By Cindy Atoji
April 15, 2008 | At Mayo Clinic, Joe Dudas is working to integrate standards — consistency of approach and a common language — into how products and data flow through the entire supply chain. Instead of varying ways of recording data, he and others on his team are applying universal guidelines for every operational step. The result so far? “We have improved price management, product standardization and reduced trading errors. All of which have contributed to the bottom line of our organization,” says Dudas, who is Mayo’s director of accounting and supply chain informatics.
Dudas is also chair of the Healthcare Supply Chain Standards Coalition, a collaborative of 28 organizations, including providers, manufacturers, distributors and group purchasing organizations. Digital HealthCare & Productivity spoke with Dudas about how industry-wide standards can reduce cost and errors in the health care supply chain.
DHP: Why the need for a standards coalition?
Dudas: The Healthcare Supply Chain Standards Coalition was formed because the industry as a whole was very confused about the need for standards. There had been several organizations that had endorsed standards and the industry really wanted a cross-industry team to look at, identify the problem, and make recommendations.
When you look at the industry as whole, and you see where the health care industry is moving, it’s clearly going to be more complex, have higher demands, less staff, and be much more competitive. Our underlying infrastructure may not be able to meet these future expectations.
Data standards are the brick and mortar of the supply chain. There’s nothing more fundamental than defining what is needed and where it’s to be delivered. Without a standard, processes are not synchronized — we’ve added time, cost, and errors in the supply chain. We’ve done that and will now take aggressive steps to further implementation.
DHP: What will the biggest benefits to health care be?
Dudas: At Mayo we don’t look at data standards differently than we look at process improvement as a whole. We are a Six Sigma shop and we embed standardization into just about every discussion. Processes are optimal when waste, error, and variation are eliminated, and data standards at core of our supply chain process. Speaking multiple languages around core data is incredibly wasteful and error prone.
Here’s an example: imagine if we didn’t have standard telephone numbers and everyone created their own phone number with no standard length or format, and no guarantee of unique identity. That is very similar to what it’s like when we “call” for a product today in health care.
Much of our ordering is through product descriptions. We have extra effort when searching and translating descriptions into the supplier’s custom product catalogue number. These translations take time and are prone to error (both for product and quantity). This same issue exists for receiving product, making payment, billing patients, as well as executing product recalls. Standards affect the entire supply chain process.
Everybody wins with data standards, especially the patient. More cost-effective, higher quality of care sounds good to me.
DHP: How have data standards helped you at Mayo?
Dudas: We’re able to connect what was once thought to be disparate processes and make them work seamlessly, as opposed a lot of stops and starts and rework within each silo.
The health care industry supply chain is unique because a lot of our incentives for buying are across the product lines, so tracking the rebate we receive and being able to report on that is difficult when you’re not using standards, even within your four walls and with your supplier as well.
A good example is how Mayo started connecting our contracting process to our buying process. With some internal standardization, we’ve been able to improve our contract compliance, that is, making sure people are buying the products that we contract for, as opposed to non-contract purchases, which obviously increase cost. We’re able to track contract compliance and not only get a better price on the front end but also receive incentives on the back end for achieving market share objectives which we set out with our suppliers when we negotiate contracts.
We have better control over supply chain from beginning, when we’re working on an opportunity for sourcing, to the time we actually purchase it and use it. Once again, if you’re not using the same language, and you’re not really looking and gluing these processes together to create a fluid chain, then you have a lot of out-of-sync processes that are a lot more difficult to control.
DHP: What industries can we use as models for data standards?
Dudas: Both retail and manufacturing have used data standards in their supply chain for a long time. The UPC has been in existence for around 30 years. For example, when you go to a retailer, there’s a bar code on the product you buy and it scans at the register. That’s a standard identifier, and that’s the same standard we’ve recommended for the health care industry as far as product identification.
DHP: Why has the Standards Coalition endorsed data standards from GS1 versus alternative standards?
Dudas: We studied this for a year, talked to many organizations, and all of the organizations that have competing products in the standards world. GS1 offered the only viable, global, cross-industry approach. And GS1 also offers a very tight system — all standards within GS1 interconnect to create a bigger system of standards that truly supports the supply chain as opposed to having point solutions. It’s one system of standards.
Remember, particularly for a hospital, we don’t just buy health care goods — we’re almost a mini community onto ourselves. The cross-industry global attributes of GS1 is only the viable solution and it is also being adopted by other countries as we speak.
DHP: What are the chief remaining hurdles to widespread adoption of data standards?
Dudas: Financial and organization commitment is the predominant hurdle. Standards by themselves don’t have a huge cost associated with them, and each stakeholder within the supply chain will have a different cost model around what it is going to cost to implement data standards.
We are working with GS1 to enhance its standards to meet health care needs. There are some attributes that need to be added; there could be some cross referencing that’s needed. We’re also working with them to build out implementation road maps, best use cases, and pilots to make it easier for organizations to implement, but each organization will have to self-evaluate what it’s going to take to implement standards within their organization.
DHP: What pilots are going on?
Dudas: There two pilots underway. One is being done under the auspices of the Department of Defense, a pilot around the Global Data Synchronization Network, a single data base with product information that manufacturers update with standard elements in it, and then the users then pull that data from that one standard database. So any time a new product is registered or updated, it’s registered in that database, so there’re no out-of-sync conditions because you’re using the same data store.
The other pilot is being done under GS1, and that’s with GLN, which is Global Location Number. They’ve done a full mapping of transaction processes, how they flow and using those elements from purchase to pay transactions.
DHP: ROI of using standards?
Dudas: ROI will vary based on institutions. There have been a lot of studies on the cost of reworking invoices and troubled P.O.’s (Purchase Orders.) It will vary by institution based on starting place, but I don’t necessarily look at it from an R.O.I. of standards. I’ve started to move away from the conversation of “what’s the R.O.I.,” to what’s the risk of not implementing data standards. The risk is that, whether it is in 5, 10, or 15 years, we won’t be able to meet the needs of society with the current system. We need to change infrastructure and be more nimble, and cost-competitive.
DHP: When will we have full standardization in place?
Dudas: Two objectives we’ve really been pushing are the elimination of a custom account number by 2010 — to create a standard identifier for the participant’s location, how we tell someone who we are when we buy something. The other target that we have is, by 2012, to eliminate the custom catalog number and to have a standard number that we’re all communicating with among the trading partners for product identification.
We have limited resources in health care industry and there are multiple organizations with redundant activity when it comes to data standards. That not only is inefficient, but also creates confusion in the industry.
We are very active in working with eight or ten groups to consolidate the efforts under GS1. Aligning all the different industry efforts is one of the most significant things the coalition has on its plate, and then educating the industry, pilots, and early-adopter groups. These are all things on our to-do list.