The National Academy of Medicine estimated the U.S. healthcare system wastes an average of $765 billion per year on misplaced or expired supplies
Research published in Production and Operations Management “The Joint Use of RFID and EDI: Implications for Hospital Performance,” which included authors Kang Bok Lee, EBSCO Associate Professor of Business Analytics at the Harbert College of Business at Auburn University, and Harbert College alum Randy V. Bradley, who is currently Associate Professor in Supply Chain Management at the Haslam College of Business at the University of Tennessee, reveals a key strategy for hospitals to track equipment and supplies and increase performance, while reducing personnel expenses and readmission rates.
Specifically, the research shows that the bundling of radio frequency identification (RFID) with electronic data interchange (EDI) provides a streamlined, all-in-one, technological database that yields greater organizational efficiency. RFID is the use of radio-frequency identification methods to tag and track items while electronic data interchange enhances visibility and communication by electronically transferring information between organizations.
The best way to understand the benefits is to picture the technologies as bookends around the revenue cycle. RFID sits at the front end, where it can be used to track supplies and equipment. The result is a clean record of resource utilization in care delivery, which is useful on the backend when hospitals transmit claims to government and private insurance payers via EDI.
After examining 3,300 hospitals nationwide, the researchers conducting this study realized RFID/EDI bundles that capture the utilization of supplies, resources, and equipment at the point of care both aids in inventory visibility and creates a clean data stream that facilitates more efficient billing of third parties.
With an organized inventory and streamlined billing process, researchers believe this not only improves an organization’s bottom line by reducing expenditures, but overall patient care as well. Ensuring supplies are readily available – not misplaced – and tracked in real time, facilitates faster diagnostics, and ensures timely medical interventions. These factors increase both the efficiency and expediency in which care can be delivered.
Value-Based Purchasing, a federal program, recently shifted hospital reimbursements to a value-based model, placing a stronger emphasis on healthcare facilities to accurately track and document resources/supplies used in the delivery of care with note that supplies are a hospital’s second-largest expense, accounting for 35 to 45 percent of their operating budget, according to researchers.
The results of the research also led the researchers to conclude that hospital administrators should not take a slow, piecemeal, or phased in approach when utilizing RFID and EDI simultaneously. Instead, they should go all in. “We found that hospitals that use RFID alone, or EDI alone, perform worse than hospitals that have neither solution in place,” researchers wrote—but like many good things, the real savings come to those who successfully combine the technologies together for maximum benefit.
Other authors in this study included Terry Esper of Ohio State University, Joonhwan In of Ulsan National Institute of Science and Technology, Bogdan C. Bichescu of the University of Tennessee and Terry A. Byrd (Retired Bray Professor Emeritus) from the Harbert College.
About the Harbert College of Business
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Kang Bok Lee is EBSCO Associate Professor of Business Analytics within Harbert College’s Department of Systems and Technology. He has published in journals such as the Academy of Management, International Journal of Research in Marketing, Physica A and Strategic Management Journal. Photo of Kang Bok Lee available here.
