Healthcare spending in the U.S. has reached $2.4 trillion, representing 17% of the gross domestic product.  Medical supplies  a $200 billion industryaccount for 40% or more of a hospitals operating costs, and represent a hospitals second largest expense after labor.  Estimates point to more than $11 to $15 billion of waste each year due to inefficient processes, rework, order and invoice errors and outdated and disparate IT.  At the core of these problems is bad supply chain data. 

Healthcares most basic data  electronic descriptions of the products used to treat patients, which companies manufacture them and delivery locations is unreliable, inconsistent and outdated.  Bad data is the source of a significant negative ripple effect that burdens the nation with billions of dollars in avoidable costs, inefficient processes and, most importantly, a negative impact on patient safety.

Tied to the commercial supply chain, the federal healthcare supply chain is not immune to these data problems, and is doing something about it.  The U.S. Departments of Defense (DoD) and Veterans Affairs (VA) are collaborating to reduce unnecessary costs and improve operations in the federal healthcare supply chain, with results that positively impact the entire healthcare industry.  

The organizations are linking, standardizing and synchronizing product information between their hospitals and supplier partners.  More importantly, the DoD and VA are working with industry partners through various proof of principle pilots to focus industry efforts in achieving and adopting industry-wide accepted data standards.  The government effort is important because it is showing through its results that only an industry-wide data standards solution set will solve the bad data problems experienced by any specific supply chain partner, including organizations that are part of the DoD, VA or private industry.  

The goals of the DoD/VA Data Synchronization Program are to:
	Increase safety for service personnel and veterans by ensuring the right healthcare product gets to the right place at the right time.
	Improve efficiencies in the entire U.S. supply chain, reducing or eliminating $15 billion a year in unnecessary supply chain costs.
	Save $30 million to $50 million a year for DoD/VA. 
	To establish a proof of principle that data synchronization in healthcare can work and is possible to do with great benefit to all trading partners.

The DoD/ VA is successfully synchronizing data in the materials information systems of more than 80 military and veterans hospitals with product data from more than 20 supplier partners and two major distributors.   The program, which started in 2003 to support the Iraq War, has saved the government more than $30 million in product price reductions through the end of 2008, with increasing savings as more hospitals join the program.  In 2008 alone, 37% of the total savings was realized ($11 million), with the biggest increase in savings in the last four months due to increased user training.  DoD/VA hospitals also moved $17 million of manual purchases to more efficient electronic methods.  

Hospitals using tools developed from the DoD/VA effort can now pull product, purchasing and contracting data from a robust, authoritative and synchronized data source developed to support the project called the Product Data Bank (PDB).  The PDB allows users to quickly identify and research opportunities to reduce costs, particularly where hospitals can leverage existing supply contracts that offer better pricing.  Savings opportunities range from a few hundred dollars to hundreds of thousands of dollars a year on a single item.  

Standardizing product data across the entire supply chain reduces healthcare costs, and most importantly, expedites delivery of the right items to warfighters, veterans and patients in the U.S. and around the world.

The DoD/VA team is using innovative technology and tools to develop software and a robust, dynamic enterprise data engine called the Product Data Bank (PDB)  allowing the federal healthcare supply chain to turn its vast supply chain data into powerful information.  The PDB serves as an authoritative resource for synchronized medical product information within the DoD and VA , as an interim step until a wide-scale industry product data utility (PDU) with global healthcare data standards becomes a reality in healthcare to provide a single, updated source for standardized and synchronized medical and surgical product information for all trading partners.  With more than 1.2 million certified and synchronized records from more than 42 million processed data records and growing, the PDB is believed to be the largest medical/surgical product database in healthcare.

The PDB, which was developed using tools from Informatica and other important technology partners, is providing an accurate and synchronized data backbone to all of the federal healthcare supply chains processes and as a template to highlight the need for an industry data standard solution.  Having enterprise-level data synchronized with site-level item masters means that materials managers will have accurate and consistent data at their fingertips.  Armed with powerful information, hospitals will be able to improve supply chain efficiency and reduce costs, by taking the steps necessary to get better pricing, for example.

The PDB operates in a net-centric environment and uses more than 75 Web services.  It standardizes and synchronizes important enterprise-level source files from all hospital sites across the DoD and VA supply chain, including Distribution and Pricing Agreements, Federal Supply Schedules, the DoD Master Database and the VA National Item File. The PDB is packed with critical product and packaging data, pricing, enterprise-wide purchasing data, product classification and contract data.

The PDB build process utilizes technology to aggregate myriad data files from unrelated sources into a cohesive and standardized view of DoD and VA purchase, contract and package configuration data.  The standardized view allows for efficient analytics to be performed against a wider set of inputs than was previously possible.  

As the data engine for the VA/DoD data synchronization effort, the PDB has enabled the DoD/VA to realize incredible savings to date ($30 million+) by populating reports that hospitals use to identify savings opportunities.  In addition, the PDB and its data synchronization/sharing principles serves as a visible platform for the value of industry data standards with data sharing networks (i.e. Product Data Utilities).  DoDs initial build your own pilot solution is just the first step in demonstrating to industry both the benefits and need for a commercial supply chain solution PDU.  DoD is actively working with over 30 industry partners in testing a healthcare PDU concept for the entire industry.  DoDs goal is to transition its PDU pilot concept into an industry-adopted and managed PDU solution.

Though we are proud of the success of our internal data synchronization program, we also look forward to the day when the entire healthcare supply chain leverages standardized, synchronized data from a single accurate source, said Kathleen Garvin, DoD/VA data synchronization program manager.  That day is getting closer, as leading industry organizations are moving to a consistent set of global standards.  In todays economic climate, it is more important than ever for the healthcare community to use a single set of standards to take unnecessary costs out of our supply chain while increasing patient safety.

Yes

Yes

Differences in how hospitals and suppliers electronically communicate information about products wreak havoc up and down the supply chain, adding costs and potentially impacting patient safety.  Materials managers spend significant resources reconciling purchase orders and invoices due to mismatched item numbers and units of measure.  A proven, industry-sanctioned methodology for defining, coding and identifying an item in purchasing systems, distributor files and contracts would remove supply chain confusion and lower costs.  In addition, data synchronization provides opportunities for hospitals to:

	Improve patient safety due to accuracy of product information 
	Spend analysis capabilities for reduced costs via  identification of non-contract/contract opportunities (as evidenced by DoD/VA product price reductions of $30 million+)
	Increase transaction accuracy and reduced rework 
	Rapidly access information on product recalls, introductions, discontinues and replacements
	Obtain accurate information to generate usable barcodes/RFID
	Focus on patient care without supply chain distractions

For manufacturers, accurate product information accessed in a PDU would:
	Increase opportunities to introduce new products
	Allow rapid distribution of complete information on discontinued, replacement and recalled products
	Increase transaction accuracy for ordering, bill payment, rebates and administrative fee calculations
	Decrease administrative costs for rebate reconciliation.
	Reduce a heavily burdened workload that currently requires global manufacturers to transmit product information in different formats to each hospital customer, distributor or GPO.

The technology is helping VA/DoD hospitals to locate the right product and price on a consistent basis, and to provide optimal long-term value through more effective negotiations of national and regional contracts.  Without a dynamic data infrastructure in place, hospitals have limited visibility into enterprise-level spending activity, and must rely on static and largely inaccurate information.  The VA and DoD are making greater sense of the data housed in their own hospitals materials management systems, allowing more meaningful analyses of spending.

An authoritative data source enables the DoD and VA each to evaluate price variables between contracts for the same item across their respective health systems and potentially use joint negotiating power to establish more advantageous supply contracts.  The DoD and VA are uncovering price variances on products, leading to savings opportunities that previously would have been impossible to find due to the disparate, incomplete and outdated nature of the data housed in hospitals IT systems.  

For example: 
	The average price for a certain IV set shows $115 for the DoD and $75 for the VA per unit, representing a potential for DoD to save $240,000, or 34% on that one item alone.
	The average price per unit for pre-washed sterile gauze shows $110 for the VA and $65 for the DoD, representing an opportunity for VA to save up to $350,000 a year, or 40% on that one item alone.

Visibility of spending information based on accurate, synchronized data is yielding powerful results, and is providing an example for the rest of industry that data synchronization using a single source of true product data is possible to do with a rapid return on investment.   

The success of the DoD/VA data synchronization program and industry interest in the results of this work led the DoD to develop and sponsor an industry pilot of the Global Data Synchronization Network® (GDSN), a non-profit global platform for the secure exchange of product information.  The ongoing pilot, launched in 2006, is demonstrating GDSNs potential to improve product data accuracy and to synchronize trading partner systems as the basis for efficient transactions in the healthcare supply chain.  Participation in the pilot has grown from an initial group of five to now more than 50 representatives from across the U.S. healthcare industry.

DoD/VA hospitals participating in the the DoD/VA data synchronization program continue to research savings opportunities that can range from a few hundred dollars to hundreds of thousands of dollars a year on a single item.  Most opportunities are ones that hospitals can easily implement.  Synchronized data in the DoD/VA PDB has allowed DoD/VA to create a wealth of cost reduction, spend analysis and best buy tools, all which are benefiting federal customers.

The way the medical marketplace changes from day to day, we need ways to identify opportunities to get the best prices and sources for items we are buying, said Janet Hinkle, supervisor of Materiel Branch at Fort Carson, Colo.  There arent enough hours in the day to identify these savings opportunities manually, so having the technology that sheds light on cost savings is extremely valuable. 

The VA/DoD data synchronization program is producing tangible results, according to John Hinson, chief, Logistics Management Service at VHAs Northern California Healthcare System, Sacramento, Calif. Key to our progress is the identification and application of key data elements that drive efficiencies in the supply chain.  VA, DoD and our suppliers are using pre-defined criteria for the standardization of our data, and the databases that feed our systems are being synchronized to establish a common language for the products we use, paving the way for more insightful and accurate spending analyses based on individual items instead of commodities.  Synchronized product data allows us to make decisive changes that could have an immediate impact on our bottom line, Hinson says.  

Hinson adds that previous spending analysis generally revolved around commodity analysis with multiple classification schemes.  He and his colleagues at VA are especially excited about what a foundation of synchronized data means for the future of the healthcare supply chain  an accurate platform for the implementations of Radio Frequency Identification technologies and the electronic health record.  With synchronized data, the future is bright, Hinson says.  

The benefits of data synchronization are finally starting to be realized by the federal healthcare supply chain, as well as by a few industryleading hospitals and medical/surgical manufacturers.  Other multibillion dollar industries, including grocery, hardware and retail, run their supply chains more effectively.  These industries identify products using consistent electronic data standards, synchronized through a single source of accurate product information, to bring data truth to every part of the supply chain. 

Today, medical supplies and devices cannot be identified in a systematic and consistent manner, and the healthcare industry is not able to reliably identify potentially life-threatening recalled or defective medical devices.  Whereas other industries use consistent and synchronized data standards to ensure all trading partners and information systems speak the same electronic language, healthcare lags in the ability, for example, to track and trace a recalled product from manufacturer to end use, or the patients bed side.  Most experts also agree that one of the primary reasons for increased supply costs and the inefficiency of the healthcare supply chain is the lack of consistent, standardized product identification, accessed through a synchronized PDU.  

In addition, efforts to implement electronic health records (EHR), radio frequency identification (RFID) and other high-visibility patient safety technologies are important but potentially will fall short if the data foundation is not in place in the nations medical supply chain.

The First and Most effective. 

The DoD/VA data synchronization project is exceptional because of its positive impact on the federal healthcare supply chain and the potential implications the lessons have for the entire healthcare industry. 

Through the use of custom software, participating VA and DoD hospitals are documenting more savings opportunities as each month passes.  VA and military hospitals and treatment facilities in the U.S. and abroad, including those in combat theaters such as Afghanistan and Iraq, and newly participating locations such as Africa and Kuwait, are able to quickly identify and research products and alternate sources that can reduce costs, and zero in on opportunities to better access and leverage existing supply contracts. By the end of 2009, most if not all VA and DoD sites will be added to the program.  In addition, two major distributors and more than 20 mutual supplier partners are contributing data for the PDB.  For the federal government, that means better care for warfighters and veterans, during both peacetime and contingency deployments, as well as reduced costs and improved supply chain efficiency.

While the governments results are exciting, the work serves as a precursor to what is possible in the commercial supply chain as data standards become more commonplace. An industry-wide source for synchronized, consistent and accurate product and packaging information will remove the need for buy-side supply chain participants to each interact directly with their suppliers to receive standardized product information.  Such a product data utility will drive efficiencies and savings to the entire healthcare supply chain. 

In 2008, the broader U.S. healthcare industry made major progress with the endorsement of a single global-wide source of true product information for healthcare.  Participation in an ongoing DoD-sponsored pilot of a specific standards system grew to more than 50 healthcare leaders from hospitals, group purchasing organizations, distributors, systems providers and supplier organizations.  The pilot, which grew out of the success of the ongoing DoD/VA data sync program, is serving as a key resource for industry players who want to know more about how data sync works and its benefits.  

Several recognized healthcare organizations, including leading group purchasing organizations, hospitals and suppliers, have publicly announced support for using specific standardsthe same ones that are being tested in the DoD pilot-- and are communicating their plans for implementation with deadlines between 2010 and 2012.  Many provider organizations have taken an additional step by requiring their manufacturer partners to incorporate certain standards in order to win contracts, by industry-endorsed deadlines of 2010 for location identifiers and 2012 for product identifiers.   In addition, the U.S. Food and Drug Administration has taken a keen interest in establishing unique device identifiers to fuel a safer, more efficient supply chain, enabling a healthcare product to be traced through the entire manufacture-to-use process. 

Due in large part to lessons learned from the governments work in this area, it appears that healthcare is finally on a clear, unified path toward using the same product language with the goals of reducing costs, increasing efficiencies and improving patient safety.

Because the benefits of data synchronization were largely unproven in healthcare at the time the DoD/VA started their program, the DoD and VA initially found challenges in recruiting participants.  The DoD had previously embarked on time-intensive initiatives to streamline its supply chain data without much success, primarily because these efforts did not include the establishment and use of a centralized data repository for accurate, consistent, standardized product information.  Other industries success with data standards was founded on the establishment and use of such a PDU.   

The DoD/VA helped hospitals and their manufacturer partners become comfortable with the processes, time commitment and potential benefits of the new data synchronization program.  They provided studies that were conducted in other industries that showed great benefits for all supply chain participants.  DoD/VA manufacturer partners are the same organizations that provide supplies to industry hospitals, and as such, suppliers were encouraged to participate in industry associations dedicated to accelerating the adoption of healthcare supply chain standards.  Suppliers participated in several other ongoing industry pilots as well.

For the DoD/VA data synchronization program, the DoD/VA felt it was important to start small by including a handful of suppliers that represented the bulk of DoD/VA purchases and testing a small number of data fields.   Starting small enabled the DoD/VA to test solutions to some technical challenges as well, including using Informatica tools to pull, synchronize and integrate data from more than 65 data sources across the DoD/VA enterprise. 

One significant windfall from the lessons learned out of the DoD/VA pilot is the additional clarity that data synchronization provides to suppliers.  While benefits to hospitals of data standards and synchronization are clear, the DoD/VA program helped shed light on how suppliers can enable a more efficient supply chain and also receive major operational benefits.

"In a fully implemented state, product data synchronization will lead to fewer shipping errors and enhance productivity in both back-office and customer-facing functions. Simply put, a proven data synchronization solution will allow manufacturers to seamlessly share accurate product master data throughout the supply chain, said Dennis Black, director of e-business for BD, a leading global healthcare products company and a participant in the DoD/VA data synchronization program.  The entire healthcare supply chain wins by reducing errors and becoming more efficient."  

To recognize supplier contributions to the project, the DoD/VA launched an awards program recognizing medical/surgical manufacturers that understand the importance of consistent data and that are leading efforts in the industry to define the role of suppliers in data synchronization efforts.  Winners are selected based on multiple criteria that measure the breadth, quality and frequency of product data submitted in support of the DoD/VA internal data synchronization program and pilot DoD/VA PDU  a single source of true, synchronized product information in the federal healthcare supply chain.  Data fields evaluated included those that are most needed for efficient supply chain interactions, such as packaging levels and product descriptions.

When the DoD/VA data synchronization program started (2003), the idea of synchronizing healthcare supply chain data seemed still like a distant, far off goal.  However, the movement has grown tremendously.  Now, with the national priority on health IT, even the U.S. FDA is eyeing opportunities in the supply chain to bring about opportunities to reduce costs, improve efficiencies and increase patient safety.  On September 27, 2007, the U.S. Congress signed into law the Food and Drug Administration Amendments Act of 2007. This act includes language related to the establishment of a Unique Device Identification system, which implemented will require:
	the label of a device to bear a unique identifier, unless an alternative location is specified by FDA or unless an exception is made for a particular device or group of devices. 
	the unique identifier to be able to identify the device through distribution and use. 
	the unique identifier to include the lot or serial number if specified by FDA. 
A properly developed and implemented UDI system has the potential to radically change the way we view medical devices.  This requires all stakeholders (device manufacturers, distributors, health care facilities, device users, patients, payors) to understand and implement their respective piece, said Jay Crowley, senior advisor for patient safety, FDA.  

Though Im sure that we cannot even begin to imagine all of the benefits  at the very least, UDI will provide a shared visibility into the life-cycle of medical devices  which will vastly improve our understanding of medical device use, post-market surveillance, and recalls, Crowley added.

Another challenge the program faced was ongoing funding.  Once up and running, the Congressionally funded data synchronization program more than paid for itself and continues to find cost savings opportunities for the federal government.

Exceeded

The DoD/VA data synchronization program illustrates how data synchronization could work for health care. The results have shown great promise as a proof of principle for the health care industry to follow.  
A growing group of key industry stakeholders is beginning to see product data synchronization as an aspect of the supply chain that can be controlled in large part due to DoD/VAs efforts and demonstrated benefits to customers.  Every transaction in the healthcare supply chain -- from contracting to procurement to payment to rebates -- would benefit from accurate, up-to-date and consistent data.  Having synchronized data would not only eliminate waste and inefficiency, but also help enhance the quality of patient care, which is an industry-wide goal and top priority.  
Properly implemented, synchronized product data could provide important information to help enhance patient safety, making sure hospitals and manufacturers are able to identify what, where and how hospitals are using individual products.  This information then would be included in the electronic patient record, and it would be accurate and traceable.  Synchronized product data would be used to notify hospital purchasers and clinicians about product introductions, discontinuations, recalls, replacements and upgrades.  
Having a single location for the secure and up-to-date transmission of standardized product data that all applicable parties can leverage would ease supply chain processes across healthcare in the U.S. and globally.

DoD/VA hospitals have quickly adopted the PDB and price reduction tools.  The technology enables them to find better contract opportunities, to conduct smarter analyses and to increase efficiencies.  Purchases that were previously conducted manually have also been brought to the electronic age.  

Users find the PDB easy to use:
	 790 active PDB users (Feb. 2009), up from 149 one year earlier.  More than 50% are soldiers in Afghanistan, Iraq and other overseas medical supply organizations supporting the war effort.  
	The PDB is reliable, averaging only 5 minutes of monthly planned down time.
	 Training requests are increasing in the U.S. and around the world.

Feedback is positive.  An overseas user supporting the war effort said:

You and your team have changed our lives here; zero balances are at an all time low.  I always point to the PDB  it gave us the light to see what we could not in the past.  In turn, by having the supplies needed on hand and ready, you have made it possible for the medics to save lives here and down range.

Already implemented in 40 military and 40 veterans hospitals, the PDB will be implemented in more than 300 federal hospitals over the next year.  The DoD/VA is finding that supply chain data standardization and synchronization provides opportunities to save valuable financial resources --$30 million to $50 million a year -- while also improving patient safety.  The DoD and VAs ongoing work is serving as a model to build upon for the commercial supply chain, with benefits to the entire healthcare industry.  The DoD and VA is leading the way to take $15 billion a year out of healthcare supply chain costs in the U.S. over the next few years.