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KSR Publishing, Inc.
Copyright © 2016

         Clinical intelligence for supply chain leadership



December 2012

People & Opinions

Worth Repeating

"It’s probably implicit for every hospital to be re-examining not only the location of their generators, but also what could happen in a major storm surge. [Hospital leaders in Contra Costa County meet regularly for disaster planning and] this will be high up on the agenda."

Dr. William Walker, director of Contra Costa Health Services, California speaking of East Coast hospital generator failures after Hurricane Sandy

"Despite technological advancements, the number of reported injuries is still unacceptably high. In 2011, the ECRI Institute ranked needlestick injuries eighth on its list of Top 10 Health Technology Hazards. A leading cause is often due to over-filled containers that have not been replaced often enough."

Jackie Rategan, market manager, Sharps Management System for Stericycle

"It’s well-known that there is opportunity to reduce waste in healthcare. A missing link has been specific data to conduct comparative analysis on the effectiveness of different practices. Our goal in conducting this analysis is to raise awareness of the economic realities of blood use and encourage providers to think more critically about their usage patterns."

Mike Alkire, COO, Premier

"New trends in respiratory care are centered around increasing patient safety in the intensive care unit, closed-loop or automated systems designed to alter support based on patient’s demands, workplace ergonomics to support the clinician, and interfacing ventilator data with electronic charting systems."

Ed Coombs, MA, RRT-NPS/ACCS, director of marketing, respiratory care systems, North America, Draeger Medical Inc.

"Today’s sterilants and disinfectants provide validated products and procedures used in reprocessing contaminated instruments. These processes are proven, repeatable and dependable. They minimize intense manual cleaning processes, reduce splash and splatter exposure, and decrease employee exposure to hazards."

Crystal Shipley, CRCST, Valisafe product manager, Medisafe America LLC


Getting it right at the point of care

Supply documentation key to quality and revenue optimization

by Karen Conway, Lana Makhanik, Richard Perrin, Kim Slote

With the advent of healthcare reform and pressures to demonstrate meaningful use of electronic health records (EHR), the need for accurate documentation of implantable devices and other physician preference items (PPI) at the point of care is more crucial than ever. These products comprise the majority of hospital supply budgets and are the fastest growing expense for most hospitals. Nevertheless, the vast majority of products are not tracked or accounted for at the point of care.

Factual and detailed clinical supply documentation is essential for multiple reasons, including patient safety and quality of care, revenue capture, accurate billing, effective inventory control, and efficient supply chain management. These endeavors depend upon the ability to capture clinical supply data in real-time and provide visibility into both demand and consumption for providers and suppliers.

Understanding the problem

Despite its importance, clinical supply documentation at the point of care is often grossly inadequate or even inaccurate. This has serious consequences for the healthcare industry. During a patient case, when wrong items or quantities are recorded, or an item fails to be recorded at all, multiple problems generally follow such as erroneous charge capture, poor product recall and expiration tracking, and inaccurate patient medical records, all of which can lead to costly waste and patient safety issues.

Faulty clinical supply documentation also results in a dysfunctional supply chain, including longer cycle times for purchase orders, invoices and payments, as well as challenges related to product replenishment and inventory management.

Poor charge capture and inaccurate billing

Documentation errors made during a case can have a significant impact on billing. For example, mistakenly documenting that a product was used for a case can result in over-billing. Over-billing, in turn, can have serious repercussions, including undue revenue claims, risk of billing fraud accusations, and exposure to potential reimbursement penalties.

Equally problematic is the risk of unclaimed revenue due to under-billing, such as when product usage is not recorded. Considering that implantable devices can account for up to 80 percent of some procedure costs, the billing and revenue implications can cost a single healthcare system millions of dollars per year.

Risks to patient safety and quality of care

Most alarmingly, a recalled item cannot be tracked to a patient if its use was not properly documented or if the lot or serial number and/or expiration date were not included in the record. Incomplete or inaccurate patient medical records put patient safety at risk and open up the hospital to malpractice liability. The statistics on recalls are concerning: according to the FDA, there were 277 medical device recalls affecting 82 million units in the 1st quarter of 2012, of which four percent were Class I recalls (those which pose a serious risk of injury or death).

Bloated inventories, waste and expirations

Poor clinical supply documentation also results in erroneous inventory data that can hamper demand planning and forecasting as well as stocking and par levels. In the absence of good data on product consumption, manufacturers will often over-produce products and/or hospitals will purchase more than necessary, just to meet possible demand. This increases the chances of products sitting on shelves unaccounted for and unused before they eventually reach their expiration dates. The risk is higher costs for all parties due to waste; the even greater risk is the chance that an expired product could be mistakenly used on a patient.

Furthermore, capital tied up in bloated inventory impacts working capital and operational margins for both hospitals and suppliers.

A $5 billion shared problem

Lack of effective management of the implantable device supply chain is estimated to be more than a $5 billion annual problem, shared equally by providers and suppliers.

For providers, the biggest concern is revenue leakage due to inaccurate charge capture, but both parties incur costs due to lost or expired products and low inventory turns. As a result, both parties have a shared interest in technology and process changes that can improve visibility into product usage and demand.

Still a largely manual process

One of the primary reasons for poor clinical supply documentation is that so much of it is still done manually. Even when an electronic means of capturing supply usage is available, it often still involves manual activities such as searching to find the correct item, re-keying to supplement or enter product data, and/or having to repeat these tasks in more than one system for different purposes (e.g., clinical documentation, billing). In the midst of a procedure, nurses still commonly write paper notes or use stickers to record product usage. Meanwhile, vendor representatives are often gathering information on the same product usage for billing and replenishment purposes. Not only are these manual processes duplicative and time-consuming, but they also frequently result in errors that require both parties to spend time reconciling the data after the fact.

Disparate systems increase the complexity

To further complicate matters, the diverse technology systems involved, e.g., clinical documentation, billing, EMR, CDM, MMIS, typically do not easily share information. As a result, items used in the clinical setting are not always visible to the materials management system and/or to the financial revenue system in an integrated manner.

Technology, automation and process improvements

There is clearly a need for efficient and user-friendly automated solutions where the clinical supply usage can be captured once and then utilized for different purposes. For accurate clinical supply documentation at the point of care, a technology solution should easily bridge MMIS and clinical documentation systems and be able to capture all of a product’s pedigree information, including lot/serial number and expiration date. Technology solutions that allow data sharing across trading partners are also important in order to improve demand planning, inventory management, and order-to-cash cycle times. Technology coupled with better processes can improve productivity, decrease clinician time spent on supply chain duties, reduce product waste and expirations, and increase billing accuracy.

The FDA’s unique device identification (UDI) regulations will help facilitate clinical documentation of products used in patient care, but only if providers take the necessary steps to capture the data. The proposed rule, issued in July 2012, will require manufacturers to label their devices with unique device identifiers that can be read electronically; but UDIs could eventually become part of the regulatory lexicon for providers as well. The FDA and the Office of the National Coordinator for Health IT are considering including documentation of UDIs in electronic health records as part of stage 3 of meaningful use.

Impact of the Affordable Care Act

This is a key moment for healthcare organizations to gain better control over their clinical supply documentation: under healthcare reform and value-based purchasing requirements, providers and suppliers will need to be able to understand if and how specific products contribute to patient outcomes. And in order to know which devices contribute to which outcomes at what cost, users need to capture the clinical inventory data accurately and comprehensively at the point of care.

Furthermore, as healthcare reform pushes hospitals toward EHR, it will become ever more critical to ensure the accuracy of the data. EHR will be used for direct patient care as well as comparative effectiveness research, and beginning in 2015, failure to meet "meaningful use" of EHR will be reflected in decreased reimbursement.


Methodical clinical supply documentation at the point of care is essential for ensuring accurate charge capture, waste prevention, efficient supply chain processes, and high quality of patient care.

Proper documentation will become even more important as the shift from ICD-9 to ICD-10 is accomplished. The increase in the number and specificity of diagnostic codes will require more detailed patient medical records. Documentation of the correct ICD-10 codes will serve as the basis for correct revenue and reimbursement.

Clearly, technology and automation are a major piece of the puzzle. Without a comprehensive IT solution that can be shared across functions as well as trading partners, supply documentation will continue to be done manually, resulting in numerous errors and gaps. Comprehensive integrated IT solutions free up clinicians to spend more time on patient care, rather than on administrative or clerical activities.

The problems of poor clinical supply documentation at the point of care are a shared industry problem because everyone is ultimately affected by the nature and quality of the data capture. Removing needless complexities, implementing automation, reducing hand-offs, and creating a more productive workflow require engaging the entire healthcare community and all of its constituents.

Karen Conway is Executive Director of Industry Relations for GHX.

Lana Makhanik is Vice President of Business Development and Co-Founder of VUEMED.

Richard Perrin is President of AdvanTech, Inc.

Kim Slote is Vice President of Communications for VUEMED.


Collaborative implantable device supply chain pilot benefits providers and suppliers

GHX recently completed the first pilot phase of a collaborative initiative involving orthopedic manufacturers and hospitals to understand the relationship between automation and accurate data. Organizations participating in the pilots determined that the ability to identify the correct products and match product information and pricing is an absolute requirement for organizations to improve implantable device management. Simply by collaborative identifying and automating processes, individual provider sites achieved the following results:

  • One provider pilot site reduced the number of touch points for purchase order (PO) creation from eight to one.

  • Another provider reduced the average days to generate a purchase order from nearly five days to just over one day.

  • A third provider reduced cycle times from point of procedure to PO generation from one week to two days.

The findings from this pilot program confirm previous industry research — providers are simply not capturing everything that they should be for billing and are working within a
5-to-7 percent error range. It also confirmed that inventory processes for implantable devices are highly inaccurate compared to other segments – most organizations are working at rates between 70 and 95 percent accuracy. Providers also tend to overpay by 12 percent on 30 percent
of products, and 12 percent of invoices are discrepant.

Additional findings included underscoring the importance of accurate, shared master data to allow catalog and pricing synchronization between healthcare providers and suppliers, and secondly, identifying current challenges for clinicians and sales representatives to more accurately capture and report on the implantable devices used in the operating room. Other progress included materials management information system (MMIS) integration and manufacturer and provider process alignment to enable suppliers to get same-day replenishment signals.

As Randy Hayas, corporate director, Materials Management at Orlando Health, explained it: “Our results after just a few months have proven worth the investment of time. The process changes we are putting in place along with the new automation are a dual opportunity for organizational improvement.”

The pilots were the first in a series being undertaken by providers and suppliers working with GHX on its initiative to create a shared industry-wide solution for implantable device management. The next pilot phase will focus on the value of greater collaboration around case scheduling and preparation. Improved upfront accuracy of items and pricing is expected to increase the purchase order and invoice match rate, enabling providers to pay suppliers faster and benefit from early pay discounts.


Making the Case for Effective Clinical Inventory Control and Documentation

By Arnold Chazal and Lana Makhanik, Co-Founders of VUEMED

VUEMED conducted a three-month case study in a busy Endovascular OR at a large teaching hospital in a major U.S. city.  The objective was to measure supply-related charge capture discrepancies and to quantify their financial impact and risk. 

Our methodology was as follows.  For the control group, the staff continued to capture information about products used during procedures the way they always had – using their clinical information system in combination with manually affixing product stickers onto patient charts.  For the experimental group, the staff employed VUEMED’s inventory management tool, VueTrack™, at the end of each procedure to scan the barcodes of all products’ labels and wrappers that were used.  All products used were recorded with their lot number and expiration date and each patient case was recorded with a unique case ID number.  Each patient’s billing record issued through the control group was then compared to the corresponding procedural record in the experimental group.

The results of our case study exceeded everyone’s expectations in terms of the sheer magnitude of the discrepancies.  Among the 100+ patient cases analyzed, EVERY case had errors in recording of product usage through existing systems and processes (100% errors rate!).

Erroneously recorded products represented 23% of total billable charges.  Underbilling errors from items recorded inaccurately or not at all were found in 93% of patient cases, thus eroding revenue capture by as much as 11% of the total charges during our case study.  Overbilling was a problem in 83% of the patient cases analyzed, resulting in exposure to a high risk of billing fraud and undue revenue claims of 13% of the total charges.  Several mistakes contributed to such serious billing discrepancies, including automatic billing for an entire case cart without checking actual usage, wrong quantities or items being recorded, and used items failing to be recorded.


In addition to billing errors, the quality of patient care was also compromised because defective patient records were created.  There was also a heightened risk of using recalled or expired items in patients because the information documented was missing products' lot and/or serial numbers and expiration dates.  Alarming considering that over 3 million units were subject of Class I (most serious) recall in the 1st Quarter of 2012 alone, according to the FDA.

As hospitals increasingly move toward electronic medical records, it is critical that there be an increased commitment to ensuring that the products usage data that is recorded and/or stored in EMR is reliable, accurate, and complete.