AHF Conference
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Tips for cutting costs

Two healthcare operators shared tactics for inventory management and purchasing at this year’s AHF conference.

Do more with less. That’s a theme many have heard in their professional careers at some point, and it’s exactly what two healthcare operators mastered. The men recently shared their experiences at the Association for Healthcare Foodservice conference earlier this month.

“When I was hired they had very low satisfaction for both patient and retail foodservices,” recalls David McCampbell, executive chef with Sacred Heart Medical Center and Children’s Hospital in Spokane, Wash. “They wanted to make changes and be impactful right away. Food signage was on Post-It Notes when I first got there. Freezers were full of convenience products. That’s how they controlled costs.

“I knew there was only one way to go and that was up,” he added.

So his first year, McCampbell started many new programs and elevated the food options offered. And it worked. Café sales increased 12 percent; catering was up by 7 percent and Press Ganey scores increased.

But so did his costs, something administrators took notice of, and they asked McCampbell to reduce his food cost by $300,000.

McCampbell started by looking at inventory and purchasing. He reviewed every invoice from the previous year and found that $111,000 of purchases from previous years were on his current budget, leading him to realize that he needed to rely on real-time purchasing and inventory, and not on reports. So McCampbell started a spend-down sheet on which he could see his budget weekly, or even daily, instead of yearly. That also allowed him to see cost fluctuations and make changes as needed.

He then started an inventory management system, which he says hadn’t been done thoroughly in years. He reorganized the inventory to make it easier to keep track of and gave managers specific sections that they were required to track. He says they found items in storage that were no longer being used.

That produced a baseline from which to work, and McCampbell then created an inventory management sheet. From that he could see that they were purchasing from too many vendors. Sacred Heart Medical Center and Children’s Hospital is part of a culinary council with member hospitals from several states. Through this council he was able to see vetted products and purchasing information. All of this combined helped to reduce the number of SKUs from 11,000 to less than 2,000. 

After getting purchasing under control, McCampbell moved on to the some tougher challenges. The team implemented a food waste tracking system, which he estimates will save $100,000 a year. He also reduced floor stock from 188 items to 83. McCampbell says that for a year nurses were able to add whatever they wanted to the floor stock list, meaning that multiple varieties of items like protein bars would be ordered and not needed. A new policy was put in place that made the nurses accountable for their floor stock needs and which held them accountable to their spend.

He didn’t, however, just cut. McCampbell also added upgraded items to the floor stock’s grab-and-go offerings. Turkey sandwiches were replaced with Snackers, which are combinations of items like cottage cheese and mandarin oranges. Not only did this elevate the options, but it also saved money. The turkey sandwiches cost $1.38 to produce while the Snackers cost significantly less at around 88 cents.   

After implementing these changes, McCampbell was able to meet his cost reduction goals and still maintain the integrity of the program.

Matt Cervay, system executive chef for Geisinger Health System in Danville, Pa., also looked at cost-saving changes after he started at the hospital. Perhaps the biggest was changing chicken serving size from 5 ounces to 4 ounces, a move that helped save $14,000 a year. 

Cervay also suggested really digging into your product specifications, because in some cases, a more premium product will cost less in the end. One example is French fries. A premium product will often yield more portions—plus it’s an item, much like bacon, that customers have a deep attachment to and want a higher quality version, Cervay noted.

He also suggested looking at slice range versus exact slice count for items like sliced pepperoni. Cervay found that he could get 800 more slices per case and could make 25 more pizzas per case when going with the exact slice count versus the slice range. His portion costs with the exact count was also less expensive, meaning he was able to make more pizzas at a lower price.

TAGS: Healthcare
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