RFID Tracking Slowly Working Its Way Into Hospital Inventory Control

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FierceHealthFinance

July 8, 2015

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Supermarkets and your refrigerator tend to have the same issue in common: "Best If Used By" labels. If you don't get around to selling or consuming that yogurt or luncheon meat by a certain date, it's usually a good idea to dispose of it and buy a replacement. Grocers have to work the systematic dumping of expired products into the cost-benefit analyses for their bottom lines.

Hospitals have that same issue as well. There are scores, if not hundreds, of items sitting on their supply shelves that have expired. They may be minor things like ointments, or they could be surgically implantable hardware that cost thousands of dollars a unit.

Former Trader Joe's President Doug Rauch has decided to address the issue on the food front with The Daily Table, a chain of supermarkets that sells foodstuffs near their expiration dates. However, it's hard to imagine a similar business model involving joint replacements. And while it makes little sense for hospital managers to drop the ball on inventory management, Jean-Claude Saghbini tells FierceHealthFinance in an exclusive interview that it's a regular occurrence.

Indeed, Saghbini has seen just about every piece of pricey hardware moldering away on hospital supply shelves. They include stents, pacemakers, heart valves and pretty much any other piece of hardware that could cost well into the five figures. In some instances, the expiration date is based on the deterioration of the product's materials; in other cases it's because the sterile field the manufactured product was shipped in is no longer viable.

"Either the usage pattern is not matched to the inventory stock levels, or you have bad 'first in, first out' practices," Saghbini said in an exclusive interview with FierceHealthFinance. An aggravating factor can be if a surgeon or other specialist ends their affiliation with a certain hospital—it may be stuck with supplies ordered particularly for that clinician's practice. Altogether, he estimates between 10% and 15% of all hospital supplies wind up expiring before they are used, leading to waste-related losses of about $5 billion a year.

Saghbini is the general manager of Concord, MA-based WaveMark. Although it was acquired by giant supply chain firm Cardinal Health at the end of 2013 and Saghbini is now a Cardinal executive, he was one of WaveMark's first employees when it began operations a decade ago. As that company's chief technology officer, he helped develop software that monitors medical supplies and tells hospital managers where it is and how it is being used. The software relies on radio frequency identification (RFID) technology. RFID tags can be placed on a small piece of paper with adhesive backing, allowing them to be unobtrusively placed on just about any item. They then emit a radio signal providing their location. The tags can either be removed manually or turned off with a scanner. Large retailers such as Wal-Mart have been using RFID for inventory control for years. Many medical device and supply distributors have been shipping products pre-tagged for RFID in recent years.

RFID has been a major development in hospital operating rooms, as the tags can be used to tell a surgical team if any sponges or other medical instruments have been left inside a patient before completing a procedure. They also have been used to combat hospital-acquired infections. But the general hospital setting has been slower to adopt their use. That's likely because there has been a lot more emphasis in recent years on avoiding retained surgical instruments than wasted surgical supplies.

RFID-tagged medical products are kept in a "smart" supply cabinet, not unlike those that monitor that comings and goings of pharmaceuticals. Such cabinets range in size from tabletop to 60 or more cubic feet. When a supply is removed from the cabinet, inventory tracking software is alerted and each piece's absence is duly noted. The item is then scanned in the operating room and linked to a particular patient. If the item is not used, it is automatically placed back into inventory and removed from the patient record when it is returned to the cabinet. Employees can access inventories online and track them in real time.

Saghbini has helped perform hundreds of RFID installs at hospitals over the years. Every single one has led to the discovery of expired items on their shelves, he said. Such systems track every item in a hospital from the time it arrives from the supplier to the moment it is implanted in a patient or disposed of. Supplies can be reordered automatically, and alerts can be sent to employees about soon-to-expire or recalled items.

Although the technology can be expensive, hospitals usually start seeing a return on investment within six to nine months of installation, according to Saghbini.

"The typical hospital can start cutting their inventory 20% to 25% within the first year," he said. There are also other cost savings that can be realized, such as the reduction in overnight shipments to address a spot shortage.

One pilot program involving device manufacturer Cook Medical and BJC HealthCare in St. Louis saved $1.5 million during the first six months of operation. Emory St. Joseph's Hospital saved about $300,000.

So far, WaveMark/Cardinal has installed smart cabinets and RFID systems in about 100 hospitals and healthcare systems nationwide. But Saghbini believes the use of the technology is entering a rapid growth mode. "(Inventory) problems are universal," he said, and they need to be addressed.

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