When the National Institutes of Health installed an enterprise resource planning system early in 2007 to help manage a warehouse in Gaithersburg, Md., it nearly joined a long list of organizations that have experienced ERP deployment disasters.
NIH replaced a homegrown system with Oracle Warehouse Management, known as WMS, and integrated it with Prism Software tools.
“It worked the first day, then the wheels came off,” said Tom Keith, director of NIH’s Division of Logistics Services.
First, the system began sending warehouse workers inaccurate information. “It would say, ‘You have product here,’” Keith said. “We would go there, and there wasn’t product there.”
Almost immediately, productivity plummeted from a daily average of 850 customer orders filled to 60. Back orders grew by a factor of 12. Some inventory numbers were wrong, and much of the information didn’t carry over correctly from the old system.
For example, feed and bedding for research animals were not shown properly. “For some reason, the system put expirations on 70 percent of our items,” Keith said. That glitch necessitated two manual inventories and put important research at risk.
NIH officials knew they needed outside help. “We decided to bring Booz Allen [Hamilton] in to help figure out what was going on really quickly,” Keith said. “They brought in the warehouse-management expertise that we didn’t have. They knew Oracle, where we didn’t.”
“This was a very technology-driven implementation,” said Eric Michlowitz, the Booz Allen program manager assigned to the project. “When you see an [information technology]-led engagement, the users feel something is being done to them.”
In NIH’s case, he said, “the processes weren’t aligned with the way the users actually do business.”
Keith said training was another problem. Efforts had largely been limited to showing users what each screen did.
“To NIH’s credit, early in the implementation, they saw that this was in fact the case,” said Robin Portman, a vice president at Booz Allen.
The company’s solution was to re-engineer business processes to capitalize on the ERP system. “When they put the new system in, they didn’t map the old capabilities to the new capabilities,” Michlowitz said. Working with the best practices and procedures of the ERP system is the key to success, he added, and it’s best to avoid needlessly customizing it in the belief that one’s business is unique.
“It’s ‘copy exact’ unless you can prove the need to do something different,” Michlowitz said. “You should ask yourself, ‘What core and differentiated functionality [do] I need for my business, and what do I do like everyone else?’”
— David Essex
Although the health care industry has been famously slow to adopt information technology, it is experiencing a modernization surge lately, with organizations weighing investments in imaging systems, electronic patient records and better-integrated, user-friendly clinical decision-support systems.
Government health agencies, like their private-sector counterparts, are even taking a fresh look at an often-maligned technology: enterprise resource planning (ERP).
ERP systems can be massive and complex. They are designed to monitor and integrate the financial, human resources and operational activities of an organization under one software umbrella.
Some experts believe the technology could strengthen hospitals’ ability to manage costs and be an asset to payers and providers facing shrinking budgets, rising expenses and stricter scrutiny from regulators.
“Most health care provider organizations are in the red,” said David Corbett, vice president of health care at SAP, an ERP vendor. “It makes it hard for them to find capital to invest in things like operations.”
Historically, the industry has been less interested in back-office systems, such as ERP, that handle the financial and operational sides of the business than it has been in clinical and patient-management tools. And organizations that adopt ERP systems generally hold onto them for too long.
Early bruises “The cost to replace them is very high, and the need to replace them may not be shown to be very high,” said John-David Lovelock, a research director at Gartner, a market analysis firm.
Furthermore, some organizations adopted ERP in the technology’s early days and found it expensive and time-consuming to deploy, he added, which makes them less inclined to try new components.
But experts say the core financial and human resources functions of today’s ERP systems can vastly improve accounting practices, business analysis, payroll processing and benefits management.
For years, ERP has been widely used to automate processes in industries with complex, mission-critical supply chains for goods and services, and health care is finally starting to catch up.
“It’s often the piece that is the weakest in the older systems,” Lovelock said. But now ERP supply-chain modules promise significant savings by automating procurement processes and aggregating purchases with approved vendors.
“That’s where some of the really large dollar savings come into play in documented case studies,” said Stacey Hicks, health care marketing director at Lawson Software, which sells enterprise-based business intelligence products. “Those are in the millions of dollars. The significance of that is it’s an ongoing savings.”
For example, the materials management department at Pennsylvania’s 200-bed Uniontown Hospital has saved $1 million annually since it replaced outdated software with Lawson’s ERP and Cerner’s clinical and financial systems.
Lawson also sells a mobile version of its ERP system that allows hospital workers to track inventory using handheld devices. That’s important because hospitals tend to have storage locations on each floor, Hicks said, and “they need a different way to track that inventory.”
Keeping employees happy Although inventory management is an appealing feature of ERP systems, health care providers are also turning to the human resources modules that vendors offer. Those tools can automate staffing, recruitment and performance appraisals, and they can facilitate routine procedures by, for example, allowing employees to check their 401(k) balances via a Web portal.
As providers struggle to find and retain qualified employees and schedule them where and when they are needed most — without burning them out — they are also dealing with ever-tightening regulations. Those factors have pushed workforce management issues to the top of the agenda.
Marc Perlman, Oracle’s vice president of health care and life sciences, said he anticipates that health care providers will make significant investments in ERP applications to “improve their ability to attract and retain their workforce and reduce operational costs.”
Vendors say payer organizations are investing in ERP and using the systems’ business intelligence features to analyze costs. Such users often seek to link treatment outcomes to the costs of individual health care services or determine a ratio of supply-chain expenses to revenue per patient.
“That’s on the cutting edge of where people are looking to take” ERP, Hicks said, adding that when the system detects unnecessary costs for inventory or labor, those costs can be directed back into clinical processes. Likewise, improvements in staff scheduling can help direct labor resources to the most appropriate services.
From the battlefield to the home front: Managing medical data
Government Health IT presents Col. Claude Hines Jr., program manager for the Defense Health Information Management System, in this recent InSight eSeminar. Col. Hines discusses the health information technology and tactical challenges faced by the military medical community in Iraq, Afghanistan and other areas of conflict. In doing so, he describes the current information technology solutions for transferring clinical data between battlefield care givers to health care personnel at military treatment facilities worldwide.
