I read an article a couple years ago that stated standardization is one of the top 10 critical initiatives for hospital executives.
I have no doubt the executives polled in the article recognized standardization as one of several key initiatives in their mission critical requirement to reduce costs, which is undoubtedly not unique to medical technology.
Recently, I had the opportunity to talk to a Program Manager for a large military aircraft supplier. Her experience involved two different military aircraft types and I couldn’t help but ask if there is any standardization between the two. After all, radar, navigation and other such systems are not unique to any particular aircraft, generically speaking.
Without hesitation, she simply responded no. After a brief pause, she stated their customers are beginning to discuss standardization and, at some point, will be specifying it as a requirement in future projects. I’ll leave it up to you to ascertain who their customer is and ultimately bears the cost for non-standardization in their products.
An example of a company that has leveraged standardization as a guiding principal, Southwest Airlines makes for a good model. I believe Southwest was clearly ahead of its time when the company standardized on a single aircraft make and model type from its inception and continues this practice today. Southwest clearly recognized the savings and efficiencies that would be derived from standardizing on a single aircraft in the way of reduced spare parts inventories, lower technical support training requirements and other operational costs.
By contrast, consider other major airlines and the various types of aircraft in their fleet. Then, consider the logistics challenges associated with managing a fleet of this size, with so many aircraft variations, that are moving from one location to another.
So, what is the Cost of Non-Standardization for hospitals?
I believe this is an incredibly difficult question to answer and I suspect standardization is viewed as an investment much like Quality was in its infancy.
The difference is quality has evolved significantly over the past few decades. The American Society of Quality (ASQ) has defined the Cost of Quality, or more aptly, the Cost of Poor Quality (COPQ) as “costs associated with providing poor quality products and services.” ASQ categorizes COPQ into four cost categories each of which can have its own measures. Measuring and monitoring these key indicators drives visibility to improving product and service quality and focus on reducing costs.
The costs of non-standardization does share the same benefits as COPQ, though I trust the hospital executives interviewed in the publication understand there are inherent costs associated with non-standardization. I would also suggest they view standardization then, and now, as a monumentally complex undertaking given the complexity of their environment, the enormous supplier base and variations in technology.
That said, hospital leaders have taken steps towards standardization in areas such as collaboration and IT infrastructure technology investments. Health care and industry have also co-contributed to this vital initiative by developing standards such as DICOM and HL7.
Going forward, hospitals have made and will continue to make, significant investments in technology. You, as Healthcare Technology Management professionals, are recognized as valuable team members and are now a critical part of capital equipment investment committees and perhaps technology councils.
Your involvement in these critical initiatives is vitally important to your hospital’s mission of providing the best possible patient care at the lowest possible cost. Technology investments will be sourced from a variety of medical companies as a result of selecting the best possible solution for each application. In your due diligence process, it may be wise to include discussions with your partners about their standardization strategy as this will have a direct impact on your costs.
At the end of the day, we know who ultimately pays the costs for non-standardization.
Steve Plaugher is Senior Vice President, Medical Innovation Group, Diversified.
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