Problem: IT at Work Data Errors Increase Cost of Care by Billions of Dollars and Risk Lives
Every day, health care administrators and others throughout the health care supply chain waste 24 to 30 percent of their time correcting data errors. Each incorrect transaction costs $60 to $80 to correct. In addition, about 60 percent of all invoices among supply chain partners have errors, and each invoice error costs $40 to $400 to reconcile. Altogether, errors and conflicting data increase supply costs by 3 to 5 percent. In other words, each year billions of dollars are wasted in the health care supply chain because of supply chain data disconnects, which refer to one organization's IS not understanding data from another's IS. Unless the health care system develops a data synchronization tool to prevent data disconnects, any attempts to streamline supply chain costs by implementing new technologies, such as data transmission using radio waves (known as radio frequency identification [RFID]) to automatically collect data, will be sabotaged by dirty data. Consider the problems created by the lack of data consistency in the procurement process. Customers of the Defense Supply Center Philadelphia (DSCP) health care facility were receiving wrong health care items, wrong quantities, or inferior items at higher prices. Numerous errors occurred whenever a supplier and DSC Preferred to the same item (e.g., a surgical instrument) with different names or item numbers. For three years, efforts were made to synchronize DSCP's medical/surgical data with data used by medical industry manufacturers and distributors. The health care industry developed data standards or codes for each item, which enable organizations Data Errors Increase Cost of Care by Billions of Dollars and Risk Lives to accurately share electronic data. A data synchronization tool provided data consistency. Results from this effort improved DSCP's operating profit margin and freed personnel to care for patients. Other benefits are the following:
• Accurate and consistent item information enables easier and faster product sourcing. (Product sourcing means finding products to buy.)
• Matching of files to ensure lowest contracted price for purchases for quicker, automatic new item entry.
• Significantly reduced unnecessary inventories and amount of fraudulent (unauthorized) purchasing.
• Leveraged purchasing power to get lower prices because purchase volumes were now apparent.
• Better patient safety.
Questions: 1. What are two examples of waste in the health care supply chain as a result of dirty data in an organization?
2. Why was data synchronization necessary to reduce inefficiency?
3. How can accurate data and verification systems deter fraudulent (unauthorized) purchases?