Q: In the new environment with pending reduction in RUGs payment, how can a facility maintain financial solvency? (Part II)

A: This month, we will discuss supply management. Just as we used the Per Patient Day factor for labor, we can use the PPD cost to manage supplies. All budgets should be written in a PPD format. That way, when census fluctuates, so does your spending availability.

Give your department managers the responsibility of managing their own budgets. One strategy is to give them 90% of their budget, and have them notify you if they are exceeding it. If someone comes to you after the first week and says they have used their entire budget, you know you're in trouble. If they come to you the last week of the month and say they need more money, you have a bit more cushion.

The second factor is supply management that includes a good distribution system, inventory control and a charge system. Many providers stopped managing supplies years ago when Medicare stopped paying for costs, saying it was too difficult. But good supply management can work to your advantage. First, private pay residents should be paying for supplies. Secondly, there are electronic supply management tools that can make tracking easier.

Supply management can give you analytical information that can assist you in monitoring usage according to resident need. Don't overlook it when managing your budget.