The Economic Benefits of a Code


Bar coded, unit-of-use packaging can help to reduce medical errors, writes the Institute of Medicine in To Err Is Human: Building a Safer Health System, and for good reason. Hospitals that rely completely on bar codes for patient and treatment identification, like St. Alexius Medical Center in Bismarck, ND, are able to maintain error rates far below that of the national average. (See Using Bar Codes to Reduce Medical Errors) Recently, President Bill Clinton called upon FDA to develop new packaging and labeling standards that can help prevent medical errors.

This month's supplement explains how medical device and drug manufacturers can help reduce such errors by bar coding unit-of-use packages. However, bar coding such packages may also be appealing from an economic standpoint. First, hospitals may be able to improve the accuracy of their patient billing. "Medical institution accounting and billing may become more valid when bar coding is used consistently to identify items and services for which patients are to be billed," says Chuck Semple of Sigma Four, a human factors engineering consultant. "It would be reasonable to expect that fewer items or services would be overlooked, and more entries would be correct and for those actually used."

Robert Hankin, president of the Health Industry Business Communications Council, agrees. "Without bar coded unit-of-use packages, there is no way to account for individual consumption. Nurses don't have time to write the individual doses taken from bulk packages and pass the information to internal billing, so patients are charged for a full bulk package . . . or there is a blanket charge on all hospital rooms." This is what has driven up the cost of healthcare, he adds.

At St. Alexius, for instance, CEO Dick Tschider claims that the bar coded packages, which are scanned at the point of care, have led to more-accurate documentation for billing, offsetting the cost of the bar code system implementation.

However, points out one industry expert, if hospital systems are paid through capitation, keeping track of individual consumption may be irrelevant.

Nonetheless, hospitals may still be able to benefit from tracking individual patient consumption. St. Alexius's materials director Frank Kilzer says that the improved documentation has kept inventory losses to less than 1%.

Drug and device manufacturers themselves may be able to realize a few economic benefits. First, if their products' unit-of-use packages were supplied already bar coded, hospitals would not need to employ a repackager or purchase equipment to bar code packages themselves, saving on capital and labor expenses. Such packages, which can help hospitals improve billing and better control inventory, may be more attractive to cost-cutting purchasers than are products supplied in bulk or without codes.

Secondly, manufacturers could determine through data acquisition what types of patients were taking their products and therefore be able to tailor the products to meet a specific patient population's needs. "The data can generate valuable statistics of medical product usage," says Karen Longe, a bar coding consultant.

Currently, hospitals like St. Alexius are relatively rare, save for a few hospitals in the Department of Veterans Affairs system and others scattered across the nation. But, given President Clinton's National Action Plan, which aims to ensure that all 6000 hospitals participating in Medicare and all 500 Department of Defense hospitals develop patient safety programs, hospital and group purchasing organizations may begin limiting their purchases to products that help prevent medical errors. If for no other reason than to improve—or maintain—a healthy bottom line, drug and device manufacturers would do well to provide bar coded unit-of-use packages that help reduce medical errors.

Daphne Allen, Editor

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