The net cost of all tangible items that are expensed, including freight, standard distribution cost and sales, and use tax rebates. This would exclude labor, labor-related expenses and services, as well as some tangible items that are frequently provided as part of service costs.

Items to be Included in Supply Costs

Surgical supplies including:

Implantable and prosthetic devices including:

Intraocular lenses
Orthopedic implants
Pacemakers and implantable cardioverter-defibrillators

Organs (but not specifically listed)
Anesthetic materials
Sutures, endomechanicals, and suture needles/wound closure devices
Surgical packs, kits and minor trays
Replacement instruments—both disposable and nondisposable (unless capital)

General medical supplies, including:

Bandages, gauze, and dressings
Physical therapy, occupational therapy, recreational therapy
IV sets
Needles, syringes
Paper products (EKG paper, dividers, etc.)

Drugs/pharmaceuticals, including:

IV solutions
Contrast media
Radiopharmaceuticals

Lab supplies, including:

Phlebotomy supplies
Chemicals, reagents, media
Blood and blood products
Supply portion (only) of any rental/lease/reagent agreement

Oxygen and related medical gases
Radiologic films and chemicals
Dialysis supplies and fluids
Linens, patient apparel, and hospital-acquired scrubs and uniforms
Dietary products, including:

Patient and cafeteria food
Nutritional supplements
Dish and flatware disposable and nondisposable

Housekeeping/cleaning supplies, including:

Cleaning products, floor finishes
Paper goods, toilet tissue, paper towels, etc.

Office-type supplies, including:

Computer supplies
Computer software (unless capital)
Copy/printer paper
Inks and toners
Forms (internally or externally produced)
Storage costs for supplier warehoused forms

Freight associated with any supply item
Standard distribution fees not including additional costs for stockless
Supply portion of outsourced contracts, including:

Dietary
Environmental services

Supply portion of any equipment rental or lease
Sales tax
Rebates (deducted from supply cost), including:

Manufacturer rebates
Distributor rebates
Dividends from purchasing groups

Not Included In Supply Costs

Supplies for vending operations
Supply costs used with an in-house laundry
Routine maintenance items (not for new construction or significant remodeling), including:

Paint
Plumbing
Lights
Filters

Grounds maintenance items, including:

Plants

Vehicle consumables (gas/oil/parts)
Nonsupply part of outsourced services
Supply portion of outsourced biomedical contracts
Supply cost associated with outsourced copy center contracts
Capital equipment
Capital portion of any supply agreements
Instrument costs incurred in a service start-up
Construction/renovation projects
Service agreements
Maintenance agreements
Repair parts, including:

Medical equipment
Nonmedical equipment
That portion of maintenance agreements for repair parts

Other purchased service
Regulated medical waste and municipal waste
Marketing materials (brochures, giveaways)
Rentals and capital leases
Expenses related to operating leases
Reference lab costs
Laundry (except linen replacement costs, if included)
Depreciation and amortization
Utilities, including fuel for internally generated utilities (oil)
Telecommunications, pagers, cell phones, answering services
Travel, education training/education
Dues and subscriptions
Recruiting, promotion, marketing
Interest expense
Taxes (other than sales taxes), licenses, regulatory fees
Outside contractor fees, consulting fees, temporary help
Bond costs
Professional fees/services
Accounts receivable collections services
Wages, salaries, benefits
Postage
Provision for bad debts/doubtful collections
Physician fees
Insurance premium and payments
Messenger service

Source: AHRMM–HFMA, 2006

This article first appeared in the October 2007 issue of Materials Management in Health Care.

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