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Part 3: RFID in Healthcare

In the final part of this Special Report, authors Brad Sokol and Sapan Shah continue to make the case for a how their "micro-modular" approach can deliver a healthy return on investment.
By Brad Sokol and Sapan Shah
Oct 21, 2004Part 1 of this special report on the use of RFID in the healthcare industry explained the Micro-Modular approach to using RFID in healthcare. In Part 2, the authors detail the processes involved in the Micro-Modular approach and how they can create benefits for healthcare providers. In this third and final part, the authors continue to make their case for how their "micro-modular" approach can deliver a healthy return on investment.

The Smallest of Small
There are a few companies working on developing RFID technology to electronically track and scan for gauze pads, sponges and bandages in the operating room. We believe in the near future we could eventually justify the expense of using RFID for supplies costing less $2 each, given the fact that RFID hardware will soon be a lower-priced commodity. There is currently an interim solution where healthcare providers can experience many of the advantages
of Micro-Modularity while planning for the eventual RF implementation. That solution is Asset Offloading, which will be tackled in Part 3 of this special report, next week.

Asset Off-loading
“Asset Off-loading" is a viable solution for noncore functions at a hospital. This existing closed-loop service program allows the healthcare provider to keep minimal stock on hand and greatly simplifying its surgical supply chain process. Additional benefits of a closed-loop distributor may be the off-loading of accountability to the product’s genealogy ownership and the cleaning and recycling of instruments and supplies. This closed-loop system provides an interim solution, and many of the benefits (to a lesser degree) realized on ROI of a full RFID implementation, thus making the investment in such a service cost-justifiable today. The only process required on the part of the healthcare organization is to provide the supply vendor a daily schedule of the procedures to be performed one day in advance.

When healthcare organizations are internally ready to implement RFID, they can integrate the supply chain software used by the asset off-loading supplier or a similar software product. There are several asset-tracking software packages specifically for healthcare organizations. However, due to the difficulty of proving ROI on low-cost asset items, these currently do not address all aspects of medical supplies in healthcare environment.

Field Proof: SRI/Surgical Express Model
SRI/Surgical Express has 10 national distribution centers to supply hospitals with their daily procedural supply needs. They are one of the most complete models of asset off-loading, with a full integration of RFID technology into Class II Medical Devices, and among the largest users to date of "multi-read" applications of RFID technology.

"The incorporation of multi-read RFID tags into over 1 million of our reusable surgical gowns and drapes eliminates the use of labor-intensive bar code scanning to track product usage. This technology offers improved inventory control and monitoring of product quality. Once the used products are returned to our processing facility, they are sorted, cleaned, inspected, packaged, sterilized and shipped back to the health care provider for use," says SRI/Surgical Express CFO Charles Pope. “This closed-loop system eliminates the need for health care providers to stock on-hand inventory and greatly simplifies their surgical supply chain process."

Each procedures set up, requires planning, time and materials. SRI/ Surgical Express uses an assembly line process with tags on the items and carts. The medical supply kits are assembled on a reader table and verified. The kits are then placed on a chart for that day’s scheduled procedures for that particular operating room. At the time of loading for delivery, the carts and supplies are again verified through another reader. At the end of the day, the carts and supply kits are returned, verified, sorted, cleaned, inspected, packaged, sterilized and shipped back to the healthcare provider for use.

Once a hospital, division or a department has been set up with asset off-loading, the following benefits are realized:

Inventory Control
• Elimination of expired items
• Reduced supply levels
• Improved supply quality
• Stock shortage alerts
• Faster inventory turns
• Reduced loss and theft of supplies

Captured Costs
• Capitalized expense moved to an operational expense; tax incentive for a "for-profit organization"
• Reduced investment in unused inventory
• Accurate and Itemized billing from vendor
• Increased order management
• Increase reimbursement
• Increased labor efficiencies
• Asset visibility
• Improved sequence counts

Hazardous Waste Reduction
• Verified sterilization process
• Vendor uses best-quality supplies

Internally, SRI/Surgical Express experienced an immediate reduction of labor costs by 5 percent. This cost reduction resulted from increased efficiencies in sorting the inbound material and asset visibility of medical items. These are the same processes followed by a central distribution materials management department in a hospital.
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