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Curbing Supply chain Costs in Healthcare

Mike Duffy, President of Hospital Solutions and Global Supply Chain, Cardinal Health [NYSE: CAH]

Today, digital technologies and the “internet of things” (IoT) is transforming our daily lives; everything is smarter, faster and more efficient. Technology allows our scale to talk to our phone; our watch tracks our heart rate, steps and calories; and our household devices like thermostats, garage doors and security cameras, to be controlled virtually—from anywhere in the world.

While many industries are capitalizing on these advances to improve their operations and the customer experience, the healthcare industry still has clinicians struggling to read medical device labels to get expiration dates and serial numbers. Barcodes are manually scanned off boxes and clinicians count product. Hospital supply rooms are stocked with millions of dollars of inventory that include expired products, nearly expired products, or products that will never be used.

The scope of this inefficiency in the medical devices market is staggering, leading to an estimated $5 billion[ PNC Healthcare; GHX quantitative research study (August 2011) ] of waste annually. Medical devices and implantables, like stents, pacemakers, hips, and knees are essential for improving the quality of life for patients. These items are high-cost and high-value and, unfortunately, flow through an inefficient supply chain.

  ​As hospitals and health networks move toward value-based care, it’s crucial to eliminate wasted time and money  

As hospitals and health networks move toward value-based care, it’s crucial to eliminate this wasted time and money. This is a problem not just for healthcare providers and medical device manufacturers, but for all of us, as patients in the healthcare system.

Cardinal Health recently commissioned a national survey to hospital executives and found that 85 percent of respondents said their health systems are currently working to identify or implement new ways to reduce supply chain waste and related costs. Overall we’re seeing a trend toward health systems looking for ways to better leverage data and analytics and promote transparency and visibility in the supply chain.

Hospital c-suite executives understand that an efficient, data-enabled supply chain can be a strategic asset. In addition, tech savvy and visionary hospitals and health systems are adopting an IoT approach to managing high-value medical devices to gain operational insights, increase efficiencies and reduce costs.

One element of the IoT approach is fueled by recent Federal Drug Administration (FDA) regulations. The FDA is establishing a unique device identification system to identify medical devices from point of manufacture to point of use at the bedside. When fully implemented, the label of most devices will include a unique device identifier (UDI) in human- and machine-readable form.

GS1 has been accredited by the FDA as the issuing agency for UDIs. Global GS1 standards meet the U.S. government’s criteria for issuing UDIs and will help manufacturers comply with the requirements of the FDA UDI regulation to support patient safety and supply chain security.

While technology can drive out significant waste locally, at a hospital, we need to adopt robust proven standards—like GS1—to realize the scale benefits that will come with a connected and transparent health care supply chain. GS1 is critical in building a foundation for the efficient sharing of information across trading partners, and can enhance and enable the interoperability of systems. Interoperability is key to connecting data sets and bringing greater insights forward for improved operational and clinical decision-making.

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Cardinal Health believes UDI is the first step toward increasing visibility and transparency of product movement across the healthcare value chain. We fully endorse GS1 as the common data governing standard for UDI that will enable scale adoption of emerging technologies and capture opportunities associated with a more transparent supply chain.

Given the transition of reimbursement from fee-for-service models to fee-for-value, it is also critical all healthcare constituents link outcomes with cost. Leveraging point-of-use data and analytics to improve patient outcomes will be made possible with the digital transformation of our supply chain, enabled by UDI.

To respond to these evolving healthcare needs and delivery models, the healthcare industry needs to go through the same supply chain transformation that revolutionized retail and other industries. We need to focus on the first moment of truth and move toward a patient-driven supply network. We need to extend our thinking beyond our own four walls (be it provider, manufacturer or distributor setting) and think holistically. We need to collaborate with all partners and focus on our shared patient. We need to embrace data standards and leverage emerging technologies that can do for healthcare what the barcode has done for retail.

In this quest to reduce the total cost of care and improve patient outcomes, the healthcare supply chain is a strategic asset that can yield significant financial savings, and technology will fuel it. So while fitness trackers and virtually-controlled garage doors are a great convenience, smart supply chains for our healthcare system are a necessity.

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