Why is the Data Supply Chain a Challenge in Healthcare?
Why is the Data Supply Chain a Challenge in Healthcare?
Healthcare logistics are complex and dependent on high quality data. Unfortunately, standardized master data is a challenge. Healthcare supply chains are being pressured to transform from order fulfillment operations to strategic analytics focused operations that support organizations in lowering the cost of non-labor spend and supporting leadership in making key business decisions. Supplies, purchased services and capital equipment acquired by the supply chain represent about 33 percent of a hospital’s operating expense budget and it is growing.
At the foundation of enabling the next generation healthcare supply chain is an organization’s item master. The item master lists all products and services that a health system purchases and is key in enabling logistics (track and trace), strategic sourcing initiatives and spend analytics. The item master should be the single source of truth from which all other supply information systems are populated.
Most industry estimates place the size of a hospital’s item master between 18,000 and 200,000 items and it’s estimated that 30-40 percent of item master files are inaccurate creating waste across the supply chain and the health system. Examples of waste resulting from an inaccurate item master include ordering off contract, ordering wrong items, prolonged sourcing process, and inability to capture commitment levels for contract pricing and slow reimbursement due to missing data. Some industry experts estimate a 1.5 percent savings impact on total non-labor spend simply by eliminating the waste generated by inaccuracy.
Beyond the waste being produced from inaccuracy is the heavy investment each health system makes in people to maintain their item master. Most importantly having an item master that is not categorized and enriched with attributes prevents supply chains from performing sourcing and spending analytics to engage in projects to strategically lower their costs.
"The item master should be the single source of truth from which all other supply information systems are populated"
Compounding the master data challenge is the number of data standards and organizations that the health systems then need to integrate to accurately transact. Standards bodies like GS1 have standards for locations (Global Location Number–GLN), product and service identification numbers (Global Trade Identification Number–GTIN), data subscription pools to acquire data (Global Data Synchronization Network–GDSN) and united nations item codes and classification (United National Standard Products and Services Code–UNSPSC). Suppliers, distributors and health systems are challenged in accurately implementing and managing these multiple standards.
Why do we Need to Fix This?
Healthcare logistics costs are significantly higher than other industries. This is due to the ineffective and inefficient business processes and integration that exist today. Best example would be to follow the transaction from manufacturing through distribution all the way to the patient.
Managing inaccurate data is estimated to waste 20 percent of current healthcare buyer time. With the financial pressure, having buyers time wasted troubleshooting and fixing issues instead of strategically supporting the buying function. This impacts the supplier, distributor and GPO that all now require resources to troubleshoot and fix data errors. Waste that we can’t afford to continue.
Outside of healthcare, supply chains have leveraged GS1 standards and collaborations to come up with working data standards. These allow everyone along the value chain to share and work together using a common data language and rules.
What do We Want?
In order to reduce the cost of our delivery network, we need to adopt clear data standards to go with the distribution standards that are in place today. We need to get to a point that when a truck backs up to our doc, we have the matching information in our systems and can easily receive, put away, manage inventory and deliver to end users. Key to this is the data setup and management from the mfg all the way to the patient.
- Accurate product and pricing data that is categorized accurately
- Barcodes/RFID tags that we can use in our systems with items tagged all the way to the lowest unit of use
Ideally, we would also enable the ability to source products and services for our healthcare organization. When there are stock outs or product supply issues, quickly being able to know competitive products/services is essential to delivery of care. In healthcare, if we get this wrong, people may die. Reflect on recent pandemic challenges and the logistics issues they created. It is much more complex to source and find solutions when data is not well organized.
Comparing and analyzing spend is essential to successful supply chains. Healthcare continues to leverage Group Purchasing Organization (GPO’s), distributors and consultants that all have their own proprietary solutions to analyze and evaluate spend. Having an agreed to dictionary of data will allow us to remove waste of every value add organization doing it but also provide better accuracy when comparing and analyzing supply information.
Why is it Different than Retail?
There are many similarities and similar products to other supply chains. One key difference is the level of regulation and level of product data needed. When you are tracking Implants, pharmacy, IT, clinical commodities, equipment, and waste stream to name a few, they all have very different data requirements to transact cleanly. We can leverage the industry areas like Pharmacy, IT and some commodities for the solution. We need to round those out with the solutions to the other missing areas.
As we look at medical devices, we not only need the product information but also the patient information systems to link them together for regulation requirements. These complexities challenge even the best intended suppliers, distributors and health providers.
Where do We Start?
There is hope! There are several industry initiatives and organizations working on creating solutions. The FDA is supporting the UDI standards through AHRMM (Association for Healthcare Resource and Materials Management). GS1 teams are also helping focus the industry around developing the industry standards.
I am dreaming of the day that the when a truck backs up to my facility and I have the correct product information, the packaging and delivery information is easy to use for my track and trace so my team can really focus on what we do best. We want to help the people that deliver the wonderful care patients need to live the healthiest lives possible.