Revolutionizing Costing in Healthcare - Trunk Stock and Cost Accounting

The term “trunk stock” might conjure up a host of images. The trunk of a car (usually a mess). A shoe store near me has a “trunk sale” every year. Of course, there’s that appendage on an elephant. But what is “trunk stock” in the healthcare context and why does it matter to the cost accountant?




Orthopedic and neurosurgery cases are big users of trunk stock. There are so many various pieces of hardware in the vendor’s catalogs that it’s impossible for the hospital to stock everything that might be possible to use. The vendors have a solution: their reps bring the inventory to the hospital and right into the operating room. When the surgeon calls for a titanium screw 2” long, the vendor rep has it, retrieving it from the “trunk” of parts they brought.


The typical information flow during the surgical case starts with OR intra-operative staff logging each piece used during the case. This includes manufacturer name and part number, description, serial number (if required), and vendor cost. In the more advanced systems, the markup is applied, and the charge is generated. Often, this can lead to data entry errors if the fields are free text. This can be a major issue when trying to analyze utilization on the back end.


Next, the vendor (or manufacturer) rep hands a detailed invoice to OR staff, which makes its way to the OR Biller. The biller calculates the patient charge based on the total invoice amount, if not already calculated in the OR system.


How does this affect Cost Accounting?


Because these parts are “non-stock”, i.e. not in the Materials Management item master catalog, it can be problematic to determine the actual cost of the trunk stock consumed during a case. There are just a few approaches to deal with this situation, depending on the data available to the cost accountant. As with most issues in healthcare costing, “the devil’s in the details.”


Traditional Approach: Inverse of Markup


In most hospitals, the trunk stock items come through on the patient bill as a single miscellaneous charge line item, such as “Orthopedic Implant”, or simply “Hip Implant”. The transaction quantity is usually “1” and the charge amount is determined by the OR Biller by looking at the invoice and marking it up by a fixed factor, for example, charge equals two times invoice cost. Therefore, the costing system needs to reverse this process, cost equals charge divided by two. This only works if the costing system can perform this calculation at the patient level. Otherwise, every patient with that specific miscellaneous charge code will get the exact same cost. This is not a good situation!


The main drawback of this approach is the lack of visibility into the exact “bill of materials” (trunk stock) used during the case. Surgeon comparisons are essentially impossible without a lot of special analysis outside of the decision support system.


OR Log Approach – Improved Data Quality


Here you have improved data quality, but with the advent of detailed intra-operative data capture using modules such as OpTime or SurgiNet, many costing systems will pull the trunk stock (as well as “stock” items) consumed during the case. The OR system will have a unique identifier assigned to each item, which is then passed to decision support (and costing) typically as a “pseudo” charge code. The item’s cost is typically derived from a separate query and incorporated into a lookup table, which the cost accountant scrubs and uploads into the system.


The potential pitfalls of this scenario usually revolve around data entry accuracy, especially for trunk stock items which are “new” to the OR catalog of items. Larger facilities may have methods to scrub this data to ensure uniformity and comparability, but we find this to be the exception.


A related data accuracy concern is the potential for overworked OR staff to inadvertently omit trunk stock items consumed during the case. Unless someone compares the case log to the invoice, this is a case of “unknown unknowns”. In a hybrid model of data entry and charging, the OR biller has no visibility into how accurately the case staff have entered the detailed items, truly a recipe for inaccurate data capture. The patient bill probably is accurate, but the OR log – the legal record for the case – perhaps is incorrect.


Integrated Data Capture Approach - Bring Together Disparate Data Sources


At Impensa, we strive to advance the practice of cost accounting to leverage data from the best sources. We also look for opportunities to inform the upstream data sources of issues discovered as the data makes its way to decision support.


Upon intake of OR log data, we pass the data through a rigorous normalization routine intended to adjust for data entry mistakes and apply standardized and consistent taxonomy far beyond what is captured in the facility’s internal systems. This is essential for accurate comparative reporting and analysis.


To obtain the correct cost of trunk stock items, we have two options. If we ingest the facility’s GPO (and local) contract data, we can match the logged item to the GPO contract and pull in the contracted cost. Another approach we have in the works is to electronically obtain the actual invoice data at the line-item level by using “810” EDI invoice data. We use that to grab the line item details with associated costs and assign it to the case. This process is particularly attractive because it allows the comparison of invoice vs. OR log. If items were not logged (or logged incorrectly), it is possible to pass this info back to the facility for remediation. Items not logged are probably items not billed, so there is a potential revenue recovery opportunity with this data as well. Also, it exposes the data to check for invoice accuracy vs. the OR log. Have you ever audited your trunk stock invoices against documented usage?


We can also combine the two approaches and compare the invoice against the GPO contracted price to look for invoicing errors. Who believes their vendor invoices are 100% accurate?




Cost of trunk stock utilization usually is a significant amount of a departments spend. The data exists to bring visibility to these high-dollar items to improve spend analysis and management. The key is to unlock all the various data elements and link them together. The potential is there for a large improvement in accuracy and confidence of your costing data.


About the Author - Doug


Share :

Popular Blog Posts