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Durdans Hospital (Ceylon Hospitals Ltd) became the first Sri Lankan healthcare institution to initiate a comprehensive Enterprise Resource Planning (ERP) system. Here is an interview with Durdans Chairman Ajith Tudawe on the implementation of the system.

Q (ERP) is a relatively new concept to Sri Lanka. What is it ?

A: An ERP is a software solution that addresses enterprise needs, taking the process view of an organisation to meet its goals, tightly integrating all its functions.

ERP systems were introduced in the 1990s. In Sri Lanka, some conglomerates and a few companies in the apparel industry have already embarked on installing branded ERP systems. A few companies have also embarked on custom-built ERP systems.

It facilitates company-wide integrated information systems covering all functional areas. It also performs core corporate activities and increases customer services, augmenting the corporate image. In the case of a healthcare institution, to meet the challenges of managed care, you'll need a fully integrated management system. The Hospital Information Management System (HIMS) is one that addresses all major functional areas of a hospital. An ERP system allows you to integrate customer services, planning, handling and distribution of pharmaceutical items and general stocks, finance and human resources across the hospital.

How does an ERP system benefit a healthcare institution ?

Benefits of ERP implementation are twofold - quantifiable and qualitative. The quantifiable benefits are increased process efficiency; reduced transaction cost due to the availability and accuracy of data and the ability to turn that data into meaningful information; reduced information organisation cost in hardware, software and staff necessary to maintain legacy system; and reduced staff training cost over time as people become more 'change ready'.

Qualitative benefits include more flexible governance and organisational structure, and a work force ready to change and focus more on high-value added tasks and to more easily capitalise on opportunities as they present themselves.

Quantitative

. Revenue enhancement

e.g., Common customer registration management

. Cost reduction

e.g., Procurement consolidation

Qualitative

. Business process alignment

e.g., Financial consolidation

. Information Technology alignment

e.g., Technology consistency

Other benefits to a healthcare institution are:

Streamlined operations, Improved administration and control , Enhanced patient care, Reduced loss of revenue, Foundation for computer-based patient records Integration of all functions already established , Dependency on human resources eliminated to a greater degree , Easy enterprise-wide information sharing, Optimisation of hospital asset management to maximise ROI , Automatic adaptation to new technology , Reduce overheads and inventories and Market share and image enhancement.

Structured approach

When and why did Durdans decide to implement the ERP? How could your ERP/ HIMS spearhead Durdans in the healthcare sector ?

Durdans Hospital has been studying the ERP concept since 1999, and decided to embark on this project in June 2002. The full implementation will take place from financial year 2004/2005. Durdans decided to install an ERP as it is a structured approach to optimising a company's internal value chain. The software, if fully installed across an entire enterprise, connects the components of the enterprise through a logical transmission and sharing of common data with an integrated ERP. When data such as revenue becomes available at one point in the business, it courses its way through the software, which automatically calculates the effects of the transaction on other areas, such as inventory, procurement, billing and posting residential revenue to the actual patients' ledger.

What ERP really does is organise, codify, and standardise an enterprise's business process and data. The software transforms transactional data into useful information and collates the data so that it can be analysed. This way, all collected transactional data becomes information that the institution can use to support business decisions.

ERP software is not intrinsically strategic; rather, it is an enabling technology, a set of integrated software modules that make up the core engine of internal transaction processing. Implementing ERP requires major changes to organisational, cultural, and business process. Many of the ERP systems developed in the 1990s caused companies to redesign their business processes to eliminate non-value-adding work, freeing employees to focus on truly value-adding activities, dramatically increasing a company's productive capacity. Among the key drivers of process redesign is the need to improve the company's financial performance by improving operational performance. Long-term financial gains can occur only when a company delivers increasing customer value while simultaneously lowering the cost of delivering that value.

According to studies in the Asia-Pacific region, 46 per cent of a hospital's total operating budget is spent on logistics-related activities (27 per cent on supplies and equipment and 19 per cent on labour). External supply chain integration initiatives (Continuous Replenishment) Electronic Data Interchange and e-Procurement are gaining more attention while the internal supply chain of a hospital still remains the weakest link in supply chain integration.

It will facilitate the enterprise to address issues on a day-to-day basis, including cost containment while providing quality patient care, integration with ERP effective relationships with clinicians, successful product standardisation and providing the enterprise with up-to-date information to make your facility more efficient.

The core capabilities of the HISM are broadly classified into the following areas: In-Patient Registration, Admission, Patients' Medical Record Information, Discharge and Transfer, OPD Registration and Administration, Wards, Physiotherapy, Laboratory, Medical Store Management, Emergency Management, Billing, Financial Accounting, Human Resources, Pharmacy, Critical Care Units, Channel Consultation, Surgical Data Linking, Radiology and other Investigations, Pantry and CSSD.

Justifying investment

Durdans has reportedly invested Rs. 15 million on this HISM. How could you justify such an investment ?

Several well-established branded ERP systems are available today. Durdans decided not to invest on these branded ERP systems, mainly because of high cost implications. They also require a higher platform and hardware. The investment may vary from Rs. 80 - Rs. 100 million which may not be justifiable. Durdans decided to design and develop a system by outsourcing it to a software developing company.

An ERP installation is a large investment of resources - financial resources for the cost of the software development. Outside assistance is necessary to develop a custom-built ERP system. A company's own human resources have to be deployed to implement it. Developing and implementing an ERP system also require a lot of time - more than 24 months in most cases and over 36 months in extremely large, complex companies that are simultaneously engaging in a high degree of process change.

At Durdans, the only truly acceptable reason to engage in an ERP system development and implementation is as a part of corporate strategy, supported by a proper information technology strategy, and business case that defines both quantifiable and non-quantifiable benefits which we intend to derive once the hospital runs the HIMS application from 2004/2005.

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