When you take the plunge and open a functional medicine clinic, you may not realize what a constant challenge medical inventory management can be. And you may not realize how much money inefficiencies and blind spots are costing you until Year 2 or 3.
You live in a world with more complex SKUs than a typical primary care office. You have to juggle items such as peptides, IV nutrients, BHRT, supplements, and equipment.
We don’t want you to suffer through needless losses or inefficiencies. This article will take a deep dive into medical inventory management and offer you helpful tips that will lead to fewer stockouts, fewer expired products, tighter costs, and an audit-ready compliance trail.
What is Medical Inventory Management?
The idea is simple, but the process can seem overwhelmingly complex. At its core, medical inventory management is the policies and procedures you put in place to manage:
- Medical supplies
- Supplements
- Equipment
However, when compared to hospitals and larger clinical settings, your clinic has a smaller footprint with more retail-style supplement sales and contains dispensary considerations when it comes to clinical inventory management.
What is the difference between medical inventory control and healthcare inventory management?
Healthcare inventory management broadly refers to your healthcare-related inventory and its:
- Planning
- Procurement
- Storage
- Distribution
- Tracking
- Optimization
On the other hand, medical inventory control focuses on monitoring stock levels, ordering, and preventing shortages or overstock of medical supplies.
Why Inventory Management Matters for Functional Medicine Clinics
The importance of inventory management in healthcare goes well beyond knowing when you’re running low on something.
Inventory control in healthcare has a direct impact on everything from patient care continuity to revenue to cash flow.
In hospital settings, American Healthcare Appraisal reported that 30–40% of surgical items may go unused, creating substantial waste. Meanwhile, according to Cardinal Health, U.S. healthcare organizations overspend about $25.7 billion per year because of:
- Excess inventory
- Expired products
- Supply-chain inefficiencies
- Poor inventory visibility
In smaller settings such as cash-based practices, DPC, or functional medicine, these hidden costs can be even harder to find, even though the damage is felt more. For example, a missing IV nutrient or peptide can mean a cancelled appointment or even a lost patient.
Common Inventory Challenges Clinics Face
Stockouts at the wrong moment (IV supplies, popular supplements)
In truth, there is no right moment to run out of inventory. As we just mentioned in the previous section, failure to have what your patient needs when they need it leads to cancelled treatments, and maybe the loss of even the most loyal patients.
As many practitioners have discussed on Reddit, your supply is your competitive advantage. Patients appreciate being able to use you as a one-stop shop for everything they need. If you force them to go somewhere else one time, you may have a hard time winning them back.
Expiration & waste
You need full visibility in your inventory at all times.
Supplements or anything else that was allowed to expire without your knowledge is a straight-up financial loss. It could easily become a recurring expense if you don’t have visibility.
The more it happens, the more you may see it as simply the cost of doing business, when it is actually completely preventable.
Overstocking & tied-up cash
What happens when you overestimate the demand for something?
Maybe your gut tells you to bulk buy a gut health supplement that is going to sell itself. Unfortunately, not only is it not selling itself, but you also can’t sell it either.
When it comes to medical supply inventory management, SKUs that move slowly are a loss. They’re preventing you from moving forward with an inventory that sells out quickly.
Ideally, you don’t want to learn lessons about inventory control in healthcare the hard way, because they can be expensive mistakes.
Storage & organization in small clinic footprints
If most of your current inventory tracking lives inside of old-fashioned spreadsheets, as well as your staff members’ minds, you’re not set up to scale.
This can be particularly problematic when you’re trying to track inventory across multiple locations, and in various refrigeration or controlled storage locations.
It’s all too easy to make manual tracking or double-entry errors that lead to costly shortfalls.
Compliance & controlled substances
Spreadsheets also make compliance for controlled substances an absolute nightmare.
On the other hand, the right system makes documentation easy and automates things like expiry tracking, which means you’re in a constant state of audit readiness.
How Medical Inventory Management Works (Core Methods)
There is no single one-size-fits-all workflow for medical inventory control. However, it usually involves some combination of:
- Par levels & reorder points: You need to define the threshold for both the minimum and maximum quantity for every item.
- FIFO / FEFO (first-expiry-first-out): It seems like common sense and incredibly simple. Use the oldest stock first, or use items with the nearest expiry date as soon as possible. However, managing this with a spreadsheet is incredibly difficult.
- ABC analysis: How is your inventory moving? What can you do to reposition and prioritize your highest-value products with the highest sales velocity?
- Perpetual vs. periodic tracking: If you’re relying on monthly counts and your competitors are using real-time tracking, you’re at a massive disadvantage.
- Barcode & expiry tracking: Precise medical inventory tracking leveraging barcode scanning to track when your products have been recalled, or are nearing their expiry date.
These are the foundational pieces of clinical inventory management, and you can click here to see the benefits of an inclusive practice management software.
Step-by-Step: How to Optimize Inventory Management in Your Clinic
Here’s a high-level overview of how to ensure your medical inventory tracking is firing on all cylinders:
- Step 1: Audit & categorize current stock. Start by building a master item list, then set your ABC tiers (as explored in the previous section) for every product.
- Step 2: Set par levels: Create the thresholds and automations to reorder points based on each item’s usage history.
- Step 3: Centralize tracking: You need one system and one source of truth that is not a series of spreadsheets. You will get the best results when everything lives inside your EHR.
- Step 4: Automate alerts: Stop worrying about low stock and upcoming expirations. Let your system do that for you.
- Step 5: Standardize receiving & counting workflows: Assign ownership to the appropriate staff members. Ensure that this is documented so that it’s trainable and transferable.
- Step 6: Connect ordering to suppliers / supply-chain: Eliminate shortfall surprises and set yourself up for faster replenishment.
- Step 7: Review reports: For the best results, do this monthly so you can adjust par levels and track your waste & stockout rate as KPIs to monitor success.
Every facility’s medical inventory management system will look different. However, if you’re doing some combination of those seven steps, you’re managing a medical practice the right way.
Best Practices for Medical Inventory Management
Hospital inventory management best practices probably don’t always apply to your smaller clinic, but the mentality is much the same.
You want to focus on:
- Count cycle-style (rolling counts) instead of one big annual count. Use your smaller size to your advantage by being more in touch with your inventory movement and your patients’ buying patterns.
- Use lot + expiry tracking on everything perishable: This reduces waste while also boosting sales. Win-win.
- Keep a single source of truth: It’s always a good idea to restrict who can adjust counts and who has access in the EHR.
- Right-size orders to usage: With the right policies, procedures and tools in place, panic-buying and deep overstocking become a thing of the past.
- Build supplier redundancy for critical items: Diversify your supplier roster so that a single supplier’s problems don’t become your problems. Always have a plan B and C.
Clinical inventory management can be surprisingly simple, with the right tools. Without them, your inventory can become your clinic’s biggest time-waster and profit-killer.
Inventory & Cost Control: Cutting Waste and Tied-Up Cash
Wasted inventory is arguably the most dangerous hidden cost that is draining your practice’s profit right now. You want the cost savings of bulk discounts, but you also don’t want to waste products on your shelves or in storage. That’s how they expire instead of generating you money.
Inventory control in healthcare is about so much more than just monitoring the products on your shelves and in your fridge. It’s about monitoring crucial KPIs such as your stockout rate, inventory turnover, shrinkage, and waste percentage.
If you’re not monitoring these numbers and don’t control them, they will control you.
Security, Compliance & Access Control
Controlling your inventory also means controlling who has access. You want to thoughtfully define the members on your team that can see and adjust controlled or high-volume items with role-based access built into your EHR program.
Doing things digitally means that you have an audit trail for every inventory action, and 360-degree insights into everything that happens.
If you’re still tracking things on a spreadsheet, you don’t have true visibility into unusual activity, or after-hours access that falls outside your normal business practices.
However, when you have the right tool, everything is secure, you’re in compliance with safety standards, with an audit trail and expiry documentation at your fingertips.
Choosing Medical Inventory Software – What to Look For
How do you choose the right medical inventory software?
No two practices have the same needs, workflows, or inventory. However, we have found that companies that find the best fit with their medical inventory systems make the following things must-haves:
- Real-time tracking
- Expiry/lot support
- Reorder automation
- Reporting
- EHR integration
- HIPAA-grade data security
And the people that get the most from their investment choose an EHR with a medical inventory management system baked in, rather than using separate tools.
How Cerbo Helps Functional Medicine Clinics Manage Inventory
As a fully comprehensive practice management suite, Cerbo makes it easier to control your inventory at every stage of the sales cycle in a simple functional medicine EHR.
Our inventory control was purpose-built with functional & integrative medicine in mind, while it’s also a functional medicine EHR that can help you ensure your inventory is not just tracked and managed, but also optimized.
By connecting the EHR system with supply chain management, clinics can:
- Streamline their inventory replenishment
- Reduce manual tasks and eliminate manual errors
- Minimize the risk of stockout
Our EHR features the following inventory control benefits:
Inventory tracking built into the EHR workflow
Gain precise inventory tracking and visibility into usage patterns. Nutritional IV therapy clinics can track the vitamins and minerals required for these treatments and make sure they’re reordered in a timely manner without overstocking.
Low-stock and reorder alerts; usage-pattern insights via reporting
Set a predetermined threshold, so that your practice management tools automatically alert your staff to reorder well in advance of running out. Prevents stockouts and makes sure you have everything you need to offer the highest level of care.
Integrations with inventory/supply-chain tools
Business-boosting and income-generating integrations with companies like Fullscript, which syncs Cerbo patients with Fullscript patients and allows them to:
- Order supplements and labs through Fullscript
- View a patient’s Fullscript supplements and labs from their Cerbo chart
- Receive Fullscript lab results electronically
At the same time, integrating with supply chain management systems opens the door to bulk purchasing discounts, further reducing costs.
Role-based access control + audit trails for controlled and high-value stock.
Gain access to effortless audit trails that track all inventory-related activities. Monitor how staff access your inventory, what items were taken, and when the access occurred. In the event of a discrepancy, our functional medicine EHR provides a clear record that can be used for investigation.
At the same time, you can set up user permissions and control access to certain inventory items based on roles. Set permissions so that only licensed healthcare providers can access controlled substances, while non-licensed staff are restricted to general inventory items.
Built specifically for functional & integrative medicine, IV/BHRT, and cash-based practices.
Finally! Something that was built with your practice’s exact needs and challenges in mind. There’s no need to add secondary or third-party/bolt-on solutions.
No double entry headaches or mistakes. Just a single practice management software that works for you.
Final Thoughts
We hope you have found this article helpful, and now see the benefit of taking full control of your inventory management.
This doesn’t just help your bottom line as you reduce waste and maximize efficiency; it also helps your patients. You’re setting yourself up to provide a higher level of care and to ensure that you’re always well-stocked with everything they need.
If you would like to see how Cerbo can help you through this process, we encourage you to book a demo.
FAQs
What is inventory management in healthcare?
On a very simple level, what is inventory management in healthcare? It’s the policies, procedures and systems put in place to manage your:
- Equipment
- Medical supplies
- Supplements
Different practices manage this in different ways. Some use spreadsheets, some use an inventory tracking tool. Others use an inventory management tool built into their EHR solution.
How do clinics prevent medical supply stockouts?
The practices that are able to avoid stockouts are the ones receiving automatic alerts on inventory thresholds when they also have high-level data into their target market’s buying decisions.
How do you track expiration dates on supplements and medications?
This is easily one of the biggest challenges that a clinic in any specialty faces. We have found that a digital medical inventory management system integrated into the EHR system you’re already using is the best way to manage this.
What’s the difference between inventory management and inventory control?
Inventory management is the broader process of planning, ordering, storing, and tracking inventory. Inventory control is a subset focused on monitoring stock levels, accuracy, movement, and preventing shortages or excess inventory.
Should inventory management be part of the EHR or a separate system?
Either option is possible, and there are practices in clinics that do both.
However, integrating your inventory management system into your EHR doesn’t always work. Your best bet is to choose an EHR with inventory management already built into the system.
How can a small functional medicine clinic reduce inventory
The best strategy is to ensure that inventory isn’t simply sitting on shelves when it is not selling.
Don’t be tempted by the lure of bulk discounts. The lower price quickly becomes more expensive if products sit on your shelves and eventually expire.
