Results and Limitations

     The results for a full facility implementation of POU are summarized in Table 1, which includes estimates of dollars generated through increased reimbursements as well as supply dollars saved over the first five years of the project.  My analysis resulted in a negative net benefit over the initial five years of the system when considering only supply savings and increased reimbursements.  Methods used to quantify these two measures are discussed later in the results section. 

Table 1

Five Year Cost/Benefit Projection of POU

     I determined project cost by reviewing data provided by the Office of the Surgeon General (OTSG).  The project cost estimate is an average of full house installation and maintenance costs gathered for AMEDD facilities during the initial phase of the Army’s POU project.  It is likely the cost of the system will be less than the estimated $2,472,833 because Landstuhl is a smaller facility with less workload than the other Army medical centers currently utilizing POU.  Complete data for both full house and partial implementation in Army facilities is available at Appendix A.

Medication Errors

    Point of use technology can reduce the number of medication errors while potentially streamlining the pharmaceutical delivery system (Ray, Aldrich, & Lew, 1995).  Landstuhl’s clinical pharmacy order and distribution system is illustrated in Figure 2.  As the illustration reflects, the number of possible error points and time delays are effectively cut in half.

Figure 2.  Workflow comparison: Traditional unit-dose drug delivery versus POU delivery.  E = potential error point; T = potential time delay.

     In order to ascertain the potential impact of a POU system at Landstuhl, I reviewed hospital errors occurring from May 15, 2002 to December 2, 2002.  I chose this period because the hospital automated its database on May 15 and errors were easy to screen and categorize during this period.  During this period, the hospital reported 142 non-fatal errors.  Both the pharmacy and nursing staff reviewed these errors to determine which errors may have been POU preventable.  Of these errors, 64% were medication errors.  These errors occurred in the pharmacy or on an inpatient ward, and the error either reached the patient or was caught by a staff member before reaching the patient.  Of the 91 errors that occurred during this period, 26% were determined to be preventable by point of use technology.  I have chosen not to monetize the cost of these errors since there were no direct costs incurred, and analyses of increased length of stay or other indirect costs are outside the scope of this research.  POU technology would assist in the elimination of a large portion of the medication errors occurring at Landstuhl, particularly missed first dose errors, because the medication would be part of the ward stock.

     The current trend in pharmaceutical delivery is the addition of barcodes on all unit dose medications (Wall Street Journal, 2003).  The barcode and code reader technology would serve as the final automated step in the delivery of medication, ensuring the right medication and the right dose is being delivered the right way to the right patient at the right time.  As long as the health care provider scans the medication barcode, an error will not occur.  Drug manufacturers have been slow to move to this procedure due to the additional expense of labeling all medications and the fact that only 10% to 15% of hospitals have bar code technology available.  This low adoption rate is the result of the lack of national standards for bar code technology.  However, the FDA plans to require barcodes for drugs and implement these requirements as early as 2004 (Wallace, 2003).

     This movement towards bar code technology, coupled with POU, indicates that reduction of medical errors through technology has become increasingly important in the health care industry.   No one solution will eliminate errors.  However, by using bar codes and POU, health care organizations can eliminate a significant number of errors.  Both identified vendors of POU technology have this available.

Medical and Surgical Supply Benefit

     The most significant monetary benefit in implementation of a POU system is the reduction of medical and surgical supply costs through waste reduction and theft prevention.  FY02 historical data, available from the LRMC Resource Management Division, was analyzed to determine annual supply and pharmaceutical costs by service utilizing Account Processing Codes (APC) and Element of Resource (EOR) codes.  Medical supply costs incurred during FY02 totaled $4.7 million dollars.  A complete listing of medical supply costs by department is available at Appendix B. 

     Determining the proportion of costs that would be managed by a POU system is a critical consideration for this project.   A large portion of these costs represents contractor provided items or locally purchased supplies that cannot be managed through POU.  For instance, Division of Pathology services accounted for over $1,000,000 in supplies, but these purchases include items such as reagents and chemical solutions, which cannot be managed through a point of use system.  Although the Department of Radiology spends more than $250,000 annually on radiological supplies, these supplies are similar in nature to those purchased by pathology and are purchased through the same supply channels—again, supply management under the POU is not feasible.  

     By reviewing all supply expenditures from the previous fiscal year, the researcher ascertained that $1,717,885 (38%) in medical supplies could possibly be managed by a POU system.  This includes all inpatient wards, most outpatient clinics in Landstuhl to include the Primary Care Clinic, and all eight Army Health Clinics.  Supply expenditure reductions in previous POU implementations have resulted in anywhere from 10% to 30% reduction in costs.  By using a 15% annual reduction in supply costs as recommended by the AMEDD Directorate of Logistics, LRMC could save approximately $257,682 annually.

     A second supply category that could potentially be managed by POU technology are the supplies purchased with the government credit card (IMPAC).  A review of FY02 financial records indicated that LRMC purchased over $3.2 million in supplies.  These records did not contain specific transactional information, and I could not determine which purchases were medical supplies.  A review of the data suggests approximately $2.5 million of IMPAC purchases were made by patient care areas in the hospital.  The by section amounts are displayed at Appendix B.  Applying the same methodology as above, 38% of these purchases could be managed through a POU cabinet, resulting in an annual IMPAC purchase inventory of $954,380.  If POU achieves a 15% reduction of these costs, LRMC saves $143,157 annually. 

Inpatient Benefit

     I attempted to quantify the additional revenue that point of use could generate in the inpatient setting.  In order to do so, patient admission data from October 1, 2001 to September 30, 2002 were pulled from the Composite Health Care System (CHCS) for four areas:  Medical/ Surgical Ward (14 C/D), Pediatrics (Peds), Labor and Delivery (L&D), and the Neonatal Intensive Care Unit (NICU).  Pharmaceutical and supply costs for these areas were pulled from MEPRS data for the same time period.  The data is summarized in the Table 2.

Table 2

Projected Annual Inpatient Pharmaceutical and Supply Cost Savings

     The results of this analysis indicate that the average medical or surgical in-patient on 14 C/D incurred $47.55 in supplies and pharmaceuticals during his or her stay in the hospital.  Projecting this average cost per patient to all patients and all areas results in an estimated $10,436.52 in additional revenues that would have been billed to the patient.  This does not include any up-charge in supply costs, a practice that is commonly done in civilian facilities.  Vendors of POU technology apply an up-charge of as high as 300% when conducting their economic analysis for a civilian facility (Omnicell, 2003).  If LRMC chose to follow this billing methodology, the results would increase three-fold to $31,309.56.

     Application of this methodology to other areas in the hospital should produce similar results.  Therefore, POU implementation would lead to a significant increase in reimbursement of expenses by pay patients.  Although inpatient itemized billing is not being done at this time, the Army has plans to implement it in the near future.

Outpatient Clinics

     The services with the highest volume of patients and greatest number of third party pay patients are the primary care and family practice clinics within the hospital and the Army Health Clinics.  Analyses of patient visit data for FY02 provided by the Landstuhl Regional Medical Center Medical Statistics office produced the results in Table 3.  These data were matched with cost accounting data from the Resource Management Office to determine average costs per patient visit.  This per visit cost was then multiplied by the number of pay patients by clinic to determine the potential additional revenue generated if a POU supply system was present in each of the identified areas.  Once again, a 300% up-charge in supply cost would increase the total annual revenue to $23,598.51.

Table3

Annual Outpatient Supply Cost and Additional Revenue Potential

     One critical performance measure for this model is that clinic personnel would be required to tie patient and supply usage together at the time the supplies were used during the patient visit.  This is done by first selecting the patient information from the computer before pulling any supplies from the POU cabinet.  Clinic personnel must comply with established procedures in order to assure accurate cost and management data is accumulated on a per patient basis.  Continual emphasis and reinforcement of these procedures is essential for success (AMEDD Logistics Systems Division). 

     Supply usage in each clinic varies considerably by the type of visit, provider preferences, patient diagnosis, and other variables.  For the outpatient model, only supply costs were considered since LRMC is currently billing for pharmaceutical items directly from the outpatient pharmacy billing practices. 

     Specific consideration must be given to each of the eight Army Health Clinics when considering POU implementation.  Each clinic serves a demographically mixed population and provides a variety of primary care services.  The small NATO clinic provides only mental health and primary care, while the larger clinics in Wiesbaden and Baumholder provide pediatric care, OB/GYN, physical therapy, social work, and optometry services in addition to primary care.   Based on workload data, the clinics that would benefit the most from a POU system are Wiesbaden, Vicenza, Baumholder, and the SHAPE clinic.  Each of these clinics has over 19,000 primary care visits per year. 

Determine Costs and Break Even Point

     Determining the optimal configuration of equipment to purchase is the most difficult aspect of this system.  Equipment availability and costs are dependent on which vendor preferences and capabilities to meet user needs.  Equipment configuration will also determine overall purchase price, cost to implement the system, and determine break-even point.  A complete requirement document could not be completed during the timeframe of this project.  Development of the requirement is contingent upon a dialogue between the user and the vendor.  Only the vendors are aware of the capabilities of their equipment and the appropriate configuration in each specific location.  Without a cost estimate, it is impossible to determine the break-even point for implementation of a POU system for Landstuhl Regional Medical Center.  The average cost for all Army Medical Treatment Facilities implementing POU was $2,472,833.

     Specific business practices (e.g., time spent inventorying, time spent restocking, etc.) must be documented and data gathered in order to accurately quantify the before and after effects of a point of use system in a medical treatment facility.  I contacted the two vendors available on General Services Administration Contract, Pyxis and Omnicell.  They provided data collection formats (Appendix D and E) and defined data points to gather in order to complete an economic assessment for the operating room (Appendix F), and the entire hospital (Appendix G) both before and after implementation.  These two appendices are extremely useful tools to use in support of this business case.  Because a facility walk through was not conducted for this project, the vendor models are not complete. This additional data should be collected in order to further validate the cost savings and break-even analysis of POU technology.

Limitations

     This cost effectiveness and return on investment analysis of this project is limited by incomplete purchase information available from the vendor.  Due to operational constraints and support for Operation Iraqi Freedom during the period of this research, I was unable to conduct a walk through with the vendors in order to determine specific ward and clinic equipment requirements.  An accurate cost estimate is essential to determine the cost effectiveness of this system.  Vendor input for each ward and clinic would allow me to determine the cost effectiveness for each unit within the organization, and determine which areas offer the highest return.

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