Inventory turns refer to how often a hospital is using or “turning over” its supplies and equipment. It is calculated by measuring the total supply spend divided by on-hand inventory. A hospital can then compare this number against the year to see how often inventory is being turned over. For example, if a healthcare facility spends $10 million on supplies and has an inventory on hand of $2.5 million, it is turning over its inventory 4 times per year, or every 3 months. Value on hand refers to the monetary value of the inventory stored at the facility. Hospitals that have higher inventory turns are freeing up cash flow to be used for other purposes. Managing inventory turns can free up cash otherwise tied up in assets (supplies) and can improve productivity and free up space. An expected range is typically between 2-8 turns per year.
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