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May 22 2013   8:44AM GMT

Automating the implantable device supply chain

Posted by: Jenny Laurello
Health care inventory management systems and software, implantable devices, Supply chain management

karen-conwayGuest post by Karen Conway, executive director of industry relations, GHX

Healthcare cannot afford to keep pushing forward with the old way of doing business. As factors like the medical device excise tax and declining reimbursements impact their respective bottom lines, providers and suppliers are looking for areas where they can remove unnecessary costs, while maintaining high quality care and service. One area gaining increased attention is the implantable device supply chain, which is rife with inefficiencies and lack of visibility. There is more than $5 billion in documented waste, shared equally by providers and suppliers in the U.S., according to research conducted by PNC Healthcare and GHX.

The implantable device supply chain’s (IDSC) problem can only be tackled through a collaborative effort because it relies on multiple parties from hospitals, physician practices, manufacturers and distributors. Its inefficiencies and waste are a result of four main problems.

  • Error-prone processes: From the moment a case is scheduled, through product delivery and use, until after the procedure is completed, the entire process is painfully manual, disjointed, duplicative and error-prone. Managing inventory, preparing for cases, documenting and reconciling supply usage involves multiple parties — sales reps, surgeons and circulating nurses, just to name a few. Combine the number of parties with manual, paper-based processes and you have a breeding ground for errors and inefficiencies.
  • Lack of data standardization and synchronization: The lack of data synchronization has historically been one of the barriers for automating the IDSC. For many hospitals, data on implantable devices is not well managed — or at all — in the item master. Unfiled items create confusion about the products used and the correct pricing, which can further delay the process and payment.
  • Ineffective inventory models: As providers have experienced increasing cost pressures in the past 10 years, they have turned to suppliers to manage their inventory. As a result, a large percentage of devices are either consigned inventory or stock held by sales representatives — so called “trunk stock” — with a much smaller percentage owned by the hospitals. Suppliers report they can have up to 60% excess inventory and write off 7% to 10% due to loss, waste or expiration.
  • Lack of demand or usage visibility: More timely communication (as soon as a case is scheduled) can help both parties better prepare the required products and instrumentation. Large volume hospitals generally try to keep enough stock on hand to manage a peak day — say five hip cases on average — but what if the patient requires an uncommon size or if each case that day requires the same size implant? Even with good planning, sometimes there are unexpected product needs, which can be harder to accommodate without synchronized product data in item masters.

A group of manufacturers and healthcare systems have been working together to address many of these issues by developing best practices and conducting pilots to measure the value of data synchronization, process automation, case preparation and product documentation. Industry-wide adoption is critical to truly change the status quo, though these pilot projects are the first step to automating the IDSC.

It’s important to help both providers and suppliers leverage their own technology investments for their internal purposes, while looking for opportunities to standardize around shared best practices when they are working together.

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