Breeding ground for growth

Original article may be found at

http://www.matmanmag.com/matmanmag_app/hospitalconnect/search/article.jsp?dcrpath=AHA/NewsStory_Article/data/MATMANMAG501&domain=MATMANMAG


There is a debate in health care about whether a fully-integrated financial system performs better than a best-of-breed combination. Hospitals deploy both types of systems to serve their evolving needs for better supply chain efficiencies and management information. The debate won't be settled by the software vendor community because of its economic interests. Regardless, most end users don't realize the potential benefits of any system.

When vendors speak of a fully integrated system, they mean a solution created by their company. Usually this doesn't mean they have designed a system from the ground up, but that they own and market systems for which they also have off-the-shelf interfaces.

Often the supply chain management portion is either an afterthought or an acquisition, which allows a company to make a claim of being fully integrated. If it is an afterthought, what results is a not-so-magical transformation of a best-of-breed system into a fully-integrated system. In either situation, the design of critical expense management functions usually is secondary to the financial general ledger (GL) package.

Making the connection

It's ironic that the two systems often operate in the same way. However, one big difference exists--users on the materials management side are almost always happier with best-of-breed systems, because systems from specialty providers bring attention to MMIS detail that users require and appreciate.

Those using a fully integrated system often say it was forced on them by an IS or finance department that didn't understand the highly specialized programs of an MMIS.

Fewer connections are needed between an MMIS and a general financial system (GFS) than most would estimate, and these connections are relatively simple batch files. A number of connections exist between the finance and materials management departments, butisn't close to the number of connections within an MMIS. An MMIS is as complicated as a financial system and in many cases, more so.

Racking up points

There is detailed integration between the accounts payable and purchasing departments, while a simple batch interface exists between the MMIS and the financial system in a single transaction. This makes it possible to perform AP/PO matching on the MMIS and pass a daily batch to the GFS.
Benefits include a 95 percent reduction of problematic invoices. With a best-of-breed MMIS, PinnacleHealth has pursued technological options aggressively. This has allowed the organization to deploy an online requisition solution to end users permitting desktop ordering of supplies, stock or non-stock, from a custom catalog.

End users have real time inquiry capability regarding POs, status, pricing, etc. Procurement deals with service issues instead of transactions. Same-day placement of expense line requisitions exceeds 99 percent, and contract compliance is almost universal.

Other accomplishments include:

• Centralizing procurement and contracting functions in a single location for a multi-facility system that extends more than 70 miles
• Performing an abbreviated launch of a true business-to-business e-commerce solution using a GPO-sponsored portal
• Opening EDI links with providers not yet Internet-ready, including the use of 810 electronic invoices
• Creating entire vendor classes capable of tracking supplies through risk-sharing arrangements, providing accurate inventory information without negatively affecting accruals to the GL
• Using hand-held bar code scanners
• Using touch-probe technology
• Using computer-generated inventory ordering patterns
• Moving supplies through multiple packaging schemes and issue units
• Developing such in-house, no-pay vendors as print shops
• Reducing supply expenses through controls and producing custom reports on demand
• Exploring a Web-deployable application with a vendor that includes seamless conversion and short learning curves
• Maintaining customer satisfaction.

While there are good fully integrated systems, most do not give the MMIS function dedicated support. This results in minimal use of its capabilities.
One particular integrated system with wide market acceptance is incapable of performing basic supply chain tasks.

A compelling example is its inability to track credits for product returns. There is no hospital in the industrialized world that does not experience frequent product returns.

Failure to account for this in an MMIS reflects a design process that lacked input from someone with supply chain credentials. Such flaws are not a part of best-of-breed solutions.

Each organization should make its own choice based on an objective cost-to-value model, but that model should include extensive examination of vendor claims vs. real-world performance. If basic functions are lacking in a hospital's MMIS, it could be argued, that organization has not actuated an MMIS, but has simply extended its front-end GL entry functions.

When originally published Stephen Tambolas was the director of materials management, at the Pinnacle Health System, Harrisburg, Pa. He earned a B.S/B.A. in information systems from Robert Morris College and an M.P.M. in health system administration from Carnegie-Mellon University, both Pittsburgh-based universities.

This article first appeared in the January 2002 issue of Materials Management in HealthCare