RFID Remakes Hospital Inventories
The healthcare supply chain is complex and riddled with inefficiencies that inflate costs and affect patient care and satisfaction.
The good news is that there is a technology-based solution available for healthcare providers ready to overcome inertia and resistance to change.
Already used widely in many industries, radio frequency identification (RFID) technology is transforming the healthcare supply chain for devices and implantables by providing hospitals, clinicians, distributors and manufacturers with actionable data.
While the full benefit is realized when all stakeholders use RFID to create an end-to-end supply chain network, individual hospitals and health systems can also use such technology independently to reinvent the internal supply chain and improve product stocking, usage capture and coherence among various operational departments.
The need for such improvement is profound and rooted deeply in the healthcare system. The traditional approach for supply chain management requires intensive staffing to handle multiple, often redundant systems that lack the data sharing and transparency critical for preventing waste. The result is an estimated $5 billion in medical device and implantable supply chain waste annually.
Inventory is overstocked and products expire at rates that result in large amounts of waste and unnecessary patient risk. The consignment distribution model has historically been popular because it creates the perception that hospitals receive items for free until they are used, which seems to many like an easy way to show cost reductions. However, this model does not generate savings over time, as inevitable losses are simply built into product cost. This practice is more problematic now than ever, as reductions in reimbursement create an acute need to eliminate waste across the supply chain.
All of this makes the traditional supply chain model unsustainable – a fact well understood by the tech savvy and data driven healthcare providers that have been adopting RFID-enhanced supply chain management for more than a decade.
RFID Data Drives Positive Results
A supply chain solution system built upon RFID technology provides robust and actionable data. Usage patterns emerge. Outcomes are linked to products and practices. Waste becomes visible, measurable and avoidable. Working capital is re-allocated. True product costs are reduced. Even healthcare industry staffing can be reorganized to reflect insights culled from the supply chain, allowing clinicians to more fully focus on patient care instead of supply chain tasks.
At an IDN enterprise level, RFID endows healthcare providers with invaluable data across all departments and facilities. The total cost of such solutions often comes as a surprise to hospital administrators, as well. While many may think RFID is prohibitively expensive, advances in the technology have driven costs down to a point where passive tags for tracking inventory cost only 30 – 50 cents per tag, compared to more expensive active tags for capital asset tracking and location services. When it comes to the bottom line, RFID solutions often pay for themselves in one to two years.
Cardinal Health is working with leading providers to help them better track and anticipate the products they need, and align those needs seamlessly with inventory. As a result, issues that previously seemed insurmountable – such as problems with product expiration, loss, overstocking and shortages – have become easy to resolve.
Three Keys for Implementing RFID-Enabled Supply Chain Management
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Scalability: A supply chain solution should be compatible across products, hospital departments and health systems. It should also account for diversity of supplies – from stents to orthopedic screws to tissue – while maintaining a “big picture” view of overall inventory that enables products to be allocated where and when they’re needed. A scalable supply chain solution enables visibility and control at a procedural department level, in the OR, at the hospital and at the IDN level.
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Flexibility: In order to make it “future proof” (or at least useful for many years to come), a supply chain management system must be able to adapt to emerging technologies. This requires a flexible framework that accommodates innovations such as near-field communication (NFC), which is fast becoming available in every new smartphone and wearable gadget. In the near future it may become common for clinicians, materials managers and other hospital employees to use an NFC-enabled cell phone or tablet to scan products and track them throughout the system.
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Ease of Use: Ultimately, the best supply chain management system is one that reduces the time a clinician has to spend managing inventory. Less time spent on such tasks translates into more time spent on patient care. Technology that isn’t easy and intuitive won’t be used. Imagine the benefits of a system that lets clinicians simply place a stent in a cabinet, and have data from that stent (such as model, size, lot number, serial number and expiration date) captured automatically and updated to the department’s inventory profile.
Technology for a Healthier Bottom Line
While today’s healthcare supply chain remains for the most part heavily fragmented, tech savvy hospitals and health systems are adopting RFID and data visibility tools to improve their internal inventory management, freeing up clinical staff to focus on patient care.
Medical product manufacturers and distributors are also ramping up RFID adoption to create fully integrated and networked end-to-end supply chain environments.
When used to its full capacity, RFID can transform a hospital’s supply chain into a strategic asset that can have a sizeable impact on reducing the total cost of care. It’s clear that technology is transforming the healthcare supply chain, and there has never been a better time to join the RFID revolution.
Jean-Claude Saghbini is General Manager of Cardinal Health's Inventory Management Solutions.
