RFID, Smart Cabinets Improve Hospital Supply Chain Management

April 17, 2018 - From EHR systems and revenue cycle management tools to data analytics and online patient payment options, hospitals and health systems are on the journey to automating all aspects of the healthcare experience. However, the hospital supply chain has proven to be a difficult component of the organization to not only automate but optimize through electronic processes.

About 78 percent of hospital staff still face manual hospital supply chain processes, according to a recent Cardinal Health and SERMO survey.

But even hospitals and health systems with automated supply chains are facing inefficiencies and challenges. Harnessing the power of existing data analytics to actually inform decision-making was the top healthcare supply chain outcome provider organizations hope to achieve in 2018, a new Global Healthcare Exchange report revealed.

Hospitals and health systems are experiencing troubles with fully automating and optimizing their supply chains because the whole process is traditionally very fragmented. Different departments use different systems and follow different workflows.

And these differences may be justified up to a point. The supply chain needs for an operating room are drastically different than the needs of an exam room or laboratory.

READ MORE: Leveraging Group Purchasing for Hospital Supply Chain Management

In the face of these challenges and more, Adventist Health White Memorial in Los Angeles, California decided it was time to effectively automate and improve their hospital supply chain starting with their cardiovascular department.

The 353-bed non-profit teaching hospital had a supply chain system in place throughout the organization, explained Daniel Moreno, RN, MS, the hospital’s Cardiovascular Line Administrator. But that did not mean the supply chain, particularly in the cardiovascular department, was effectively automated.

“They looked at it in the traditional sense, saying let's do this because we have this system already throughout the whole hospital,” he recently told RevCycleIntelligence.com. “But those solutions don’t necessarily work in the cath labs because of the fact that you need stuff emergently. You don't necessarily have time to go and push a button, find the patient, and pick the patient. That doesn't work in the cath labs.”

Hospital laboratories in general face this issue, he elaborated based on his own experiences.

“Most labs that I've been in have been in a similar situation and they end up just shutting the system off,” he said. “They become expensive storage cabinets. Staff need the doors open all the time, so they can get in, grab the product, run to the table, and make that work.”

READ MORE: 3 Most Common Healthcare Supply Chain Management Challenges

The inadequacies of the hospital supply chain system resulted in manual processes for over 1,700 stock keeping units (SKUs) at Adventist Health White Memorial and no convenient way to manage expired and recalled products. The latter seriously threatening not only costs but patient safety.

“Manually looking at expiration dates is very difficult in a huge lab because you try to look at these little itty-bitty expiration dates on the sides of the boxes and, as a clinician, that is not your priority,” he remarked. “Your priority is to take care of patients and make sure things are taken care of. If they have downtime, they will look at expiration dates. But, again, a manual check can be fraught with errors.”

Manual inventory management also resulted in wasteful spending and missed revenue.

“We were probably throwing away anywhere from $15,000 to $20,000 a month on expired product,” he reported. “The other thing we found is that people had been using supplies that had no charge codes attached to them whatsoever. We were giving away $900 pieces of supply to patients and never charging them. It was almost $46,000 in supplies that did not have charge codes that we found when we implemented the system.”

With these issues in mind, Moreno participated in a one-year trial with Cardinal Health to implement an inventory management solution that used radio-frequency identification (RFID) and smart cabinets to improve hospital supply chain efficiency, spending, and patient safety.

READ MORE: How a Small Hospital Developed Lean Supply Chain Management

The cardiovascular department’s five rooms now have smart cabinets. When supplies first arrive at the hospital, the product gets an RFID tag with a barcode that links to the inventory management system. So, when clinicians take a product from a shelf, they just need to wave the item in front of the cabinet’s reader. The cabinet sees the RFID tag and communicates with the inventory management system.

The smart cabinets also scan the products still on its shelves and updates the system with what exactly is on each shelf at that time. This feature minimizes the impact of clinicians taking an item and not using it or putting it back.

If a clinician takes an item off a shelf and doesn’t use it, the smart cabinet will alert the system of a missing item and tell the user the time the product left the shelf, Moreno explained.

“You can do one of two things,” he said. “You know when it came off the shelf, you know what room it came from, so you can go to that room and say, ‘Okay, did someone use the product? Is it on the shelf?’ If it's still sitting there, you put it back on the shelf because people get busy. They just forgot to wave it and didn't charge it. You can go back to the staff and say we used that and forgot to wave it. You can let them know.”

“The other piece is if that comes off the shelf and goes downstairs to my other lab and goes on that shelf, then it automatically populates up in that cabinet, so it doesn't show up as a missing item.”

The communication between smart cabinets also allows clinicians and administrators to see where needed products are to cut down the time it takes for the product to get to a patient.

In addition, the RFID technology significantly improved the manual management of expired and recalled products, Moreno added.

“Since everything's barcoded and tagged, when you get on your dashboard in the morning it will tell you that you have 16 products expiring in 30 days or seven days or however you set that limit,” he said. “And they're on shelf two, three, and five.”

“You can go and you pull those off the shelf and give them to a vendor or whatever you need to do with them. But you're not pulling expired product and using it on patients. Even if somebody pulled an expired product and waved it on the reader that would shine a big, red sticker saying that this is an expired product. You automatically know that you shouldn't be using it.”

Since inventory management is automated, the system also automatically alerts Moreno and other hospital supply chain staff about industry recalls as soon as they are released.

“Generally, you know even before the FDA or Medtronic sends a letter saying I've got an expired product. I've already pulled it off my shelf because I know way in advance,” he noted.

The automated inventory management system and RFID technology implementation significantly improved supply chain efficiency within the cardiovascular department. Within three months, Adventist Health White Memorial saw a 67 percent decrease in staff time dedicated to manually counting supplies, and an 84 percent improvement in time spent placing orders.

A more efficient supply chain meant that the hospital could save on labor costs and ensure clinician time was spent more on patient care, not manual inventory management tasks.

“From a productivity standpoint, I saw it go from seven people to one person,” he stated. “That was almost a full FTE [full-time equivalent] savings. And I took that FTE and moved it to one person. Now she's managing that halftime and doing another project half the time.”

“I can also take those clinical people who were counting and performing supply stuff and put them back to clinical work,” he continued. “They are doing cases and running more rooms instead of running around trying to count inventory.”

But Moreno pointed out that expired and recalled product management really produced the return on investment with the hospital supply chain optimization project. The hospital observed a 95 percent improvement in tracking expired product.

Projected annual savings from just identifying products prior to expiration is $120,000. “We proved our ROI just on expired product,” he remarked.

The hospital also saw initial savings of $42,000 from improving charge capture through RFID technology.

Moving forward, Moreno intends to push for an organization-wide implementation of RFID technology and smart cabinets to further increase savings and hospital supply chain efficiency.

“My hope as a service line administrator and looking at our region was to implement this as a regional approach because I have my sister hospital about eight miles away,” he explained. “If we can share high dollar products, like a $25,000 catheter, and I can carry one and she can carry one, then it benefits everybody. We don't have expired product and we don't have these high-dollar tickets on the shelf that we could potentially not use. Or if I run out and I need one in a hurry, I can drive it over.”

This type of effective automation will drive organization-wide efficiency and save the health system from wasteful spending. Achieving operational efficiency while reducing costs is crucial at a time when hospitals are engaging in value-based reimbursement and population health management, which require a lot more work with the same amount of resources.

“As cases become more complex and staffing gets tighter, it's key that we stay up on technology to make that workload easier for everybody and streamline those processes,” Moreno concluded.