, the organization can increase productivity which increases the income. If the nurses and nursing assistants spent less time searching for supplies, they would have more time to spend on patient care. In the OR, the less time spend searching for supplies, is less time spent on cases which can eventually lead to a least one more OR cases per day. Besides the increased productivity and increased income, CareFusion promises a return, and then some, on the investment. Purchasing a capital expenditure like this will have a positive influence on any future equipment purchases. As the supply tracking improves, other areas of the organization will want to improve as well in order to keep up. The motivation to do better will allow for an easier and possibly quicker purchasing process. Cost containment plays a large role in the functioning of an organization. Essentially, cost containment is exactly what it sounds like; the controlling of expenses that are needed to run an organization or project. Keeping a close watch on costs helps keeps excess costs at bay, as well as dismiss frivolous cost spending. Outdated paper systems make it difficult to track excess spending on supplies. For example, if a nurse were to grab two packages of sterile gauze and only marked down one, that is a 50% loss as the patient was only charged for one package. Other times, items are grabbed in emergent situations and are forgotten about. This means if an indwelling catheter, a nasal cannula, intravenous (IV) start kit, and IV fluids are grabbed while a patient is having a congestive heart failure (CHF) exacerbation, the nurse may forget to charge these items to the patient. If this patient is transferred to another unit, it is even more unlikely that the nurse will charge the patient. Now that patient’s chart with stickers and barcodes is off the unit as well as their charge card. Another way that the Pyxis Supply Station contains cost is by tracking when inventory needs to be stocked and avoiding any out of stock situations. Cost containment goes hand in hand with patient satisfaction. Being able to track inventory leads to more satisfied patients and customers. If an item is out of stock, it delays the care and treatment of that patient. In a time where patient satisfaction weighs heavily on reimbursement, it is essential to avoid any situations that would upset a patient. For example, it is not unlikely for a patient to have orders pending prior to a discharge. If a patient is awaiting a specific dressing change before being released, they are expecting those dressing supplies to be in stock on the unit. However, on a floor that performs many dressing changes each day, such as an open heart surgery unit, these supplies can get used up quickly. If these supplies are out of stock and need to be ordered or retrieved from another floor, this delays discharge time. “When a user takes a supply item from stock, the system automatically posts the charge for that patient’s bill and adjusts the inventory accordingly” (Smith, 2011) Investing in a large expense like this can seem risky at first. However, the organization needs to see how the benefits of such an expenditure will outweigh the risks. A capital expenditure is defined as, “a commitment of resources that is expected to provide benefits during a reasonably long period, at least two or more years” (Cleverley et al., 2011, pg. 423). It should be known to a hospital that previously invested in Pyxis medicine dispensing machines that these pieces of equipment last for many years. To determine the benefits of this expense it may be necessary to evaluate the product prior to purchasing (Cleverley et al., 2011, p. 423). When CareFusion quoted SGMC a return on investment of 200% in the first year, they were skeptical. However, they conducted an on-site visit to a nearby medical facility and found that their return was close to what CareFusion quoted them (Smith, 2011).
This expenditure would relate to the needs of this organization because it is estimated to save millions of dollars. Upon research the Pyxis Supply Station, SGMC’s Chief Operating Officers noticed that by investing in this expenditure, the organization could save about half-billion dollars (Smith, 2011). The management goals of this purchase are to demonstrate a revenue increase as well as a productivity increase. The money that is saved with the purchasing of this equipment, as well as the return on investment percentage, adds to the hospitals budget. Aside from bringing in more revenue, the hospital can save money by eliminating positions and unused equipment. Through the use of the Pyxis Supply Station, SGMC notices that the cardiac catheterization laboratory was able to eliminate about $10,000 in supplies that we infrequently used (Smith, 2011). Along with eliminating supplies, it is possible that organizations can adjust the job of employees who control the inventory stock on each unit. Currently, it is some one’s responsibility to go through the supply room on a daily basis and count and stock inventory. Having a machine that does this automatically means that this person’s position can be adjusted to an area where it would be more productive.
Changing a position to a more productive and cost effective job, is not the only benefit of this expenditure. Making supplies and equipment easily available and at the ready, allows the nurse to return to the bedside quicker, resulting in an increase in patient care. Monetary wise, the Pyxis Supply Station proves time and time again why it should be invested in. SGMC report that within the first year of use, there was a $1 million reduction in excess OR inventory (Smith, 2011). Along with the continuation of inventory reduction, SGMC also reported that after the third year of use, they saw a net positive financial impact of $2.9 million. They contributed this to reduced spending and revenue enhancement, all from the use of the Pyxis Supply Machine (Smith, 2011).
The most obvious benefits are the financial gains that are achieved after purchasing a Pyxis Supply Station. In a chart provided by Smith (2011), shows that after just three months SGMC has an 803.5% net return on the investment. Aside from these gains, many other goals are reached upon purchasing this piece of equipment. Managerial goals of increasing revenue and productivity are met due to decreasing wasted time and lost charges. Investing in a Pyxis Supply Station will not only increase the economic environment of the organization, but will also meet the organizations goals and needs. Without the use of a Pyxis Supply Station, the organization will continue to lose revenue and continue to slack in productivity.
References
CareFusion. (2015). Retrieved from http://www.carefusion.com/medical-products/supply- management/perioperative-solutions/
Cleverley, W., Song, P., & Cleverley, J. (2011). Essentials of health care finance. (7th ed.). Sudbury, MA: Jones & Bartlett Learning. Retrieved from University of Phoenix eBook Collection database.
Smith, R. (2011). Healthcare purchasing news. Retrieved from http://www.hpnonline.com/inside/2011-11/1111-WW-CareFusion.html
Kathleen Edwards
HCS571- Financial Resource Management
March 2, 2015
Ronald Sugar
A Capital Expenditure: A Pyxis Supply Station
A Pyxis Supply Station is a large capital purchase, however the benefits of this purchase strongly outweigh the cost. A Pyxis Supply Station is a large automated dispensing machine for patient supplies, much like a medication dispensing machine. Purchasing enough supply towers for each unit in the hospital will be expensive, but will improve productivity, help boost revenue, and will be more efficient than the current bar code sticker method currently in place. The current method is ineffective, inconsistent, and revenue is being lost on patient …show more content…
supplies. A new system is necessary to maintain an adequate budget for each department and the organization as a whole. “CareFusion” (2015), the manufacturer of the Pyxis Supply Station, claims that their products “provide a measureable return on investment, while helping to increase the charge capture, streamline workflow, improve case costing, facilitate regulatory compliance, and enhance data analysis” (Pyxis Perioperative Solutions).
In fast paced areas, such as the Emergency Room (ER), operating room (OR), and cardiac catheterization laboratory, supplies are often grabbed quickly. The patient leaves these areas to return to their floor, and the charge of that equipment or supply is lost. “CareFusion” (2015) claims that Pyxis has previously reduced lost charges by 97% in one facilities OR (Pyxis Perioperative …show more content…
Solution). Investing in a Pyxis Supply Station will support many management goals. A few of these goals include boosting revenue from patients, increasing productivity, and improving patient care. To take a look at the benefits of a Pyxis Supply Station and how purchasing one will reach management goals, it is easiest to study how the OR tracks and charges for supplies. It is important to understand that the OR accounts for 50% of a hospital’s expense budget and can generate up to 42% of all patient revenues (Smith, 2011). South Georgia Medical Center (SGMC) recently implemented a Pyxis Supply Station in their OR and reported an increase in revenue, a reduction in spending, and a transform in workflow as well as a return on their investment after several years (Smith, 2011). Patient revenue is generated from services provided while the patient is admitted in the hospital.
These services include physician consultations, diagnostic tests, laboratory values, medications received etc. When the task comes to assign costs to certain departments, the hospital needs to know which of these department to assign these costs to. Patient supplies and equipment storied in a Pyxis Supply Station can be defined as a direct cost. “Direct costs are directly linked and assigned to products or services” (Cleverley, Song, & Cleverley, 2011, p. 315). In order to provide each unit with the reimbursement for their direct costs, the cost must be traceable to that specific unit. Purchasing a Pyxis Supply Station for the OR and each unit will trace these supplies to their proper
origin. Aside from tracing costs and assisting with reimbursement, a Pyxis Supply Station will help boost revenue. The current method of tracking supplies is barcoding or the use of stickers on certain supplies. A paper trail, like so, can result in lost charges and mistakes, especially if the nurse is in a hurry. Lost charges equals lost revenue for the hospital. A Pyxis Supply Station is an automated dispensing machine for patient supplies and equipment and is much like the automated medicine dispensing machine. As patients are admitted to the hospital, they are programmed into the machine. Every different type of supply is programmed into the machine, from shampoo to pleurovac’s. To retrieve these items the nurse must sign in and pick the patient they wish to withdraw supplies on. The supplies are selected and each door or drawer opens and the nurse is able to withdraw the supplies they need. Unlike the current method of searching for supplies on a shelf, or going to central supply to select items that are out of stock, the Pyxis Supply Station is a guaranteed way to save time. Investing in a Pyxis Supply Station can enhance the economic environment of the organization in many ways. By cutting the time spent searching for supplies, the organization can increase productivity which increases the income. If the nurses and nursing assistants spent less time searching for supplies, they would have more time to spend on patient care. In the OR, the less time spend searching for supplies, is less time spent on cases which can eventually lead to a least one more OR cases per day. Besides the increased productivity and increased income, CareFusion promises a return, and then some, on the investment. Purchasing a capital expenditure like this will have a positive influence on any future equipment purchases. As the supply tracking improves, other areas of the organization will want to improve as well in order to keep up. The motivation to do better will allow for an easier and possibly quicker purchasing process. Cost containment plays a large role in the functioning of an organization. Essentially, cost containment is exactly what it sounds like; the controlling of expenses that are needed to run an organization or project. Keeping a close watch on costs helps keeps excess costs at bay, as well as dismiss frivolous cost spending. Outdated paper systems make it difficult to track excess spending on supplies. For example, if a nurse were to grab two packages of sterile gauze and only marked down one, that is a 50% loss as the patient was only charged for one package. Other times, items are grabbed in emergent situations and are forgotten about. This means if an indwelling catheter, a nasal cannula, intravenous (IV) start kit, and IV fluids are grabbed while a patient is having a congestive heart failure (CHF) exacerbation, the nurse may forget to charge these items to the patient. If this patient is transferred to another unit, it is even more unlikely that the nurse will charge the patient. Now that patient’s chart with stickers and barcodes is off the unit as well as their charge card. Another way that the Pyxis Supply Station contains cost is by tracking when inventory needs to be stocked and avoiding any out of stock situations. Cost containment goes hand in hand with patient satisfaction. Being able to track inventory leads to more satisfied patients and customers. If an item is out of stock, it delays the care and treatment of that patient. In a time where patient satisfaction weighs heavily on reimbursement, it is essential to avoid any situations that would upset a patient. For example, it is not unlikely for a patient to have orders pending prior to a discharge. If a patient is awaiting a specific dressing change before being released, they are expecting those dressing supplies to be in stock on the unit. However, on a floor that performs many dressing changes each day, such as an open heart surgery unit, these supplies can get used up quickly. If these supplies are out of stock and need to be ordered or retrieved from another floor, this delays discharge time. “When a user takes a supply item from stock, the system automatically posts the charge for that patient’s bill and adjusts the inventory accordingly” (Smith, 2011) Investing in a large expense like this can seem risky at first. However, the organization needs to see how the benefits of such an expenditure will outweigh the risks. A capital expenditure is defined as, “a commitment of resources that is expected to provide benefits during a reasonably long period, at least two or more years” (Cleverley et al., 2011, pg. 423). It should be known to a hospital that previously invested in Pyxis medicine dispensing machines that these pieces of equipment last for many years. To determine the benefits of this expense it may be necessary to evaluate the product prior to purchasing (Cleverley et al., 2011, p. 423). When CareFusion quoted SGMC a return on investment of 200% in the first year, they were skeptical. However, they conducted an on-site visit to a nearby medical facility and found that their return was close to what CareFusion quoted them (Smith, 2011).
This expenditure would relate to the needs of this organization because it is estimated to save millions of dollars. Upon research the Pyxis Supply Station, SGMC’s Chief Operating Officers noticed that by investing in this expenditure, the organization could save about half-billion dollars (Smith, 2011). The management goals of this purchase are to demonstrate a revenue increase as well as a productivity increase. The money that is saved with the purchasing of this equipment, as well as the return on investment percentage, adds to the hospitals budget. Aside from bringing in more revenue, the hospital can save money by eliminating positions and unused equipment. Through the use of the Pyxis Supply Station, SGMC notices that the cardiac catheterization laboratory was able to eliminate about $10,000 in supplies that we infrequently used (Smith, 2011). Along with eliminating supplies, it is possible that organizations can adjust the job of employees who control the inventory stock on each unit. Currently, it is some one’s responsibility to go through the supply room on a daily basis and count and stock inventory. Having a machine that does this automatically means that this person’s position can be adjusted to an area where it would be more productive.
Changing a position to a more productive and cost effective job, is not the only benefit of this expenditure. Making supplies and equipment easily available and at the ready, allows the nurse to return to the bedside quicker, resulting in an increase in patient care. Monetary wise, the Pyxis Supply Station proves time and time again why it should be invested in. SGMC report that within the first year of use, there was a $1 million reduction in excess OR inventory (Smith, 2011). Along with the continuation of inventory reduction, SGMC also reported that after the third year of use, they saw a net positive financial impact of $2.9 million. They contributed this to reduced spending and revenue enhancement, all from the use of the Pyxis Supply Machine (Smith, 2011).
The most obvious benefits are the financial gains that are achieved after purchasing a Pyxis Supply Station. In a chart provided by Smith (2011), shows that after just three months SGMC has an 803.5% net return on the investment. Aside from these gains, many other goals are reached upon purchasing this piece of equipment. Managerial goals of increasing revenue and productivity are met due to decreasing wasted time and lost charges. Investing in a Pyxis Supply Station will not only increase the economic environment of the organization, but will also meet the organizations goals and needs. Without the use of a Pyxis Supply Station, the organization will continue to lose revenue and continue to slack in productivity.
References
CareFusion. (2015). Retrieved from http://www.carefusion.com/medical-products/supply- management/perioperative-solutions/
Cleverley, W., Song, P., & Cleverley, J. (2011). Essentials of health care finance. (7th ed.). Sudbury, MA: Jones & Bartlett Learning. Retrieved from University of Phoenix eBook Collection database.
Smith, R. (2011). Healthcare purchasing news. Retrieved from http://www.hpnonline.com/inside/2011-11/1111-WW-CareFusion.html