Healthcare Revenue Cycle Management, ICD-10, Claims Reimbursement, Medicare, Medicaid

Practice Management News

Healthcare Supply Chain Transparency May Save Billions in Waste

By Jacqueline DiChiara

- The evolving connection between healthcare supply chain and revenue cycle management is yet to be explored. As RevCycleIntelligence.com reported, an innovative discipline level within the healthcare supply chain realm is emerging as healthcare costs increase.

Supply chain management

Steve Kiewiet, Vice President of Supply Chain Operations at BJC HealthCare, spoke with RevCycleIntelligence.com to provide an expert overview of the current state of healthcare supply chain and its greater implications on revenue cycle. BJC Healthcare is 2015’s winner of the national healthcare provider Supply Chainnovator award by Gartner, Inc, for End-to-End Supply Chain Visibility (E2ESCV).

Kiewiet says the healthcare supply chain industry is currently not at the same level as many other industries in terms of efficiency, collaboration, transparency, and connections. “We have a lot of ground to cover to make the changes necessary to live in the new healthcare economy growing out of healthcare reform and the Affordable Care Act,” says Kiewiet.

To help cover more ground, Kiewiet says the healthcare supply chain must focus on end-to-end visibility. Supply manufacturers are disciplined in their supply chain efficiency as raw materials progress towards finished goods. However, once a finished good is produced, “from that point up until it’s used for a patient, we haven’t focused on efficient tracking like we need to,” he explains.

“Due to vertical internal structures, supplies and supply data historically have been siloed and firewalled so that information important for efficient business operations is fragmented. We end up spending billions of dollars of inventory within these various silos because we live in a world where you can never run out of anything ever, in the interest of what is best for the patient,” says Kiewiet.

READ MORE: Provider Profitability Drops Under Biosimilar Use Reimbursement

Information about inventory usage used to be generally unknown, which proved especially problematic, he says. Strategies are now in place to better identify what will be used, when, how, where, and by whom, says Kiewiet.

“We found a couple of innovative supplier partners who said, ‘Let’s break those firewalls and let’s do something different.’ What does ‘different’ look like, and what would the value of that be? What value can we drive regardless of an ownership model in starting to have true visibility on that supply chain?” he asks.

Radio Frequency Identification (RFID) technology, says Kiewiet, provides a valuable solution. As HealthITSecurity.com reported, such encrypted information within a mere tag can prove valuable for tracking purposes.

Kiewiet says streamlined data-sharing allows for reduced process variation along the healthcare supply chain. “When we have visibility of product from finished goods to the use on the patient and we actually capture demand and consumption versus capturing purchasing activity, we capture consumption activity,” maintains Kiewiet. “We significantly reduce waste and variation in the supply chain. Inventory levels come down for everybody. Product expiration can be virtually eliminated,” he says.

Products that are at risk of expiration or obsolescence cost money. With increased visibility and collaboration along the healthcare supply chain, products are more likely to be consumed before their shelf life ends, he says, which saves money.

READ MORE: Group Purchasing Increases Healthcare Supply Chain Savings

Kiewiet’s work began with stents within cardiac cath labs and GI endoscopy labs. Areas of anticipated tangible growth include procedural areas, interventional radiology, operating rooms and implants, he adds.

The link between healthcare supply chain and revenue cycle is crystal clear, says Kiewiet. Whatever is documented into a procedure must be billed for accordingly, he says. “We are now developing revenue cycle and clinical data systems along with our inventory system,” he explains. “Because everything is tagged and everything is visible in our inventory system, we know when a product comes out of storage and goes into a procedure room and is then scanned or documented into a procedure as part of electronic medical records,” he adds.

Billing records and bills must correspond neatly with everything done in a procedure before payment tracking ensues, says Kiewiet. Merging together inventory records, clinical documentation records, and charging records is a top priority, he says. The availability of such information in real time is essential to tracking excess products that later fall off the clinical documentation radar, states Kiewiet. If a product, for instance, is opened and then thrown away or simply was not used, such information should be documented and linked to the inventory record.

“We can provide real time consumption and inventory record data after a case closes. We can provide a report to the managers of those units that says, 'Ten things came out of inventory and went into that room for this procedure. These things were documented and used. One was opened and thrown away. One wasn’t documented anywhere, and it’s not back in storage. Where is it?'”

Although preliminary industry-wide averages exist, acquiring accurate baseline data regarding such numbers is rare, says Kiewiet. Most systems fail to track several billions in healthcare dollars – about 5 percent – of expiration or waste because the healthcare industry is not yet able to mimic the fast-paced supply chain models of, say, its consumer goods neighbor, Kiewiet maintains. “We document a piece of it when we do a physical inventory here and there, but it’s not something we’ve measured.  It’s not a discipline that’s been built into the healthcare world yet,” he says.

READ MORE: Is It Too Soon to Gauge ICD-10’s Long-Term Coding Future?

The development of robust supply chain teams is key to driving change into the healthcare economy, says Kiewiet. Still, RFID adaption rates and associated requirements are lagging behind technological capabilities.

“If you look at the ability to do barcode reading in general, the bigger issue to highlight around technology and supply chain in healthcare is data standards,” Kiewiet states. “Even in the stent space, if I go pull a stent off my shelf, (regardless of the manufacturer), that package will have anything from 2-7 barcodes on it. They all have different standards and all have different data tied to the barcode. Which one do I read?” he asks.

The implementation of standards for data, RFID, barcodes, and product naming would help a lot, he maintains. “Technology has to be very versatile and very robust to be able to compensate for the lack of data standards,” he explains.  

“We can’t underestimate how much money we may be losing that we’re not even aware of because we haven’t taken complete control of our supply chain. It’s not just about negotiating a better unit cost. It’s much bigger than that. It’s around aligning our entire supply chain industry from manufacturing to patient use in removing variation and waste. Until we do that together, we’ll fight forever over the pennies in the pricing fight that goes on,” Kiewiet advises.

“We could remove enough waste from the supply chain that the device manufacturers can achieve strong financial performance and deliver value for their shareholders. The hospitals can do what they need to do and maintain their operating margins and take care of patients and make people better,” explains Kiewiet. “There is value enough in taking control of the supply chain excess of our industry to fix it. Even with a heavy investment of technology into this, everybody would still come out well ahead.”  

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