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Medical Logistics System Saves DoD Big Bucks

By Jim Garamone
American Forces Press Service

WASHINGTON, Aug. 30, 2001 – For years, defense officials have been saying that the department would reap substantial savings by adopting private industries' "best-business practices."

The Defense Medical Logistics Standard Support system proves the point. The program is a partnership of DoD, TRICARE, the services and commercial companies, said Army Col. Dan Magee, program manager.

The system brings "best practices" to bear on medical logistics. With these changes, DoD has virtually eliminated the large inventories that military hospitals and clinics used to keep on hand. Further, DoD now pays the lowest prices for supplies and drugs of any large U.S. healthcare organization, he said. Finally, by using commercial systems the whole process of contracting, ordering and paying is totally electronic.

"We've reduced by over $600 million the amount of medical supplies that we hold," Magee said. "We also have $150 million a year in cost avoidance because we use these large central contracts."

Technology is useful, but was not key to making these changes. The big leap was in terms of business practices, Magee said.

DoD used to have a unique system -- its own depots full of medical supplies and its own techniques for moving information, he said.

"We basically switched to say, 'We're going to use commercial distribution techniques, we're going to put big central contracts in place to get the best prices for the products, and then let's put the technology in place that facilitates our users doing it -- whether it's a hand-held terminal reading a bar code or whatever,'" Magee said.

The system works this way: A doctor sees a patient and prescribes drugs or supplies. The patient gets the supplies and moves on. Later, a medical logistics technician inventories supplies using a wireless bar-code terminal that can automatically trigger orders for needed supplies. About 80 percent of all supplies arrive within 24 hours, the rest within 72.

The next phase of the program is in testing now and adds equipment and equipment maintenance to the system. It will be phased in throughout DoD in 2002 and 2003, Magee said.

The logistics system gives DoD medical beneficiaries quality products and guaranteed delivery, he said. By freeing up money, he concluded, local officials also can add healthcare providers and buy new equipment.

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