Use of Universal Product Numbers for Medical Equipment and Supplies
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Department of Health and Human Services OFFICE OF INSPECTOR GENERAL Use Of Universal Product Numbers For Medical Equipment And Supplies JUNE GIBBS BROWN Inspector General NOVEMBER 1999 OEI-07-99-00230 OFFICE OF INSPECTOR GENERAL The mission of the Office of Inspector General (OIG) mandated by Public Law 95-452, as amended by Public Law 100-504, is to protect the integrity of the Department of Health and Human Services programs as well as the health and welfare of beneficiaries served by them. This statutory mission is carried out through a nationwide program of audits, investigations, inspections, sanctions, and fraud alerts. The Inspector General informs the Secretary of program and management problems and recommends legislative, regulatory, and operational approaches to correct them. Office of Evaluation and Inspections The Office of Evaluation and Inspections (OEI) is one of several components of the Office of Inspector General. It conducts short-term management and program evaluations (called inspections) that focus on issues of concern to the Department, the Congress, and the public. The inspection reports provide findings and recommendations on the efficiency, vulnerability, and effectiveness of departmental programs. OEI's Kansas City office prepared this report under the direction of James H. Wolf, Regional Inspector General. Principal OEI staff included: REGION HEADQUARTERS Michael Presley Barrett, Project Leader Stuart Wright, Program Specialist Perry Seaton, Team Leader Brian Ritchie, Program Analyst Tricia Davis, Program Analyst To obtain copies of this report, please call the Kansas City Regional Office at (816) 426-3697. Reports are also available on the World Wide Web at our home page address: http://www.dhhs.gov/progorg/oei EXECUTIVE SUMMARY PURPOSE To provide a descriptive summary of the healthcare industry’s use of Universal Product Numbers (UPNs) and their potential use by the Medicare program. BACKGROUND A Universal Product Number (UPN) is a product identifier which is encapsulated in the bar code media. A bar code is a medium which allows a number or other information to be read automatically by a bar code reader and entered into a computer without having to manually type in the data. UPNs can be encapsulated within a number of data structures and can be used with or without a bar code. All UPNs are variable length alphanumeric strings of either 14 or 20 characters that can be used universally as the key identifier on each inventory unit for durable medical equipment and supplies. They can also be used as the key identifier to communicate product information among all trading partners in the supply chain. A number can be assigned to each packaging level (or inventory unit) of each product. We based our study on information gathered from manufacturers and suppliers of durable medical equipment and supplies who have been using UPNs and bar codes as well as software producers and representatives from industry groups. FINDINGS Universal Product Numbers Are Currently Used By Some Hospitals, Distributors, and Manufacturers Primary Use -- Supply chain management Bar codes are currently being used within the healthcare industry primarily as a mechanism to control the supply chain. However, we found UPNs are not used in every situation in which an item is bar coded because not all manufacturers assign UPNs to their products. In these circumstances, users of bar codes must assign their own proprietary numbers to effectively utilize their bar coding systems. Hospitals -- Experimenting with bar coding systems We identified three hospitals currently using UPNs. They began utilizing UPNs to more effectively eliminate waste and overutilization of costly supplies and equipment, assist in modifying physician practice patterns, and streamline the patient billing process. Use of UPNs 1 OEI-07-99-00230 Some distributors and manufacturers are currently using bar coding systems We identified a number of distributors and manufacturers currently using UPNs to simplify ordering systems for customers. At least one large manufacturer also allows customers to find products by UPN on their web site. UPNs May Be Valuable To Medicare If Impediments Can Be Overcome Product Identification Most industry members agree that UPNs would allow for a number of advantages to both Medicare and the industry as a whole by allowing Medicare to specifically identify the product being claimed and provide more efficient edits. They would also aid in fraud and abuse detection. Impediments to effective use of UPNs There are a number of impediments that must be overcome if UPNs are to be utilized effectively by the Medicare program. For example, a standard national data repository does not exist. In those databases that do exist, there is insufficient detail for full identification of product equivalencies, and UPNs are not assigned to all medical equipment and supplies. Some manufacturers also have concerns about their responsibility to assign these numbers. Furthermore, HCFA currently lacks authority to appropriately control the system. CONCLUSION UPNs, While Promising, Are Not Ready To Be Adopted By The Medicare Program In order for UPNs to be used by Medicare, it will be necessary to: S address the specific impediments discussed above; S methodically implement important steps in utilizing UPNs, and conduct periodic assessment of their viability; S involve all major players fully in the process, including manufacturers, suppliers, distributors, the coding industry and HCFA; and S provide adequate funding for planning and implementing this program. Use of UPNs 2 OEI-07-99-00230 TABLE OF CONTENTS PAGE EXECUTIVE SUMMARY ............................................... 1 INTRODUCTION ..................................................... 4 FINDINGS ..................................................................9 Universal Product Numbers Are Currently Being Used By Some Hospitals, Distributors and Manufacturers ..........................................................9 Health care entities primarily use UPNs for supply chain management ........ 9 A few hospitals are currently using bar coding systems ....................9 Some distributors and manufacturers use bar coding systems ............... 10 Users cite a number of concerns about UPNs .................................11 UPNs May Be Valuable To Medicare If Impediments Can Be Overcome ........... 12 Product Identification .............................................. 12 Impediments to effective use of UPNs ................................13 CONCLUSION ...................................................... 15 Use of UPNs 3 OEI-07-99-00230 INTRODUCTION PURPOSE To provide a descriptive summary of the healthcare industry’s use of Universal Product Numbers (UPNs) and their potential use by the Medicare program. BACKGROUND Universal Product Numbers (UPNs) have been in existence for more than 10 years, being used for supply-chain management1, pricing, and billing. While most people recognize the bar code used on many products, the UPN is not as familiar. It is a product identifier which is encapsulated in the bar code media. A UPN can be used with or without a bar code. A bar code is a medium which allows a number or other information to be read automatically by a bar code reader and entered into a computer without having to manually type in the data. To be useful, product identifiers must be unique. This allows systems to distinguish one product at a given packaging level from another. Data processing systems are unaffected by whether product identifiers are numeric or alphanumeric, descriptive or encoded, or of fixed or variable length. This requirement of uniqueness led to the creation of the UPN, a unique identifier combining a manufacturer number, item number, and packaging level information. UPNs can be encapsulated within a number of data structures or bar codes. All UPNs are variable length alphanumeric strings of either 14 or 20 characters that could be used universally as the key identifier on each inventory unit for durable medical equipment and supplies. The UPN can change if the product’s characteristics, such as labeling or packaging changes (i.e., product color, use of a product trade name, or use of a generic name). It can also be used as the key identifier to communicate product information among all trading partners in the supply chain (i.e., manufacturer, distributor, supplier, provider, and end user). Such a number can be assigned to each packaging level (or inventory unit) of each product. Modern data systems accommodate all data types efficiently and, provided one adheres to basic design conventions for product identifiers, alphanumeric identifiers do not impact data processing procedures. Moreover, information such as manufacturer, item number, and level of packaging cannot be extracted from this number to identify individual components. 1The term “supply-chain management” refers to the management of the process of manufacturing, ordering, distribution, and reordering equipment and supplies utilized by any given company. Because many organizations are decreasing or no longer maintaining inventories due to the advent of just-in-time inventory control, management of the supply-chain became more important and an increasingly popular way to lower costs. Use of UPNs 4 OEI-07-99-00230 The process begins with the manufacturer. First, manufacturers must join one of the two Code Councils, the Health Industry Business Communications Council (HIBCC) or the Uniform Code Council (UCC). When