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Standardized bar codes offer big savings

What exactly does it cost to do business? The question dogs healthcare finance professionals. The answer – or at least the medical device supply-chain piece of it – is within reach, according to a new case study on the use of the Perfect Order metric and GS1 bar code standards.

In “Perfect Order and Beyond,” manufacturer Becton, Dickinson and Company, and ROi, the distribution arm of the Mercy healthcare system, detail the first known application of the global bar code standards in a clinical setting, from the manufacturer’s floor to the patient’s bedside. The collaborative project was completed before the industry sunrise dates for both the GS1 Global Location Number (GLN) and the Global Trade Item Number (GTIN).

“If people understand the benefit of Perfect Order measurements combined with the use of the GS1 standards, great efficiencies can be gained across the entire industry,” said Dennis Orthman, a supply chain expert at Strategic Marketing Initiatives, the industry group that pioneered the use of the Perfect Order, a measure of supply-chain efficiency. “We’re hoping that this case study helps to propel the use of not only the Perfect Order but of the GS1 standards as well.”

For comparison, retail marketplace leader Wal-Mart has long used standardized bar codes to eliminate waste from its supply chain, allowing Wal-Mart to pass savings on to customers in the form of lower prices. Not so in healthcare.

“Right now we don’t have that common language,” said Orthman. “Manufacturers and suppliers identify products with one method, and hospitals identify products with another. The dysfunction that those two numbering systems create leads to a great deal of inefficiencies.”

And they add up. BD and ROi revamped business processes and technical infrastructure to create a common language.

“Perfect Order gives us a true consumption model,” said Curtis Dudley, vice president of integrated business solutions at ROi, “so we know where and when we use supplies, enabling us to manage that information effectively.”

Among the chief benefits of the BD/ROi program:

• A 30-percent reduction in days payable outstanding
• A 73 percent reduction in billing discrepancies
• Improved sourcing of products
• Fewer calls to customer service centers
• Fewer stock outages
• Better charge compliance

Alex Zimmerman, the director of integrated business solutions at ROi, helped design the program and co-authored the study. Historically, he said, a medical device might arrive at a patient’s bedside bearing as many as three separate bar codes. The use of code standards eradicated duplication and dramatically reduced the attendant man-hours needed to correct errors in its purchasing, shipping and storage centers.

But the benefits don’t end when the right payment reaches the right vendor, Zimmerman said, or when the right device reaches the right patient.

As the adoption of GS1 standards continues, “it will dramatically change the way the healthcare supply chain operates,” he said. With one scan of a device, organizations will “see on the patient health record (which products are) used. That will lead to things like comparative effectiveness analysis and recall management. It’s in those intangible areas where you’re going to see the biggest value from this process.”

Meanwhile, BD and ROi are eager to share their experience.

“We want the industry to transform,” said Curtis. “We want to share information (about our program) with other suppliers and providers and provide an example that they can look to and see how this can work within healthcare and how it will lower their costs and ultimately lower the costs in the industry to do business.”

The study can be found at: www.gs1us.org/BDMercystudy.
 

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