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Hospital Materials Management Information Systems [Part 2]

Fundamentals of Software Implementation

By David J. Piasecki; CPIM

By Hope Rachel Hetico; RN, MHA

Dr. David Edward Marcinko; MBA

www.HealthcareFinancials.com

The singular focus of any Hospital Materials Management Information System (HMMIS) is to deliver significant improvements in the ability of hospital facilities, networks, and other healthcare organizations to optimize the processes and work flows associated with materials management systems and reduce the costs related to inventory, durable medical equipment, pharmaceuticals and supply chain management (SCM).

Understanding Strategies

Strategically, hospitals must exploit contemporary technologies and connectivity with suppliers and trading partners to:

  • improve patient care and safety,
  • increase efficiency,
  • drive down costs, and
  • optimize inventory levels.

Software Implementation

As with the selection process written about previously, ERP software implementation may also require outside assistance.  Whether you use consultants from the software vendor, a business partner, or an independent firm, the implementation plan will likely be the same.  It’s very important to listen to consultants and be prepared to dedicate the resources outlined in the implementation plan.  A common mistake made by healthcare entities going through their first major implementation is to underestimate the complexity of their operations, the extent of system setup and testing, and the impact the implementation will have on their operation.

ERP Implementation

Here is an outline of a common scenario in single-hospital ERP implementations.

  • The consultants warn of the consequences of not dedicating adequate resources.
  • Management publicly agrees but privately thinks the consultants are crying wolf.
  • Implementation fails or goes poorly.
  • Management claims “how could we have known?”

Don’t let this be you.  The only thing to assume about the implementation is that it that it will be much more difficult than expected, it will take longer than you expected, and it will cost more than expected.

Like most other projects, the success of a software implementation will be based upon the skill of the people involved, training, planning, and the effort put forth.  Plan to have the most knowledgeable employees heavily involved in the system setup and testing.  

Testing Programs

Adequate time should be dedicated to make sure every aspect of every process is thoroughly tested.  An example of a detailed testing program is listed below:

  • Does the purchase order [PO] receipt screen have all the information needed to perform the receipt such as vendor item number, item description, unit of measure?
  • What happens when we receive more than the PO quantity?
  • What happens when we receive less than the PO quantity?
  • What happens when we enter multiple receipts against the same line?
  • What happens if someone tries to change the PO quantity after we have entered a receipt?
  • What happens if one changes the PO quantity at the same time we are entering a receipt?
  • What happens when we reverse a receipt?
  • What happens when we reverse a receipt after it has been paid?
  • What happens if the ordered unit of measure is different from the stocking unit of measure?
  • What happens when we receive an early shipment?
  • What happens when we try to receive against a cancelled PO?
  • What happens when we change the receipt location?

After the system has been thoroughly tested, employee training begins. Remember, dealing with unexpected issues is the norm; you don’t also need to be training employees after the system is supposed to be operating.

Hands-On Training

The training should consist of hands-on training and include written procedures for the tasks performed.  For most positions, make sure that each employee has entered the equivalent of at least a full day’s transactions during the training.  Using an actual day’s transactions is a good way to make sure the variety of transactions an employee is likely to encounter have been experienced. The most common mistake made in training is a lack of adequate repetition. Just because someone was able to perform the task once, during a training session on a Saturday three weeks prior to “going-live” does not mean they will be able to perform the task with system start-up. If they have repeated the task many times over a series of training sessions, they are much more likely to remember how to do it. 

Assessment

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Watch the data. During and immediately after the implementation it is incredibly important to watch the data and make sure everything is working as planned. Monitor the status of orders, purchase orders, and delivery orders paying specific attention to “stuck orders” or other exceptions. Conduct some aggressive cycle counting of fast-moving items to make sure transactions are working correctly. 

Conclusion

So, tell us what you think about your hospital’s SCM software implementation? Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, be sure to subscribe to the ME-P. It is fast, free and secure.

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Hospital Materials Management Information Systems [Part 1]

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Fundamentals of Inventory Software Selection

By David J. Piasecki; CPIM

By Hope Rachel Hetico; RN, MHA

By Dr. David Edward Marcinko; MBA

The singular focus of any Hospital Materials Management Information System (HMMIS) is to deliver significant improvements in the ability of hospital facilities, networks, and other healthcare organizations to optimize the processes and work flows associated with materials management systems and reduce the costs related to inventory, durable medical equipment, pharmaceuticals and supply chain management (SCM).

Understanding Strategies

Strategically, hospitals must exploit contemporary technologies and connectivity with suppliers and trading partners to:

  •  improve patient care and safety,
  •  increase efficiency,
  •  drive down costs, and
  •  optimize inventory levels.

Software Selection

Software selection and implementation services have become big business for consulting firms as well as the software vendors themselves.  Even with outside assistance, selecting the right software for hospital operations and having a successful implementation can be an extremely difficult undertaking. Horror stories of failed enterprise resource planning (ERP) system implementations are unfortunately very common.  Anyone who frequently reads business publications have read stories where large healthcare corporations, posting smaller than forecasted profits, cite problems associated with the implementation of a new software system as one of the causes.  Whether these claims are legitimate or not is up to debate. What is true is that hospitals are highly dependent on information systems and failures in the selection and implementations of systems can result in anything from a minor nuisance to a complete operational shutdown.

Those unfamiliar with business inventory management software should be prepared to be bombarded with acronyms and buzz words.  E-business, web-enabled, E-procurement, E-fulfillment, E-manufacturing, collaborative, modular, and scaleable are just a sampling of the terms used to describe (sell) hospital software inventory products.

Inventory Tracking Software

Healthcare enterprise inventory tracking software with implementation ranges in price from a few thousand dollars to millions.  In fact, up until recently, if you were a medical clinic with annual revenues of less than $200 million, many of the top enterprise software vendors didn’t even consider you a potential customer.  Fortunately, this arrogance has been tempered recently due to economic conditions (primarily the software vendors’ cash flow). Unlike five years ago, when the software vendors felt they held all the cards, today it is truly a buyer’s market. No matter how big or small an entity, many vendors will be vying for software dollars. That’s the good news. The bad news is that you must sift through all these products to find the one that best meets your business needs.

Process Definition

The most important part of the software selection process is defining the processes within your health organization and determining functionality that is critical to your medical operation.  Many times clients get distracted by the bells and whistles and forget about their core healthcare business functions.  As a healthcare entity in the DME distribution fulfillment business – focus on functionality related to order processing, as well as warehouse and transportation management. Be wary of the software vendor that claims packages that work equally well in all environments.  Most software packages are initially designed with specific situations in mind; asking the vendor about their biggest customers will often give you an idea as to the type of operation the software was designed to work in.

Product Functionality

When you look at the detailed functionality of a product it will be important to have listed detailed functionality requirements of your healthcare operation.  This is where hospitals often make mistakes by emphasizing functionality that they currently don’t have, but would like, and overlooking core healthcare processes that their current system handles well.

Example:

For example, if you are awestruck with functionality that allows remote access to a medical charting system from an Internet browser on an ambulatory device – and as a result – overlook critical functionality related to order entry or demand planning, you may end up with a system that provides great visibility to the fact that patient revenues are failing. Never assume a software package “must” be capable of handling something considered a standard function.  Some examples of detailed functional requirements are as follows:

  • E-commerce capabilities
  • Multi-facility demand planning
  • Postponement and configure-to-order functionality
  • Forecasting and demand planning
  • Back-order processing
  • Lot or serial number tracking
  • Forward pick location replenishment
  • Batch or wave order picking
  • Returns processing
  • Back flushing DME inventory
  • Co-product processing
  • Outsourcing specific operations
  • Multiple stocking units of measure
  • Product substitutions
  • Blanket orders
  • Shipment consolidation
  • Multi-carrier rate shopping and manifesting
  • First-in first-out processing

documents

Assessment

Don’t settle for “yes, we can do that” responses from the software vendor. It’s your responsibility to verify that not only can they do it, but also that they can do it to the level required. Ask detailed questions as to exactly how it works in their system. Look at the specific programs used to achieve the task and verify that the data elements required to achieve the task are present. Don’t allow the software vendor to sidestep your questions by retreating into obfuscating technical jargon

Conclusion

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RFID versus WiFi Hospital Inventory Tracking Systems

Understanding Competing Wireless Technologies

By Davd Piasecki, with

Hope Hetico; RN, MHA

www.HealthcareFinancials.comHOFMS

The two wireless technologies currently competing to provide hospitals with better systems for managing equipment inventories are (WiFi) and active RFID.

Wireless-Fidelity [WiFi]

WiFi is the name of the popular wireless networking technology that uses radio waves to provide wireless high-speed Internet connections. The WiFi Alliance is the non-profit organization that owns WiFi (registered trademark) and the term specifically defines WiFi as any “wireless local area network products that are based on the Institute of Electrical and Electronics Engineers’s 802.11 standards.”  Yet, less than 5 percent of North American healthcare facilities are equipped with these real-time locating systems, so the market is currently up for grabs.

WiFi Pros

The advantage of WiFi-based real time locating systems (RTLSs) is that most hospitals already have WiFi networks in place, and many medical devices are equipped with WiFi functionality. Moreover, WiFi vendors such as Aeroscout, Ekahau, and PanGo market their products based on a standards-based non-proprietary functionality. The downside of WiFi systems is that hospitals will need to install additional access points to bring the needed functionality to existing networks.

RFID Pros

On the other hand, RFID vendors such as RF Code and Radianse point to the wide application of RFID for asset tracking, and to the technology’s longevity in the industry. Still, RFID tags remain suspect because their ability to efficiently track DME may not be private or secure. Increasingly, WiFi seems more ubiquitous than RFID.

Finally, of the three WiFi major vendors, only Ekahau makes a point of stressing that its inventory system is based only on WiFi and not RFID, so the issue isn’t clear cut.  Perhaps it will take both technologies to deploy RTLSs for hospitals.

General Recommendations

As a general recommendation, RFID is not yet practical for most small to mid-sized healthcare entities or medical clinics looking to automate their inventory-related transactions (though it does work for other applications such as with returnable containers and asset tracking).

RFID Hype

Despite the hype over RFID, bar codes are not becoming obsolete and are still very effective at quickly and accurately identifying products, locations, and documents. Unless there exists an application where bar codes simply don’t work, or where RFID offers a significant advantage over bar codes, use bar codes. Even if an application that cries out for RFID exists, hospital material management administrators may want to consider waiting (if possible) as the cost of the technology comes down.

Both RFID and WFI Needed

According to Robert M. Wachter MD, Professor and Chief of the Division of Hospital Medicine and Associate Chairman of Department of Medicine, and Lynne and Marc Benioff Endowed Chair in Hospital Medicine, University of California at San Francisco, and Chief of the Medical Service at UCSF Medical Center [personal communication], both should be used.

Ultimately, of course, we do need both bar coding and RFIDs, and we need rigorous studies looking at what works and what doesn’t. But, you have to start somewhere. Even though the evidence continues to trail, based on what I know today, if I was a hospital ready to get into the IT game, I’d go with bar coding first. 

Assessment

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In the next few years, standards will be finalized, hardware prices will drop, software will become more readily available, and, more importantly, the bugs will be worked out of all these systems.   

Conclusion

And so, your thoughts and comments on this Medical Executive-Post are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, be sure to subscribe to the ME-P. It is fast, free and secure.

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On Healthcare Inventory Management

Understanding Fundamental Principles

By Staff Reporters

www.HealthcareFinancials.com

According to industry inventory management expert Mr. David Piasecki, healthcare inventory is a term that describes medical items used in the delivery of healthcare services or for patient use and resale. Much like Durable Medical Equipment, a certain safety margin of stock should always be available. Inventory ranges from normal administrative office supplies to highly specialized chemicals and reagents used in the clinical laboratory. It should be distinguished from capital supplies, such as major equipment, instruments, and other items that are not used up faster than inventory or related inventory wastes.

Historical Review

Historically, asset utilization ratios provided information on how effectively the enterprise used its inventory assets to produce revenues, or deplete its cash. For example, the inventory turnover ratio (ITR) determines the total volume of inventory turnover (change) during a pre-determined accounting period (month or quarter). It is defined as cost of inventory purchased for the period, divided by average inventory (AI) at cost.

Consulting Firms

Dunn and Bradstreet, the supply chain management – consulting firm and others, do not provide exact comparatives for private healthcare ITR. Nonetheless, ITR is useful as an internal performance indicator of inventory turnover speed and cash flow enhancement. Currently however, for public hospitals, 60 – 75 days is estimated to be the average time for inventory turnover.HOFMS

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The main problem with traditional ITR, similar analyses such as AI and ICP, and the usual inventory costing methods (e.g., last-in first-out, first-in first-out, specific identification, average costs), and even just-in-time inventory costing, is that they do not embrace Supply Chain Inventory Management. This occurs because sources of profit or loss are not recognized in the traditional inventory cost accounting equation:

Assessment

Cost of goods sold = beginning inventory + net purchases – ending inventory

Conclusion

And so, your thoughts and comments on this Medical Executive-Post are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, be sure to subscribe to the ME-P. It is fast, free and secure.

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Integration of Hospital Automatic Data Collection Technologies

Review of Automatic Data Collection Equipment

By David J. Piasecki, with
Hope Hetico; RN, MHA

While hardware costs of automatic data collection [ADC] equipment continue to come down for hospital and healthcare organizations, the cost of integration will often prove to be the project buster. Software and integration costs will often be several times the cost of the hardware, especially in smaller health system operations where only a few devices will be used. Integration of ADC technologies is also far from standardized.

www.HealthcareFinancials.comHO-JFMS-CD-ROM

Example:

For example, when implementing a system with portable terminals, one integrator may create a program on the terminals that will write directly to the file on the host system, another may create programs on a separate server to do this, another may write or modify a program on your host system and use terminal emulation software, and another may use a screen mapping tool to reformat an existing program to be used on the portable device. So, make sure to speak with several integrators to ensure the best solution. Also, make sure to participate heavily in equipment selection and program/process design (prompts, data input) to ensure a system that provides the highest levels of accuracy and productivity.

Real-Time Locator System 

A real-time locator system (RTLS) uses RFID technology that provides the objects they are attached to the ability to transmit their current location.  The system requires some type of RFID tag to be attached to each object that needs to be tracked, and RF transmitters/receivers located throughout the facility to determine the location and send information to a computerized tracking system. While it sounds like a great way to eliminate “lost” inventory, the systems are still too costly for most inventory-tracking operations and are more likely to be used to track more valuable assets.

Screen Mapping/Screen Scraping

This software provides the functionality to change the arrangement of data fields on a computer screen that accesses a mainframe computer program. Screen mapping is frequently used in combination with terminal-emulation software to “remap” data fields from a standard mainframe program to be used on the smaller screen of a portable hand-held device.

Speech-Based Technology

Speech-based technology, also known as voice technology is really composed of two technologies:  (1) voice directed, which converts computer data into audible commands, and (2) speech recognition, which allows user voice input to be converted into data.  Portable voice systems consist of a headset with a microphone and a wearable computer.

Terminal Emulation

Software used on desktop and portable computers is available that allows the computer to act like a terminal connected to a mainframe system. If you have a networked desktop PC and are accessing mainframe programs (green screen programs) you are using terminal emulation. Terminal emulation is also a common method used to connect portable computers (as in pharmacy bar-code ADC systems) to mainframe software.

Warehouse Management System

Computer software designed specifically for managing the movement and storage of materials throughout the healthcare system warehouse or chain of command generally controls the following three operations:  (1) put-away, (2) replenishment, and (3) picking.  The key to these systems is the logic to direct these operations to specific locations based on user-defined criteria.  Warehouse Management Systems (WMSs) are often set up to integrate with ADC systems. 

Conclusion

And so, your thoughts and comments on this Medical Executive-Post are appreciated. Can you think of any other data integration technologies?  Tell us what you think. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, be sure to subscribe to the ME-P. It is fast, free and secure.

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Healthcare Organizations: www.HealthcareFinancials.com

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Hospital Automated Data Collection

Understanding Data Capture Technologies

By David J. Piasecki, with
Hope Hetico; RN, MHA

Automated data collection (ADC), also known as automated data capture, automated identification (AutoID) or automated identification and data capture (AIDC), consists of many different technologies. Bar codes, voice systems, RFID, OCR, laser scanners, vehicle mounted and wearable computers are all part of ADC management and hospital inventory activities.

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Six-Figure Projects

However, the fear of six-figure project costs often prevent many small to mid-sized hospitals and healthcare systems from taking advantage of these technologies. The key to implementing cost-effective ADC systems is to know what technologies are available and the amount of integration needed to implement them. Applying this processing knowledge in a healthcare organization will help in developing the scope of any project. Limiting projects to or prioritizing by those applications that have a high benefit/cost ratio allows these operational improvement technologies within a reasonable budget. 

Example:

For example, adding a keyboard-wedge bar-code scanner to an existing personal computer (PC) or blade terminal in a nursing station is a very low-cost method for applying ADC to existing hospital reporting applications. This type of hardware is inexpensive and the only real programming required is to add a bar code to the proper form (work order, pick and delivery slip, etc).

Review of the ADC Technologies

Some of the current hospital data capture technologies include the following:

a. Bar Codes

b. Bar-Code Scanners

Laser or CCD 

Auto-Discrimination

Keyboard-Wedge Scanners 

Fixed-Position Scanners

c. Portable Computers

d. Batch versus Radio Frequency

e. Hand-Held Devices

f. Vehicle-Mounted Devices

g. Wearable Systems

h. Voice Technology

i. Optical Character Recognition

j. Light Systems

Assessment

Driven by a need for improved data capture, asset management, staff mobility and standardized medication administration to name a few benefits, hospitals are likely to invest much more heavily in ADC and Wi-Fi technologies over the next five years, according to this new research report.

Link: http://www.eweek.com/c/a/Health-Care-IT/WiFi-Healthcare-Systems-to-Hit-49B-878082/

Conclusion

And so, your thoughts and comments on this Medical Executive-Post are appreciated. Tell us what you think. Can you think of any other hospital data capture technologies? Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, be sure to subscribe to the ME-P. It is fast, free and secure.

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Medical Inventory Management Methodologies

Understanding Traditional Costing Methods

By David J. Piasecki, with
Hope Rachel Hetico; RN MHA, CMP™cmp-logo1

A good inventory management system offers opportunities for improved efficiency in any healthcare organization. The following traditional methods of inventory cost accounting and management are useful when one is calculating the cost of supplies (as opposed to medical items for resale and DME).

a. LIFO

The last-in first-out (LIFO) inventory costing method means the last items purchased are the first to be used (at least for cost calculations if the inventory consists of identical units). In times of rising prices, a lower total cost inventory is produced with a higher cost of goods sold. The last items purchased are most often the most expensive, and used first for the calculation. This happens because LIFO increases an expense (cost of goods sold) and decreases taxable income. Given the same revenue, higher expenses mean less profit. Deflation has the opposite effect.

b. FIFO

The first-in first-out (FIFO) inventory costing method means the first items purchased are the first to be used (at least for cost calculations if the inventory consists of identical units). In times of rising prices, a higher total cost inventory is produced with a lower cost of goods sold. This happens because FIFO decreases an expense (cost of goods sold) and increases taxable income. Deflation has the opposite effect.

Note: Any switch from FIFO to LIFO does not change reality, and although a decrease in reported incomes occurs, it does not increase cash outflows. However, for a taxable healthcare entity, after-tax net cash flow does increase.

c. Specific Identification

Specific identification is used for larger pieces of equipment, as it traces actual costs to an identifiable unit of product and is usually applied with an identification tag, serial plate, or radio frequency identification device (RFID) scanner. It does not involve flow-of-cost analysis. It does, however, permit the manipulation of income because healthcare entities state their cost of goods sold, and ending inventory, at the actual cost of specific units sold.

d. Average Cost

Average costing calculates ending inventory using a weighted average unit cost. When prices are rising, cost of good sold is less than under LIFO, but more than that under FIFO, and hence income manipulation is also possible.

e. Just-in-time Management

Although technically not a costing technique, JIT inventory management means that inventory supplies like DME are delivered as soon as needed by the healthcare organization, the prescribing doctor, or the patient. In JIT, inventory is “pulled” through the flow process. This is contrasted to the “push” approach used by conventional IM. In the push system, DME is already on-site, with little regard to when it is actually needed. In the JIT “pull” system, the overriding concern is to keep a minimum cost inventory, so that means having a system in which inventory is obtained on an as-needed basis.

The key elements of JIT consist of six parts:

1. a few dependable vendors or suppliers willing to ship with little advance notice;

2. total sharing of demand information throughout the supply chain;

3. more frequent orders;

4. smaller size of individual orders;

5. improved physical plant (hospital or clinic) layout to reduce travel flow distance; and

6. use of a total quality control system to reduce flawed medical products.

Using the JIT method, inventory is delivered when needed, rather than in advance, saving handling and storage costs. The healthcare entity never needs to stockpile inventory, and cash flow is enhanced. JIT is further characterized as follows:

  • little or no work orders;
  • little or no tracing of materials;
  • fewer inventory accounts or accounts payables;
  • reduction or elimination of work-in-progress or handling activities; and
  • no tracing of overhead and direct labor costs

JIT requires a dependable working relationship with suppliers and the precise calculation of inventory needs, especially for the following:

  • sterile surgical packs;
  • gastro-intestinal and gastro-urinary instrumentation;
  • orthopedic and OB-GYN inventory;
  • invasive heart and lung equipment;
  • radio isotopes and trace radiographic materials; and
  • equipment for almost all pre-schedule medical interventions and procedures.

Assessment

This means that, when JIT inventory monitoring is used, healthcare managers are better prepared with the proper inputs to control and reduce inventory, including when dramatic bursts or declines occur. This means a more rapid and higher cash flow balance, rather than inventory balance. Each of these traditional methods of inventory cost accounting is adequate for most healthcare facilities, but as inventory orders and costs continue to increase, economic order quantity [EOQ] costing may be the most effective means of accounting for inventory in DME-intensive organizations.

Conclusion

And so, your thoughts and comments on this Medical Executive-Post are appreciated. Can you think of any other inventory management technologies?  Tell us what you think. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, be sure to subscribe to the ME-P. It is fast, free and secure.

Link: http://feeds.feedburner.com/HealthcareFinancialsthePostForcxos

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

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Sponsors Welcomed

And, credible sponsors and like-minded advertisers are always welcomed.

Link: https://healthcarefinancials.wordpress.com/2007/11/11/advertise

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