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DEB NAVAS, EDITOR AT LARGE
For supply chain and ADC (automated data collection) system vendors with
their fingers on the pulse of the health care industry, business is strong
and steady-with a favorable prognosis of robust growth to come. Both regulatory
and market forces are driving the need for increased accuracy, efficiency,
and cost savings among service providers and their product suppliers. Still,
experts concur that a significant penetration of supply chain automation
into health care has not yet occurred, and few providers are fully automated.
But the goal-integrating facility-wide supply chain systems that will reduce
fixed overheads, create more efficiencies in hospital business offices,
free up time for professional caregivers, and cut overall costs-is now clearly
in sight.
First Do No Harm
"One of the biggest focuses this past year for hospitals and medical
centers has been the nursing shortage," said Jeff Schou, director of
health care markets for Symbol Technologies. "Health care provider
facilities are faced with the challenge worldwide: How do I get the most
from a limited staff? … The focus on accuracy that resulted from the
1999 IOM [Institute of Medicine] study citing up to 98,000 deaths owing
to medical errors also plays a big role in driving point-of-care dispensing
systems." Symbol has a number of partners-major distributors and systems
providers such as McKesson (San Francisco, CA) and Autros (Toronto, ON,
Canada)-that are rolling out wireless point-of-care drug and supply dispensing
systems using Symbol's PDA (personal digital assistant)-type terminals.
(Frequencyhopping systems in the 2.4 GHz band have do not interfere with
medical equipment operation, noted Mr. Schou.)
Nurses scan patient wristbands and medication unit bar codes with the palmtops
to verify drug doses and capture data for billing. Wireless terminals also
expedite lab orders, test outcome availability, and accessibility to telemetric
results- such that EKG (electrocardiogram) output, pulse and respiration
numbers, and so on can now travel with a patient throughout the hospital.
Symbol-based system have been implemented at the Mayo Clinic (Rochester,
MN), at a number of Veterans Administration hospitals around the country,
and at St. Peter's Hospital in Albany, NY.
On the software side, one recently launched system from Canadian developer
MedcomSoft is a customizable platform for Web-based medical records documentation.
Browser-based access allows for the exchange of text, graphical test results,
x-rays, photos, and video clips. The MedcomSoft system, currently in clinical
trial at a teaching hospital in Toronto, also supports online ordering of
lab tests and prescriptions and provides access to best-practice guidelines.
In addition, the system incorporates automatic "E&M" coding
(Evaluation and Management-a standardized coding system used by health care
providers and insurers) of symptoms, diseases, and therapies for improved
efficiencies. Sami Aita, M.D., chairman and CEO of MedcomSoft, estimates
that the average surgeon, for example, seeing 10 to 15 patients per day,
could free up as much as 150 minutes by updating those records via MedcomSoft's
graphical interface instead of dictating notes for later transcription.
Furthermore, in terms of dollar savings, explained Dr. Aita, the cost of
transcribing physicians' dictation manually, coding those notes, and proofreading
them can amount to as much as $20,000 per year per physician.
Find It Stat Accuracy and efficiency take on an added dimension of
urgency in many health care applications, as human life may hang in the
balance. A number of computer-based asset location systems can track portable
medical equipment, but only RF (radio frequency)- based systems can do it
in real time when finding the equipment is critical in an emergency.
"Hospitals and medical centers have to be able to determine the availability
of all portable machinery-EKG machines, defibrillators, gurneys, wheelchairs-in
real time," observed Geva Barash, executive vice president of sales
and marketing for i-Ray Technologies.
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For hospital-type RTLSes (real-time locating systems), i-Ray uses active RF tags with batteries onboard, operating in the 915 to 920 MHz spectrum. Each tag transmits its signal within a range of a few hundred feet to antennas that are deployed throughout the hospital. The antennas feed the data to base stations integrated with the hospital host, and personnel can access the locating system from PCs via the facility's intranet. The system can also be used outdoors to locate wheelchairs left in parking lots.
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Collaboration for Cost Recovery Escalating health care costs across the board have prompted hospitals to get serious about inventory control and cost recovery. "The need to reduce inventory costs is critical," said Jim Stiles, vice president of HealthLine Solutions. "Today hospitals are looking at JIT [Just-in-Time]." HealthLine sells bar code-based solutions that use wallmounted Linx terminals to track and monitor inventory requirements by specific department- for example, recovery room, intensive care, or the cardiac catheterization lab, where costing by procedure is a priority. "Hospitals need to accurately track patient charges, but also save money by streamlining inventory handling and labor management," said Mr. Stiles. "These systems generate reports on inventory utilization, which is especially important for nonstock inventory that's more expensive and unique to one or two departments. Hospitals such as St. Francis in Monroe, LA, and St. Luke's in Cedar Rapids, IA, have cut about $500,000 to $600,000 in inventory carrying costs."
According to Dave Linnen, senior director of product marketing for Manhattan
Associates, a warehouse and supply chain management software developer,
lead times are decreasing for device manufacturers. "It's no longer
okay to send three or four pallet loads to hospital storage or the wholesaler.
It's becoming more like a JIT environment-delivery if not in hours then
in a matter of days. High-dollar items are costly to store. In that respect
real-time collaboration on customer demands is essential to accomplish JIT
delivery."
Manufacturers and wholesalers are beginning to provide automatic replenishment,
added Mr. Linnen: "With wholesalers trying to be a one-stop shop, monitoring
inventory makes buying and receiving that much easier for customers."
For example, Henry Schein Inc. (Melville, NY), a medical, veterinary, and
dental products supplier and Manhattan Associates customer, offers online
ordering and provides dentists with software to track product used, which
triggers automatic replenishment.
According to Mr. Linnen, another current trend in health care management
is the need for publicly traded companies to look out for shareholder value.
Consequently, margins are getting slimmer, and the demand to cut costs is
further affecting hospitals, nursing homes, and government facilities. "Ongoing
consolidation is driving centralized purchasing," noted Mr. Linnen.
"There are a whole lot fewer wholesalers out there than [there were]
two years ago."
Steve Halula, director of customer strategic solutions for Catalyst International,
a provider of warehouse management and supply chain execution solutions,
agrees that medical/surgical manufacturers are moving toward a JIT model.
"Customers are placing smaller orders more often," he said. "They
need to get product out the door quickly, and they're in a competitive environment;
they have to have efficiencies."
Mr. Halula is currently involved with a system implementation for Medline
Industries (Mundelein, IL), a major U.S. medical supply manufacturer and
distributor, with 30,000 health care provider customers. Medline's Kansas
City, MO, warehouse has become the beta site for Catalyst's latest Web-based
WMS release, interfaced with Medline's SAP R/3 backbone via Catalyst's XML
(eXtensible Markup Language) SAP interface. According to Mr. Halula, a major
selling point was the browser-based architecture, enabling faster deployment
because of its standardized methodology for interfacing with legacy systems;
real-time visibility throughout the enterprise and the system's ability
to track at the granular level for lot and date capture were also important.
"The advanced XML-based interface uses SAP's business connector for
most appropriate mapping methodology," said Brian Daleiden, director
of strategic alliances for Catalyst. "It lowers user risk because there's
no middleware, the initial installation cost is less, and lifecycle costs
are significantly lower."
Regulatory Pressures
More and more, health care product providers are looking like consumerdriven
businesses when it comes to fulfillment. The push for accuracy and a critical
need for cost containment, plus regulatory mandates for lot and date traceability,
are driving automation throughout distribution. But scanning goods into
receiving at the warehouse is only the beginning. Tracking product at every
move-down to the point of care-is the goal.
"Over the last two or three years, FDA [U.S. Food and Drug Administration]
regulatory compliance for the pharmaceuticals industry has been driven down
to device manufacturing as well as wholesalers and distributors," said
Manhattan's Mr. Linnen. Stryker Endoscopy (Santa Clara, CA) and Amerisource
Bergen (Valley Forge, PA) are among Manhattan's extended supply chain execution
customers.
"Every point of contact has to be accounted for in a chain of custody
tracked through manufacture, to distribution, to the emergency room or bedside,"
said Mr. Linnen. "Typically, medical product companies use an ERP [enterprise
resource planning] backbone, which doesn't collect data in enough detail
for lot and date tracking."
The FDA's Title 21 CFR (Code of Federal Regulations) Part 11 covers electronic
records, encompassing each point in which a product undergoes any activity,
whether within one facility or between facilities, throughout the supply
chain, for cradle-to-grave accountability. "The spending in this area
will be ongoing, both here and abroad," noted Mr. Linnen.
In addition, all individual medical/ surgical supplies will eventually be
traceable. Seven years ago, the U.S. Department of Defense mounted an initiative
to have all such products sourcemarked with bar coded UPN (Universal Product
Number) identifications (available through the Uniform Code Council, or
UCC, and the Health Industry Business Communications Council, or HIBCC)
on primary and secondary packaging.
Compliance has slowed since then, although individual wholesalers and group
purchasing organizations (GPOs) continue to carry the banner. Two of them
are Intermec customers. Premier (San Diego, CA), a GPO representing some
1700 hospitals, and Allegiance Healthcare (part of Cardinal Health; McGaw
Park, IL), a distributor of medical/ surgical products, have requested that
their manufacturer and supplier customers become UPN compliant.
According to Frank Gallo, account executive for Intermec, "About a
year ago, Allegiance gave its vendors a June 30 deadline, which wasn't met.
We've also worked with Premier on UPN compliance, but manufacturers drag
their feet, seeing it as an added expense. The cost and productivity benefits
are great on the provider side-but also for health care in general. Down
the road it will help meet FDA compliance and safety issues, but I don't
know how easy it will be to get everyone on board. Still, UPN will happen
eventually."
However, Paul Chiappetta, a quality operations manager who is currently
heading a UPN initiative for Becton, Dickinson (BD; Franklin Lakes, NJ),
a leading manufacturer of medical supplies, devices, technology, and systems,
put his finger on the paradox of the health care industry's longstanding
reluctance to get serious about bar code-based data input: "We never
had a Wal-Mart to enforce compliance."
Becton-Dickinson Optimizes Its Supply Chain
The phrase "six sigma" has recently become a popular business-management
buzzword, derived from the statistical use of the Greek letter sigma to
measure deviation from perfection (with six sigma representing 99.9997 percent
accuracy, or 3.4 errors per million). Strictly speaking, Six Sigma is a
specific quality control and project management philosophy that has been
successfully implemented at a number of tier-one companies, including Motorola
and GE, for which it has saved billions of dollars. In popular usage, however,
the term refers to a very high and continually improving degree of process
accuracy.
Motivated by patient-safety issues, the health care industry is hungry for
technology that helps attain six sigma accuracy in packing and shipping
systems, explained Mike Nolan, president of AIS (Automatic Identification
Systems), an ADC systems developer and integrator. "We determined the
impact of ANSI grade A bar code verification and data validation on the
shipping systems of one of our health care clients," he said. "Using
a mathematical model, we were able to come very close to a six sigma result."
That client, Becton, Dickinson, is actively engaged in implementing a six
sigma optimization of its entire supply chain. According to BD's Mr. Chiappetta,
"We applied six sigma methodology to analyze our distribution operations
and realized that bar codes are the most significant technology for improving
supply chain performance."
Because of consolidation, BD has higher-throughput distribution centers
(DCs) that must deal with varying business practices and a multitude of
product ID formats. "We recognized that we were operating as a decentralized
company, with nonstandard product line labeling and workflow among manufacturing
facilities," said Mr. Chiappetta.
The larger DCs are equipped with RF terminals and bar code scanners for
recording storage locations, pallet contents, and product moves. Andrew
Stellon, BD's packaging team leader, explained that the company tried piloting
the next level of bar coded data entry by scanning product bar codes, but
the program was dropped owing to inconsistent and noncompliant marking of
incoming items. But two years ago, BD began implementing a corporate- wide
SAP ERP system, driving the need for product and packaging standardization
across the board. "Bar code scanning will improve lot-tracking accuracy
and prevent unit-of-measure packaging errors," explained Mr. Stellon.
"SAP requires us to have a perfect and uniform system of entering and
exiting product. Plans are in place for 100 percent scannable productmarking
conformance, which will be used on all packaging levels directly handled
by our DCs." BD is requiring compliance, including on-time advance
ship notices (ASNs) from both suppliers and its own manufacturing plants.
"In keeping with six sigma methodology, we needed to get a handle on
how compliant we were," said Mr. Chiappetta. "[AIS] designed a
discrepancy auditing system [that would] interface with the verification
systems at the DCs, to obtain comprehensive measurements of all 6000 product
IDs in hub one alone [DCs in Chino, CA; Indianapolis, IN; and Bridgeport,
NJ]." Two years ago, BD purchased AIS bar code verifiers and a PC-based
data collection system to audit product entering its hub-one DCs, but the
system was not up to the magnitude and speed required. BD asked AIS to upgrade
the bar code testing system. The new system, SCANAuditor, resides on a Casio
PDA, for portable label scanning. The program displays ANSI decodability
grades, interprets UCC application identifier structures, and also decodes
the product ID and additional data, such as quantity, expiration date, and
lot number, into human-readable text. Inspectors and pickers can then verify
that the correct product has been picked against the human-readable product
ID on the shipping label.
"We've scanned the codes and made the results available to all our
suppliers," said Mr. Stellon. "We have to get everyone compliant
and then focus on purging inventory of noncompliant product before the SAP
system goes live." The first grouping of DCs to go live with an SAP
interface will be BD's hub one. As soon as BD achieves a high degree of
label compliance, it will begin using bar codes in its 3PL's (third-party
logistics provider's) proprietary warehouse management system.
Besides improving picking, shipping accuracy, and customer service, BD's
six sigma system will also provide better return on its SAP ERP system.
"We see health care as being more sensitive to bar code-based transactions
than retail because of the patient safety factor," observed AIS's Mr.
Nolan. "But in light of the recent terrorist attacks, optimizing the
supply chain goes beyond productivity and efficiency considerations. A sound
infrastructure is a critical security issue."
DEB NAVAS has been writing about supply chain and ADC technologies for 12
years.
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