A Novation White Paper MOBILE AND THE HEALTH CARE SUPPLY CHAIN Welcome to the age of mobility and the pervasive Internet an age that allows us to be highly interactive, make personalized decisions and conduct business anywhere. The distinction between performing business on the Web and via the mobile is quickly blurring. With this explosion of activity, and increased adoption of mobile devices by hospitals, we fully expect that by 2015 more decision-making and business transactions will be done via mobile devices than through the desktop. Today, there are already significant benefits associated with use and adoption of mobile technology, and this white paper outlines the current trends and benefits of using mobile technology in the health care supply chain. Hari Subramanian Director, Mobile Solutions Novation
INTRODUCTION With the rapidly growing use of mobile devices and the availability of mobile applications, there has been a gradual but significant shift in the way corporate users approach business transactions. This is clear in the banking and retail sector, and it is steadily making its way into the health care business space. Users enthusiasm for purchasing online and using mobile technologies in pursuit of instant satisfaction and better value is altering the way business is done. Corporate users now routinely read product reviews and conduct price comparisons before attending meetings with suppliers. They pay attention to distributor and supplier comments on Twitter and Facebook about the products they are interested in, and actively seek offers from daily deal publishers. They manage their accounts with online and mobile products, and regularly use alternative mobile methods of payment. Health care organizations are facing several challenges as they encounter new and updated regulations, the unknowns of health care reform, changing reimbursement policies and a down economy. There is no doubt that reducing costs while delivering high-quality medical care is a top strategic objective. Health care providers focus primarily on eliminating waste in the clinical operations, such as reducing hospital stays or unnecessary testing. While this is a valid area of focus, one aspect that consumes nearly onethird of all hospital operating budgets often remains overlooked the health care supply chain. When hospitals look at reducing costs for their bottom line, supply costs are second only to labor in terms of significant expenses. The health care supply chain is one of the most complex operations in the hospital business, yet it has not matured when compared to other industries, and remains fairly low-tech. The supply chain is heavily dependent on manual data processing and has poor access to accurate information. In many cases, personnel lack visibility into the entire supply chain. This causes a reduction in data accuracy, increased cycle-times and supply chain costs, and ultimately, an increase in overall health care costs. STATE OF MOBILE TECHNOLOGY IN HOSPITALS Mobile technology in the hospital is growing at a tremendous rate. It is being used in many departments within the hospital, and is continuing to grow in its adoption as technology platforms and solutions delivered to the marketplace improve. In a survey conducted among VHA and UHC member organizations in March 2012, 70 percent of health care organizations were found to have a mobile strategy and written guidelines on managing mobile devices. Additionally, 63 percent of respondents indicated that their organization had a group focused on developing, deploying and managing mobile applications. Smartphones (59 percent) were the most common type of device used by organizations, followed by tablets (40 percent).
Research shows that during the next five years, tablets and mobile phones will play a key role in the health care space. Connecting patients with providers already occurs, but we expect to see mobile technology play a key role in improving work flow processes both clinical and supply chain. According to Porter Research, nursing, physicians, pharmacy and supply chain/materials management currently make up the top four mobile solutions user groups. Source: Porter Research Providers Perception: Mobility in Healthcare, August 2011 With all of these recent advances in mobility and wireless technology, for many it is still not quite clear how adoption of these technologies will optimize and improve health care supply chain operations. We believe, however, that the trends for mobile in the health care supply chain space present a significant business advantage, with enormous cost reductions and productivity benefits. BUSINESS VALUE OF MOBILE IN THE SUPPLY CHAIN Mobile's relatively recent entry into the health care industry requires that any supply chain organization looking to invest in mobile device and application deployment justify this investment, quantifying a broad set of benefits provided by this mobile technology. First, employees already use their mobile devices regularly, whether for work or personal use. There are clear benefits to using mobile applications, and if users are armed with the right business applications, these devices will also be used whenever possible for enterprise benefit. Second, research and studies show that increased productivity is the most common quantifiable benefit of mobile technology adoption. Along with that productivity come lower costs and higher performance. Notably, the value of any new technology is proportionally associated with the rate of adoption higher user value leads to increased adoption and in turn, to even further quantifiable benefits. Moreover, mobile devices and supply chain applications already provide very specific benefits to the hospital supply chain user:
Additional Procurement Channel Hospital staff has an always-on channel available to look up product information and place orders as needed. Staff members don t have to wait to get back to their desk to research and place an order. With many personnel now bringing in their own devices, additional users could easily be added on mobile devices. Influencing Decision-Making With analytic applications now available on mobile devices, staff can make informed discussions with suppliers and distributors during meetings. The user has real-time access to the application to get immediate pricing information to negotiate with the supplier. Increased Productivity With staff members now having access to data on their devices and with their ability to place orders, they save time having to go to their desk or assign tasks to a specific person in charge of ordering. This potentially saves a few hours over the course of a week that they could then use for other tasks (See Scenario 1). Scenario 1 Challenge Supply chain professionals are often on the move at meetings, traveling or on the hospital floor. To research specific products and understand their facility s spend or the price of a specific product, they have to dedicate time at their desk. Solution Supply chain managers bring smartphones and tablets to work every day to reap the benefits of improved mobility and flexibility. They have discussions regularly with suppliers and distributors and want instant access to information. By providing them access to critical price benchmarking data on the handheld, they are able to view the information on the go. They can look at it when they are traveling in order to prepare for negotiations before the meeting. They can also pull up current pricing data at a meeting to show the supplier. Benefits Productivity improvement Managers save time; even an hour a day adds up to significant ROI. Staff savings Many times the hospital can save on hours that a dedicated analyst would spend examining pricing reports. Instant access With instant access to information, managers can perform their analysis anywhere and can look at information as they are thinking about it, looking at specific inventory levels for a product or as they are having discussions. Get notified instantly A DMM can request notifications for specific key performance indicators (KPI). These could be specific alerts metrics such as the price of a product going down or inventory level going down for specific products. Instead of waiting to get back to the desk to find this information, they are notified immediately on their handheld. Improved work flow With the work flow applications available on mobile devices, users receive alerts when they must approve an invoice or review orders. This again improves productivity and reduces the need to work strictly at a desk.
Status updating Staff members can now make updates to price and spend data for an item as they are moving about the hospital floor. Once product codes are standardized, they can scan product codes with the device camera to update pricing data. With decisions based on the latest data, staff members can be assured they are making the right purchasing decisions. Improved notifications With users regularly carrying their mobile devices, they can be notified at the different stages of an order. For example, if an order is needed urgently, alerts can be set up to notify users of arrival. Notifications can also be set up to alert pharmacists on drug recalls, enabling a pharmacist to quickly order alternative drugs. Reducing inventory costs Costs, such as inventory carrying costs, can be reduced slightly with a tighter supply chain work flow enhanced through mobile touch points. This provides a significant enhancement of the just in time inventory concept, as the user now has the ability to pull items from the supply chain more quickly (See Scenario 2). Scenario 2 Challenge A materials manager is in discussions with the director of quality value analysis and a surgeon on the total cost of performing a hip replacement surgery. As the surgeon lists out specific items they use, the materials manager wants to suggest and show the specifications of possible replacement products to bring down the cost while retaining quality. For this, the materials manager has to schedule a meeting, prepare well in advance for the meeting, research and print all the information and possibly have additional discussions with the surgeon. Solution With clinicians and materials managers carrying smartphones and tablets around the hospital, a work flow application on their handhelds would allow immediate and real-time access to information on products and costs. The materials manager could review possible substitute products on his tablet and immediately pass them to the surgeon for review. The surgeon could review the information on his tablet when he has time and pass his feedback and choices back to the manager. They can conduct the entire discussion online and avoid precious time that could be used for other tasks. Benefits Productivity improvement Both the manager and clinician are able to save precious time. They are able to carry on with regular duties and perform additional tasks on the go. Interactive discussions Even if the surgeon wants to meet with the materials manager directly, the mobile applications can help with interactive discussions at the meeting. The manager can look at specific products and hand the device to the surgeon to examine in more detail. Real-time information With information updated in real time, both the surgeon and the manager have real-time access to the costs, inventory levels and product specifications required. Part of the work flow Making mobile part of the work flow ensures that tasks are getting done and mobile is part of the process of doing business.
Increased user engagement Mobile allows users to have timely, relevant communications at their fingertips. For example, if the hospital system has multiple locations across the country, specific information about an individual facility can be triggered by user location. With supply chain applications, messages can also be tied to specific catalog activity, product searches and analytics related to past purchasing patterns, providing a personalized user experience. The diagram below highlights the stages of the supply procurement cycle, and maps the benefits that mobile technology could provide at each of those stages: Post-Order: Order/claim process Mobile alerts e.g. delivery time Paper elimination Post- Order Research COST Influence What to Buy: Self-service access to data on current price, spend for products Access to data on inventory levels Product information, reviews Where to Buy: Self-service access to data on comparable products and benchmark price/spend data Data to help with negotiation Access to price and spend data on suppliers, distributors Order Order: On-the-go ability to place orders if needed Mobile status updates Material Procurement Cycle Mobile Benefits QUANTIFYING THE BENEFITS AND COSTS Almost every supply chain application vendor provides a mobile channel for its customers, or is in the process of developing that channel. Novation fully expects that by 2014, materials managers and their staffs will be using mobile devices for decision-making, as well as placing and monitoring orders. As outlined above, mobile adds significant value to the supply chain operation. The particular challenge in quantifying these benefits lies in the adoption and usage of the applications. Benefits such as direct sales are easily quantified because they go directly to the bottom line. Others, such as influencing decision-making, or the marketing value of new and innovative initiatives, are more difficult to quantify. The following return on investment analysis helps to quantify some of the costs and benefits of implementing a mobile strategy:
COSTS PER YEAR COST ASSUMPTIONS Cost of deploying 100 ipad2 devices $39,900 Assume 100 devices are deployed to hospital staff at $399/device Training and Support $10,000 Assume $100/device per year and 100 users Software support $5,000 This includes installation of mobile device management and other software. Assume $50/user/year Net Cost of mobile BI effort $49,900 BENEFITS AND SAVINGS/YEAR Number of users 100 ASSUMPTIONS More frequent analysis and decision-making Consultative decision making with vendors, physicians $140,000 Average hospital medical, surgical, pharmaceutical supply chain spend is $1 million per year. Documented savings hospitals get by using our analytic applications is 7%/year Assuming an additional 2% savings by frequent and consultative decision using mobile making = ~$1,400/user/year Increased user productivity in the hospital floor. Saved time use for other tasks Self-service savings, reduce dependence on analysts and other staff $96,000 $7,200 Assume 2 hours productivity increase/month by using mobile applications. Able to focus on other tasks. $40/hour * 2 * 12 Assume 4 hours/month reduction in other staff hours. Assume 5 other staff members including analysts participate in some form of producing reports. $30/hour * 4* 12 * 5 Average Savings from Mobile BI effort $243,200 Return on Investment = (benefit - cost)/cost 387.6% As shown above, the ROI for a set of just 100 users is quite significant. This table is only a small sample of potential benefits. As more users adopt mobile technology, the total value drastically increases. A net increase in value for the organization translates to overall savings for the organization. And this in turn reduces costs across the supply chain, and ultimately for the patient. CONCLUSION The health care supply chain is evolving and hospitals are looking for innovative ways to streamline and squeeze out savings at every link in the chain. Mobile devices have had a profound effect on the e- commerce world, particularly in the way consumers engage with retail merchants and financial institutions. They are steadily making their way into the business environment, effectively becoming the focal point of an integrated customer experience before, during and after a transaction. Hospital supply chain organizations will continue to need to justify the business value of adopting a mobile strategy. As outlined in this paper, there are clear and quantifiable benefits for a hospital supply
chain organization in adopting mobile technology. From always-on access to the latest pricing and spending details, from work flow improvements to inventory cost reductions, health care organizations using mobile solutions can achieve tangible and lucrative savings. Organizations must focus on taking into account the potential of existing smart devices and look at the applications that align with these devices. The goal for the health care supply chain organization should be to provide a uniform and seamless experience for the end user. The organizations must ensure that the transition between the current usage models of the Web and mobile be made fairly transparent. Key focus should also be placed on bringing out specific uses where mobile applications will be beneficial over Web applications. This will promote greater use and loyalty of the mobile applications, thereby promoting further savings for the organization and ultimately for the end consumer the patient.