Standards Group Pushes Forward

Edition: January 2002 - Vol 10 Number 01
Article#: 1141
Author: Robert Neil

Forget what you may think are the mostimportant issues in today's health care supply chain. If you haven't put ''standards'' at the top of that list, it's time to change your thinking. Although health care is one of the country's largest businesses, with an annual purchasing volume that exceeds other major sectors, the industry still lags embarrassingly behind those other sectors in that it still lacks a common buying and selling language.
Products sold by one manufacturer have different identification codes from those of other manufacturers. Manufacturers of everything from cotton swabs to pacemakers have their unique inventory systems designed to communicate within their own operations, but nowhere else. The result is confusion and extra work for hospital materials managers, who must order, receive and record shipments using something equivalent to an English-to-every-other-foreign-language dictionary.
For many, many years, suppliers and buyers have vowed to rectify the system and put a common nomenclature in place, but obviously, those plans have never lead to sustained action. It's not as if usable tools don't already exist. Inventory and tracking schemes such as universal product numbers (UPN) and health industry numbers (HIN) are already in place, just not widely used. A number of health care executives believe these tools should be widely used as part of a universal health care product standards system.

Good News
The good news is that a movement with enough clout to force such an adoption is gaining momentum. CHeS, the Coalition for Healthcare eStandards, Ann Arbor, MI, is made up of a very impressive group of individuals representing most of the country's major provider organizations. Core members include normally rival group purchasing organizations such as Premier Inc., San Diego; Novation, Irving, TX; and Consorta Inc., Rolling Meadows, IL, as well as competing e-commerce operations Inc., San Diego, and Neoforma Inc., San Jose, CA. They represent about 80 percent of the purchasing volume that flows through GPOs today.
The youngest members of the operation are the 'dot-com' companies, but their participation represents the reason CHeS was formed, that is, to reach a consensus on standards. The promised savings and efficiencies of e-commerce will not materialize unless industry wide standards are in place. The supply ordering and receiving process will continue to be time-consuming and filled with errors if suppliers don't use common standards.
Representatives from CHeS made this point repeatedly during a special session at the HIGPA 2001 International Expo in Palm Springs, CA, this fall. The hour-and-a-half session was a late addition to the conference, but was one of the more vital meetings. Since many of the industry's top executives were attending the annual gathering, CHeS had an opportunity to draw together some of its top supporters in one place and time. This type of public assembly hasn't taken place since the group was formed in June 2000 under the original name of the E-Standards Work Group.
The panel included John Burks, senior vice president of e-commerce and information services for Novation; John Strong, president and CEO of Consorta; Howard Sanders, senior vice president of group purchasing services for Premier; and Joe Pleasant, senior vice president and CIO of Premier.
Strong emphasized that the group is not trying to re-invent the wheel. He said CHeS is well aware that several taxonomy systems have already been developed. Its participants simply want the industry to get together and agree to use one set of standards.

Progress Already Made
Though leaders like Strong are still trying to gain industry wide awareness of CHeS's mission, the fact is, significant work has already taken place. For example, CheS has finished evaluating available standards, said Janet Cutliff, vice president of business development at MedCenterDirect Inc., Atlanta, GA, one of the lesser-known core members of CHeS.
CHeS has selected the UNSPSC (United Nations Standard Products and Services Codes) taxonomy as the best choice for health care to use in categorizing and classifying products and supplies. Cutliff said that UNSPSC fits well because it's an open system, which means no licensing fees are needed for organizations to use the standard. Additionally, UNSPSC is already widely adopted in other industries, and it has a solid track record.
However, UNSPSC does not represent every one of the vast number of unique products and items flow that through the health care supply chain. CHeS committees have been developing a complete set of standards for all items, and the tasks have been broken out by product classification. Work on items that fall under the classification of ''Laboratory Measuring, Observing and Testing Equipment'' was completed in September 2001 and is now available for use.
Cutliff noted that a number of small and large manufacturers have been offering a great deal of input, and that CHeS is seeking additional outside help. A committee has been developing the category of ''Medical Equipment, Accessories and Supply'' since December 2000. So far, the group has expanded what were originally about 500 products in 23 classes to more than 1,600 products in 200 classes.
The next step is to post the developed taxonomy on the CHeS website ( and solicit feedback from distributors, manufacturers, providers and other interested parties.
CHeS has taken on a large task, but it's showing signs of progress. Eventually, everyone in the supply chain might benefit. However, the biggest challenge may lie ahead: Once standards our developed, manufacturers will have to be convinced to use the new system.
At the HIGPA conference, Consorta's Strong provided a brief, but well-targeted point to consider: ''In 10 to 20 years,'' he said, ''I would hate to see this industry standing around talking about the fact that we need to have standards. We've been talking about it for 30 years and we still haven't realized any of the potential. It has been all talk and very little action.''

About the Author:
Robert Neil is an Orange County-based heath care analyst and business writer who specializes in supply chain and managed care issues. He may be reached through his Web site: