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But in the healthcare-reform-minded mid-1990s suppliers and providers alike recognized that that was too limiting in scope. So these automated supply cabinets then were touted as effective inventory management tools for cost-conscious facilities.

Since then, manufacturers of these products expanded their applications even further, adding data management and patient safety to the repertoire of theft prevention and inventory management. Arguably, all of these attributes could have been applied near the time of their introduction, but advancements in computer technology later made them easier to implement, transforming them into more than just boxes and shelving attached to a computer, but what some vendors have coined "automated point-of-use supply management technology."

Over the years, the key players in this market segment have updated the aesthetic design elements of these products with more glass, rounded edges, smoother lines and touch screens to eliminating the cabinets altogether with bar-coded or button-driven technology under an "open shelving" concept. In fact, the key players today offer both closed technology (computer-equipped cabinets) and open technology (buttons, keypads and wands only) to enable PAR level inventory management, data tracking, theft and waste reduction and patient safety achievement.

As far back as the early 1990s, Healthcare Purchasing News chronicled the development to this technology, explored the costs and benefits of investing in it, how it conceivably could be improved, and what the future of such systems may involve.

But will changes in computer technology – specifically tracking – alter how providers view and use automated point-of-use supply management systems?

Growing interest in radiofrequency identification and real-time location systems has some wondering whether RFID or RTLS will obviate the need for electronic supply cabinets and open shelving systems in the future. After all, conceptually you could affix chips and tags on everything shoehorned into a cluttered closet and produce a comprehensive content listing that rivals output from the closed and open cabinet systems. So what roles will these products play in an eventual market rife with chips and tags?

That’s what HPN aimed to find out, asking knowledgeable experts in the field about the market longevity of these products.

With the emergence of RFID and RTLS technologies, why do you believe that providers will even need closed and/or open supply management technologies? Will RFID be incorporated into closed and open systems in the future? Why? How do you respond to providers who don’t want to invest in the closed or open systems because they’re awaiting RFID to solve all of their problems?

Michael Carpenter vice president,
spaceTRAX InnerSpace Corp.,
Grand Rapids, MI

There is no question that RFID technology provides incremental benefits that will drive savings. The balance of costs vs. benefits will determine the rate of adoption and in turn produce economies of scale that creates a more effective cost model.

RFID has its place in both closed and open systems, but again the cost/benefit curve is the determining factor. Today, RFID technology tends to deliver a higher rate of return when used in conjunction with closed systems, but this is primarily when expensive devices are stored. The rate of return drops off quickly with both RFID and closed systems for lower-cost/higher-volume items, such as catheters and guide wires. This is where a bar-code-driven solution is best applied. 

Specialty clinical items fall across the full spectrum of the cost/benefit curve, and thus derive value from both RFID and bar code inventory management systems. The key benefits of RFID are derived from its ability to communicate item level information both seamlessly and continuously.  When combined with security and access controls, RFID makes it possible to link the ‘who,’ ‘what’ and ‘when.’ The existence and combination of this data changes behavior patterns, providing accountability and traceability and ultimately improving charge capture and reducing waste. 

RFID adoption will begin at the provider level but the technology should not be viewed as only viable when manufacturers’ place RFID tags on their devices. We believe the technology, tools and processes are in place for providers to begin implementing RFID, bar code and combined solutions to gain control of specialty clinical inventories.

Point-of-use systems will continue to play a key role in executing an efficient and effective materials management strategic plan. RFID and RTLS technology will continue to be refined and take its place in a total supply chain management solution. The individual, and often subtle, requirements of each supply location demand a solution that is not bound by one specific technology.

RFID/RTLS technologies may fit well for managing mobile assets, staff and a select number of high value products. However, this may not be the optimal solution for lower-value/high-velocity items, which constitute the majority of items flowing throughout the healthcare supply chain. Organizations may find the cost, labor investment and practical operational value of managing the exact location of these items to be cumbersome and perhaps of little value.

Perhaps the key question is not whether RFID and RTLS will make open and closed technologies obsolete, but rather, how can the healthcare industry integrate this new technology effectively into a total supply chain strategy?

Current point-of-use systems are highly flexible in their data architecture and adapt readily to new formats of information collection. As these advances prove valuable, technology-savvy organizations will merge RFID and RTLS solutions with their legacy systems to enhance service offerings to their clients.

Once again, the optimal solution for any given supply location could and should be a hybrid of technologies. Equally important is the development of the business intelligence surrounding the data that is collected by all technologies, including key performance indicators, reporting/decision tools, process plans. When properly designed and utilized, current technologies offer flexible, high value/low investment solutions to the everyday management of the supply chain.

To paraphrase Jim Collins in Good to Great, ‘Great companies use technology as an accelerator of momentum (in this case supply chain improvement), not a creator of it. Certainly a company cannot remain a laggard and hope for (supply chain) greatness, but technology, by itself, is never a primary root cause of either greatness or decline.’

To date, even the most sophisticated supply chain companies in the world have yet to deploy RFID technology to the lowest-unit-of-measure level and struggle with how best to ‘operationalize’ these changes. To wait on what could be, and not utilize all the resources that are available to a supply chain leader today, is doing your organization a disservice. Best-in-class healthcare organizations are combining the technologies of today with a passion for service in order to deliver unsurpassed performance, all the while keeping a keen eye on innovations and how they can enhance this vision of excellence. These organizations are not waiting for industry-changing events; they are creating them.

Closed and open supply management technologies are popular because they are well-established technologies, economically justifiable and user-friendly, with many systems generating high compliance rates. While RFID holds great ultimate promise, today less than one percent of U.S. hospitals have any sort of RFID pilot in place — for supply or medication management — and most of these are in limited areas of the facility. This low level of adoption of RFID is due to many factors. I would highlight the fragmented state of RFID’s value delivery chain, necessitating relatively high systems integration costs for providers, which are intent on implementing an RFID-based system. In addition, there are additional ongoing costs, in particular the tagging of items.

There’s no question that RFID will be incorporated into closed and open systems at some point in the future. For a number of years, Mobile Aspects, a healthcare IT vendor headquartered in Pittsburgh, PA, has marketed RFID-based cabinets, and in August 2004, Omnicell Inc. showed a prototype of an RFID-based supply cabinet for use in the cath lab at the 42nd Annual Conference & Exhibition of the Association of Healthcare Resource and Materials Management (AHRMM), held in Nashville, TN. As for the incorporation of RFID into open systems, a number of vendors, including Symbol Technologies, now the enterprise mobility business of Motorola, has offered RFID scanners, as well as scanners combining RFID and bar code scanning, for open environments.

Providers which are not implementing closed or open systems today because they are waiting for RFID to solve all of their problems are akin to people who choose not drive any sort of car today — gasoline or diesel-powered, hybrid or electric — because they are waiting for the emergence of hydrogen-powered cars. In the meantime, there’s lots of value that the existing technologies can provide.

As with any shift in technology, to displace existing supply management approaches, RFID will have to demonstrate a superior value proposition to providers, with marginal utility exceeding marginal cost. I believe RFID will carve out niches in the medication-use process in pediatric hospitals and other hospitals’ neonatal intensive care units, in supply management for specialty areas, and in equipment or asset management.

Where by law you must track narcotics or monitor drug dispensing, you will need a way to lock those supplies for accountability. On the med/surg side there are benefits to controlled cabinets as well. Not that you can prevent dishonesty, but there are benefits to locking up high-dollar items and being able to identify who accessed them. With RFID and RTLS technology, you could match frequencies to identify the users and where products go. That’s costly now.

A primary area for RFID or RTLS is asset management. Take IV pumps, for example. Most hospitals have enough pumps; they just can’t find them because they are hidden behind a door, in a closet or down a hallway. RFID and RTLS could make asset management easier and effective. However, these assets are not typically put in cabinets. What goes in locked cabinets are patient care consumables, and some are quite expensive, so keeping track of them is essential. Good inventory management could produce significant savings.

You can tell who opens today’s cabinets and what they take, but without ‘locator tags’ someone might say they got one item when they got five. Control is still lacking. With RFID or RTLS, theoretically every package and piece of equipment could be tagged. You could know not only what was taken but where it went. And in the ideal situation, every individual in the organization would be tagged as well.

If I were a supplier of closed cabinets, I would be integrating these two technologies. The cabinet would identify the product as well as who took it. The RFID or RTLS would indicate where the product went.

Here’s the exciting part. You could use it particularly with high-dollar items and with implanted devices. Every patient who gets an implant has to be tracked, and so do the devices. The cabinets could be programmed to integrate information automatically into the implant register and the patient chart when a product is taken from the cabinet. Advances in technology make possible the convergence of safety and inventory management, resulting in a better system that may be less expensive in the long run.

It’s really cool stuff – something we’ve been wanting for a long, long time. These technologies will integrate safety, legal monitoring, regulations and inventory. We will need to demonstrate the value of that integration to providers. A closed system or locked cabinet will produce essentially the same results if RFID or RTLS is used.

Closed systems can be integrated directly to the inventory control system or materials management system with automatic ordering, stocking and charging. Open system would be more manual with someone checking inventory and placing orders. RFID or RTLS would work with both, and either system will show where the item ends up and how it’s to be charged. The difference will be the cost.

The exciting potential will be to get a ‘tag’ installed when the item is manufactured so that it can be tracked from its point of origin until it is consumed.

Cardinal Health Supply Technologies provides solutions designed to help customers reduce cost, work more efficiently and provide better patient care. As the pioneer in the healthcare automation business we were the first to offer an integrated hybrid inventory system combining bar code systems, radio frequency devices and secured point of use systems as part of a scalable, end to end solution beginning in 2001. We recognize that there is no ‘one size fits all’ answer and see RFID as a viable complimentary technology to existing supply automation systems once the technical challenges have been overcome and as the cost and read rate accuracy of RFID systems continues to improve.

Even after these issues have been addressed, RFID’s most promising segment will likely be in managing high-value low-volume product and devices for the foreseeable future where the added labor and tag costs can be more readily absorbed. A blended technology solution offers a cost effective means of tracking of both high value (valves, stents, pacers) and high volume (bed pans, [bandages]) products to be tracked through a single unified system.

The early emergence of RFID in retail confirms that providers will continue to need scalable and flexible systems that offer a variety of storage, security and tracking options including bar codes, open shelf and secured storage systems. The most notable purveyor of RFID in the retail sector is Wal-Mart who continues to use cashiers and bar code based self checkout point of purchase systems, as part of their global inventory and information management systems. Similarly, we believe that providers will continue to need a variety of technology solutions to meet their inventory and information management needs that will likely include hybrid combinations of bar code, open shelf, radio frequency touch panel, secured touch to take and RFID systems.

RFID adoption across the industry is likely to increase as reliability and consistency of the technology improves to more acceptable levels and the costs of the disposable passive chips and supporting technologies continues to fall. Today RFID adds cost to the supply chain management process in a market where vendors and customers have been working diligently to reduce costs. Manufacturers have been unwilling to bear the cost of the technology and the result is that early adopter providers are being tasked to create and affix tags to each device and enter critical fields, such as SKU, description, lot and serial number, potential points of failure and inaccuracy.