Saving a buck on a nip and a tuck

With former Saskatchewan premier Roy Romanov travelling the land searching for cures to Canada’s ailing healthcare system, it is not surprising that cost-cutting practices are often at the forefront.

Though important, these practices are not “sexy.” It often takes a back seat to the high-profile, and more important, patient care. New scanning technology allows for earlier diagnosis. Faster computers help with the design and creation of new drugs. Better surgical tools allow for less invasive surgery.

But with the Canadian healthcare system faltering, any solutions geared toward improving productivity are being looked at. One way to save time and money, and increase efficiency, is decidedly unsexy: e-procurement. Ontario hospitals, alone, order more than $1.6 billion of equipment, supplies and pharmaceuticals annually, often from hundreds of suppliers.

A study done last year by the Ontario Hospital Association and the Efficient Healthcare Consumer Response concluded that a more efficient supply chain could save Ontario hospitals a minimum of $120 million annually.

Today, most hospitals have their ordering system integrated with their financial software. Bob orders 500 boxes of saline. The order is sent to finance, which verifies the validity of the order against Bob’s authority and budget. But how does Bob actually order the saline? The odds are pretty good he calls or faxes the supplier.

Those nightmare days are over for Jack Mui, manager of materials management at Victoria Hospital System in Winnipeg. He used to fax orders to suppliers and wait for them to be processed before he was finally sent back an illegible fax. Not exactly high-tech.

“Now instead of printing an order and faxing it to them, all we have to do is click the icon and send it to the vendor…and then in less than half an hour we will get a confirmation,” he said.

The 226-bed Victoria Hospital has implemented an Edmonton-based Ormed Information Systems Ltd. solution. It is a suite of applications which connect to its ORMED X Internet portal.

The ORMED X exchange model manages a transaction from the point of requisition (which could be a desktop anywhere in the organization) to the processing of funds.

“The portal allows (a company) to carry live data from anyone of Ormed’s software systems and take the data and passes it out to where ever it needs to go,” said Chris Sherback, CEO of Ormed.

So an order of 1,000 boxes of saline can automatically be checked against a department’s budget and then against what actually arrives at the shipping dock, before it goes on to finance to be paid. One integrated mouse click takes the order through the entire process without needing to re-key data.

The Ormed system has helped the Victoria Hospital increase the accuracy of its orders and more easily track billing discrepancies, Mui said. “That is a big plus.”

Mui said there was very little training involved since procedures did not need to be changed when Ormed was brought on board. He said the first two months were spent tweaking the system, but overall the implementation was SNAFU free. Right now only products from Baxter and Johnson & Johnson can be ordered through the Ormed portal. Mui would like to see more vendors available in the future. He also wants to be able to browse company catalogues online.

If you can do it here

Andrew Bartels, research leader for e-business applications and strategies with the Giga Information Group in Norwalk, Conn., said if an integrated e-procurement implementation can work in a hospital it can work pretty much anywhere – in part, because the tradition was never there in the first place.

“By and large, hospitals and healthcare facilities have operated with core systems that have come not from the ERP vendors but typically from specialist vendors,” he said. “[So] it has been so slow into the medical world.”

Also, there are advantages to e-procurement specific to the medical world.

“[Complete system integration] can become particularly important in the medical world, where certain types of products may only be purchased by a licensed health provider,” he explained. Unlike most companies where ordering authority is a company policy, in the medical field it is often a government one. Morphine, for example, can only be ordered by specific doctors and pharmacists.

Regardless, Bartels said completely integrated e-procurement solutions can be quite beneficial.

Overall, it drives reductions in purchasing costs by shifting from paper to electronic ordering. Costs can go from over $100 per order to as low as $5, he said.

E-procurement also increases employee compliance with purchasing policies and creates a central source of information which can be used to negotiating additional cost savings with vendors, he said.