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ERP in healthcare

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 ERP in Healthcare

Martin Mucheleka and Raija Halonen

University of Oulu, Oulu, Finland
mucheleka@gmail.com, raija.halonen@oulu.fi

Keywords: Enterprise Resource Planning, ERP, Healthcare, Literature Review.

Abstract: Attempts to improve healthcare services have increased worldwide and the role of information technology
(IT) is increasing to find solutions for various issues facing the healthcare sector. The purpose of this study
was to find out how enterprise resource planning systems (ERP) have been used in the healthcare sector and
how these systems could be used to improve healthcare services. The field of IT now encompasses all in-
dustries, including the healthcare sector, which is currently going through fundamental changes. Based on
the literature reviewed in this study, the use of ERP systems in the healthcare sector has not been widely re-
ported. However, some findings showed that ERP systems could be used in the healthcare sector to improve
the quality of services. Based on these findings, if ERP systems were successfully implemented in
healthcare organisations, they would promote significant changes in certain areas such as in finance, human
resources and capacity, revenue and admission resources. ERP systems could also improve both the profita-
bility and services of healthcare organisations. Because of the lack of research in this area, further studies
should investigate the usage of ERP in healthcare organisations.

1 INTRODUCTION 2011.) However, implementing ERP in healthcare

environments faces several challenges such as long
Information is an important aspect of the healthcare time for implementation as described by Abukhader
industry. Sharing knowledge has become important (2014).
in order to reduce costs and improve the services The healthcare sector worldwide is facing chal-
rendered to customers. Therefore, the healthcare lenges, such as the rising costs of healthcare services
system needs to be able to collect and share infor- (Woodside, 2007). Population aging and increased
mation amongst several entities, such as clinics and disability is reflecting on the services requiring mul-
customers. It also needs to provide information tiskilled services especially in middle and high in-
about billing and medical knowledge within the come nations (Hirdes et al., 2008). Furthermore, the
healthcare organisation and to stakeholders. (Bose, management of the healthcare industry involves
2003.) Moreover, the increased use of IT has been several stakeholders, such as governments, clini-
led by the desire to reduce costs, to increase compet- cians, service providers and users (Soltan-Zadeh and
itiveness in the healthcare sector, and to improve Córdoba, 2014).
personalised personal healthcare (Siau, 2003). This study focuses on how ERP systems have
This study analyses ERP in the healthcare sector been used in healthcare organisations and how they
and seeks ways to improve healthcare services by could be used to improve their efficiency. Tradition-
implementing ERP systems. The literature review, al healthcare organisations use segregated infor-
as described by Kitchenham (2004), was applied. mation systems. Therefore, these organisations are
In general, current business environments have challenged in sharing important information
taken different shapes, and ERP systems are essen- amongst different entities. The study also highlights
tial in improving the efficiency of an organisation the benefits of ERP for organisations that successful-
and its strategic decision-making. Therefore, ly implement and integrate this system.
healthcare organisations are not an exception to the
new business changes currently taking place. Indeed,
the many business challenges faced today can be
tackled by the adoption of ERP. (Lee and Kwak,

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2 RESEARCH METHOD 3 LITERATURE REVIEW

In this study a literature review was conducted, and This section first the context of the study opening
it required the following: formulating a research concept of ERP and continuing to research about
question, planning the review, doing the review and ERP in healthcare. After that, benefits due to ERP
finally reporting the review (see Kitchenham, 2004). are summed followed by disadvantages due to ERP.
The literature review is also defined as a method
of identifying, assessing and analysing published 3.1 Context
primary studies in order to answer research ques-
tions (Staples and Niazi, 2007). Healthcare providers such as physicians can no
Therefore, literature reviews are research studies longer entirely rely on their knowledge and memo-
conducted for many different reasons, such as de- ries to realise their scientific knowledge required for
termining how much is known about a topic and professional practice (Karsh, Holden, Alper, and Or,
answering a research question about the existing 2006). To respond this problem, Orzano, McInerney,
research on the subject (Okoli and Schabram, 2010). Scharf, Tallia, and Crabtree (2008) introduced a
A literature review can also explain and find an- knowledge management model. They believe that
swers to research question, illustrate activities in knowledge management processes and tools can be
different forms, such as pictures, graphs and so on, thought of as ways to organise and influence learn-
in order to make connections among and describe ing and decision making within practices to achieve
activities. A rigorous literature review identifies the overall health.
most important aspects of the study and places the The healthcare industry is strongly depending on
citations correctly. (Levy and Ellis, 2006.) its customers and information relating to the cus-
Regarding the conclusion to the literature review, tomers, pharmacies and other service providers
Rowley and Slack (2004) observed that the literature (Hung et al., 2010). Seeking ways to improve ser-
review identifies the existing knowledge about a vice quality is related to costs and higher demand in
subject or research question, which serves to organ- the services (Akbar, 2003). Because of competition
ise the relevant literature to be used in the study. amongst healthcare providers, healthcare organisa-
Prior studies are scanned and examined for data that tions have changed rapidly in the last few years in
will serve to answer the research question. Digital the attempt to improve the effectiveness and effi-
libraries are used to find journals that are relevant to ciency of healthcare delivery (Helfert, 2009).
the study. As hospitals have been transforming their organ-
In this study, the followings digital libraries were isational structures, van Merode, Groothuis and
used: ACM Digital Library, Emerald Insight, Hasman (2004) recommended a central planning and
Google Scholar, IEEE, Science Direct, Web of Sci- control system to manage the transformation and
ence, Inderscience, World Scientific and the Oulu related processes. They note that the restructuring of
University Library. healthcare sector and implementations of case-mix
In this study, the first scientific search for articles systems have forced hospitals to organise their ser-
was done in Google Scholar, using the search string vices according to patients' needs. After that they
“ERP systems in healthcare”, which yielded only 42 question the type of information systems that could
hits, thus indicating that the specific topic has not support the new healthcare delivery organisations.
received much attention so far. The search then was The role of knowledge management is significant.
modified to individual words and narrowed to arti- Their answer is an ERP system that is planned for
cles published from 2000 to 2014 and that included healthcare delivery organisations. ERP systems have
the following keywords: decision support systems, been known in manufacturing and service organisa-
information systems, healthcare, knowledge man- tions since 1990’s and later early 2000 they have
agement, public health, business processes and soft- been implemented also in healthcare sector (Botta-
ware. This search yielded 380 articles. Genoulaz and Millet, 2006).
The search was then refined to obtain articles The concern of van Merode et al. (2004) was
that addressed or contained phrases and information known already earlier as Berler, Pavlopoulos and
about ERP, healthcare, social science and medicine. Koutsouris (2001) described their best understanding
This was further limited to the topics of healthcare, about how to manage interoperability of a regional
health service, health system, health insurance, healthcare system. They introduced a framework
health promotion, which yielded 80 articles. This that was based on Health Level 7 (HL7) and argued
paper is a limited version or those reviewed. that their approach is pragmatic, achieves data inte-

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gration and provides an acceptable solution. HL7 is patients, and keeping track of inventory and supply
widely used today in healthcare (see e.g. Nowak, chains.
2014). Healthcare organisations handle huge amounts of
ERP systems are software packages that allow an information that they rely on to carry out their ser-
organisation to view information about the entire vices (Grimson and Hasselbring, 2000). For exam-
organisation, as well as the power to influence the ple, a hospital handles data from many different
operations of an organization (Gargey and Brady, departments, some of which must be shared in order
2005). Amoako-Gyampah (2007, p. 1233) defines to provide services. The information is used differ-
ERP as ‘programs that provide single integrated ently according to the function of departments, such
software that aim to provide single integrated soft- as controlling and planning. Therefore, it is im-
ware to handle multiple corporate functions includ- portant to make this information accessible to the
ing finance, human resources, manufacturing, mate- appropriate departments at the right time. (Stefanou
rials management, and sales and distribution ERP and Revanoglou, 2006.)
systems are programs’. Because information is an important part of the
Sammon, Nagle, and Carlsson (2012) report in healthcare system, it is relied on to carry out the
their review about early ERP that as there is no gen- duties of physicians, patients’ home care, and chron-
erally agreed definition for EPR systems they define ic care. Hence, the integration of different services
that 'by design' an ERP is an operational-level sys- and processes would benefit the healthcare organisa-
tem. On the other hand, Al-Saleem, Junaid Qayyum, tion and eradicate the traditional segregation of pro-
Ziani, Mansoor, and Amin (2012) value EPR sys- cesses, which has resulted in the reduced sharing of
tems as the most groundbreaking progress in infor- information. Integrated systems would allow the
mation technology. healthcare organisation to coordinate management
Klaus, Rosenman and Gable (2000) noted that and support the efficiency of patient care. (Bose,
three types of ERP systems are commonly offered 2003.)
by ERP vendors: Furthermore, Handayani, Rahman, and Hi-
 Generic form software targets specific in- dayanto. (2013) emphasised that healthcare organi-
dustries and must be configured. sations need to have automated information systems,
 Packaged software is preconfigured ERP such as an ERP system in order to meet the demands
software that is tailored according to the in- for the quality of healthcare services. In addition,
dustry sector. Chen, Dolan, and Lin (2004) pointed out that the
 Configured packaged software is the most healthcare sector has lagged behind other sectors in
often used in operational installations that making these changes. Currently, several different
have been individualised according to the systems are used in the healthcare sector in order to
client’s specifications and requirements. help conduct daily work and manage resources ef-
In addition, Kunkel, Rosenqvist and Westerling fectively.
(2007) asserted that organisation observed that IT Lee and Kwak (2011) argued that many business
plays an important role and adds value to an organi- environments have changed, including also the
sation. Therefore, organizations have been acquiring healthcare sector. Therefore, ERP could help the
IT systems in the last 20 years, and the healthcare healthcare sector by improving the integration of
sector has invested heavily in technology (Menon, processes and services. They suggested that if ERP
Lee, and Eldenburg, 2000). was successfully implemented in a healthcare organ-
isation, it would promote significant change, espe-
3.2 ERP in Healthcare cially in finance, human resources and capacity,
revenue, and admission resources.
Clinicians, physicians, nurses and managers need Furthermore, Tarn, Yen, and Beaumont (2002)
quality tools in order to improve and cope with noted the importance of information technology as a
emerging medical technologies and methods to key factor in organisations. Therefore, technologies
maintain quality healthcare services (Miller and Sim, such as ERP systems could play a major role in fa-
2004). cilitating organisations in meeting their goals. The
Recently Poonam and Divya (2014) asserted that benefit of technologies such as ERP systems is the
previously the healthcare sector used IT mainly for integration of the organisational processes, data and
billing and accounts. However, this trend has ex- organisational elements. Tarn et al. concluded that
tended to include complex areas, such as reducing combining all elements into a single system has
costs, improving efficiency, managing and caring for many benefits, such as improving the operational

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efficiency of an organisation. about that patient (Shnayder et al., 2005). ERP sys-
Healthcare systems rely on information from dif- tems may help healthcare organisations to facilitate
ferent sources and entities to carry out duties, such the administration of their services through access-
as physicians’ diagnoses, patients’ home care and ing various ERP information systems in different
chronic care. Hence, the integration of different locations. Being able to access medical information
services and processes would benefit the healthcare is vital to the health fraternity because it helps them
organisation and eradicate the traditional segregated to be efficient and effective. (Padhy et al., 2012.)
processes, which result in the reduced sharing of Grimson et al. (2000) observed that although
information. Integrated systems would allow the healthcare organisations handle large amounts of
healthcare organisation to coordinate management data, the inability to share these data has led to their
and ensure the efficiency of healthcare provided to inefficiency, preventing them from operating effec-
patients. (Bose, 2003.) tively or reducing costs. This further affects the time
Integrated systems are an important aspect of taken to handle and share various data within the
every service organisation; the healthcare sector is organisation and with stakeholders. Gupta and Kohli
no exception (Reay and Hinings, 2005) and integrat- (2006) noted that every organisation aims to im-
ed electronic information systems can effectively prove its services and operations. Therefore, ERP
transform the healthcare sector (Haux, Ammen- systems have been used to improve the internal op-
werth, Herzog, and Knaup, 2002). For example, the erations of organisations. Business dynamics require
use of telemedicine is increasing, allowing for the an organisation to have a more prudent system for
administration of healthcare to remote patients decision-making, as well as monitoring and control-
(Connell, 2006). ling information.
Huq, Huq, and Cutright (2006) reported that the In addition, Grimson et al. (2000) argued that
delivery of services is complicated and depends healthcare organisations handle large amounts of
heavily on information. Hence, healthcare organisa- data and information. However, the inability to share
tions depend on information about individual pa- this data and information has led to the inefficiency
tients, care providers, results and the science of care. by most healthcare organisations to operate effec-
Furthermore, today, patients are managed by differ- tively and reduce costs. This further affects the time
ent physicians, unlike the days when a single physi- taken to handle and share various data and infor-
cian was responsible for a patient’s health. mation within the organisations and with stakehold-
Based on Schnayder, Chen, Lorincz, Jones, and ers.
Welsh (2005) and Padhy, Patra, and Satapathy A case study conducted by Stefanou and Re-
(2012), the rough architecture of an ERP is shown in vanoglou (2006) revealed that implementing a sim-
Figure 1. ple system in a healthcare organisation can have a
tremendous impact. Therefore, there is no doubt that
implementing an entire ERP system can have a posi-
tive effect throughout an entire organisation.
Although ERP systems are recommended as a
solution to several challenges, Gupta (2000) claimed
that these systems are costly and that they change
the operation of an organisation. Organisations that
have successfully implemented an integrated an ERP
system may face resistance from employees (users)
that are required to shift to the new systems Because
of the resistance to embracing change, it therefore
could take a long time for the organisation to realise
Figure 1: Physicians and Central Patients’ Database.
the benefits of the new system, which might result in
budget overruns.
Figure 1 illustrates a central database of patients in a
healthcare organisation, which is accessed by several 3.3 ERP Benefits
physicians. In this case, all physicians are able to
access specific information regarding a patient. This section reports the benefits of implementing
Because many physicians collaborate in the ERP in four departments in a hospital.
management of a single patient, it is important that Front Office
they have access to readily available information The front office, often called Front Desk, is one of

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the most important components of every hospital Operational Costs

because provides patients and their families with According to Stefanou and Revanoglou (2006), ERP
updated information. People working at the front systems significantly reduce human interference in
desk have access to information about - for example various tasks because information transfer is raped
- appointments, bed availability, specialised ser- and completely automated. ERP systems also reduce
vices, and schedules of doctors. ERP software great- the workforce needed to manage patients’ registra-
ly assists in the efficient organisation and smooth tion, billing, discharge, and transfer. Therefore,
operation of the front desk. healthcare organisations saving such costs will im-
Financial Management prove efficiency and productivity.
ERP software can help identify solutions to cut In addition, Gattiker and Goodhue (2005) assert-
costs, improve managerial reports, reduce risks and ed that organisations implement and integrate ERP
anticipate results. It allows a hospital to integrate systems for various reasons, such as reducing costs,
numerous financial processes and manage them in having centralised data storage accessible by various
an improved manner. Many industry experts think departments, integrating business, and providing the
that no tailor-made ERP solution is available for the opportunity to redesign business practices. In his
healthcare industry. Nonetheless, there is no doubt literature review of 79 journal articles Moon (2007)
that the healthcare industry can benefit tremendously pointed out that even if ERP systems are not the
from ERP software in many ways. (Shang and Sed- major decision support systems they are usable also
don, 2000; Stefanou and Revanoglou, 2006.) in that function.
In summary, ERP systems, such as web applica-
Inventory Management
tions, may help the healthcare organisation to carry
Inventory management is one of the most prominent
out its processes effectively, such as filling orders.
features of ERP systems. It has also proven to be
Furthermore, both academicians and practitioners
important in the healthcare industry. Hospitals find it
consider ERP systems are considered an important
difficult to manage inventories on a daily basis.
part of technology and vital to the improvement of
Therefore, an ERP software can offer significant
business processes (Hendricks, Singhal, & Stratman,
help in this regard, such as, for example, coordinat-
2007).
ing the purchase and maintenance of instruments,
keeping track of the expiry period and reorder status,
finding economical suppliers. (Stefanou and Re- 3.4 ERP Disadvantages
vanoglou, 2006). Furthermore, a single computer
system promotes transparency and access to the Despite their advantages, ERP systems have some
organisation’s database, which allows the managers drawbacks. Lengnick-Hall et al. (2004) asserted that
to make informed decisions and report on the per- ERP systems follow strict routines, which does not
formance of the organisation (Kumar, Maheshwari, encourage other options. On the other hand, this
& Kumar, 2003; Klaus, et al., 2000.) promotes the transparency of an organisation, as the
In addition, Shehab, Sharp, Supramaniam, and information is shared and accessed through the cen-
Spedding (2004) pointed out that implementing an tral database. They continue that ERP systems have
ERP system in an organisation brings significant defined processes that allow for no alternatives.
changes, such as the following: Furthermore, Gupta (2000) claimed that ERP sys-
 Having automated and integrated business tems change how organisations operate. Organisa-
processes within the organisations tions that have successfully implemented and inte-
grated an ERP system may face resistance by the
 Sharing of information and practices within
employees (users) who are required to shift to the
the organisation and reducing repetition and
new systems. Because of the resistance to embracing
error
change, it therefore takes a long time for the organi-
 Ability to access organisational information
sation to realise the benefit of the new systems,
in a real-time environment, which makes it
thereby causing budget overruns.
easier to make quality decisions
In addition, Gupta (2000) pointed out that in an
Therefore, it would be difficult and time consuming
ERP system, errors are not usually detectable, and
for management to make decisions without having
there is always a chance that errors are carried all the
access to vital information. However, with a single
way through the single ERP system without being
computer system, management would have access to
noticed. Furthermore, ERP systems are very costly
information, thus enabling them to make decisions
to acquire.
that further reduce administrative costs.
On the other hand, Shehab et al. (2004) pointed

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out that organisations that successfully implement an implement and integrate into an organisation, as
ERP system will require sufficient data storage, noted by Abukhader (2014), Shehab et al. (2004),
networking capability and overhead needs, such as and Rashid, Hossain, and Patrick (2002). Moreover,
training staff on in using the ERP system. ERP systems are dependent on the vendors for fu-
In conclusion, Wailgum (2008) claimed that ERP ture maintenance. (Rashid et al., 2002).
systems have several hidden costs that are caused
after the successful implementation and integration
of the systems. Hidden costs include staff training, 4 DISCUSSION
testing the integrated software, in addition to the
possible customisation of the system by add-ons if This study conducted a literature review with the
the integrated system does not fit well with other objective of gaining knowledge about using ERP to
systems and components of the organisation.
improve the healthcare sector. The review focused
on the advantages and benefits of the ERP system
Table 1: ERP system—advantages vs. disadvantages.
for healthcare services. Eighty articles were exam-
Advantages Disadvantages ined.
Operations – this helps ERP systems may have ERP could help healthcare organisations to im-
to reduce costs and too many features and prove their decision-making processes, which are
cycle time, which results modules that users need critical for both the organisation and its managers.
in improved customer to consider, thus imple- Having access to a single database would allow
services menting only the most managers to make informed decisions and report on
important ones. the performance of the organisation. (Kumar et al.
Finance – ERP can help Implementation – ERP 2003.) As pointed out by Shehab et al. (2004), ERP
to identify solutions to systems are expensive to systems allow all organisational activities to be au-
cut costs, improve man- implement and may tomated into a single computer system, thereby im-
agerial reports, reduce result in unsuccessful proving the access and sharing of organisational
risks and anticipate implementation, costing
information and reducing repetition and errors.
results. It allows a hos- the organisation money
Stefanou and Revanoglou (2006) noted the dif-
pital to integrate numer- and resources. Mainte-
ous financial processes nance is expensive be-
ferent types of ERP system integration, including the
and manage them in an cause it requires the healthcare-specific process, as follows:
improved manner entire system to be main-  Business process integration (BPI) or best-
tained as a single unit. breed ERP: serves the computerised pro-
IT infrastructure – Build Organisations often cess systems of the administration, finan-
business flexibility for depend on the ERP ven- cial and clinical functions
current and future dor that implemented  Non-ERP applications: integration of pa-
changes in the organisa- and integrated the sys- tient relationship management systems, pic-
tion, IT costs reduction tem for maintenance and ture archiving and communication systems,
and increased IT infra- future upgrades, unless laboratory information systems, operation
structure capability. they decide to change theatre systems and clinical decision sup-
the system. port systems
Central database – Eve- Reliability – Organisa-  ERP as a web-based application and system
ry department and busi- tions using ERP systems integration: systems, E-procurement of
ness unit of an organisa- risk breaks in their ser- medical supplies, information integration
tion will have access to vices when their ERP
among several different hospitals
the information readily systems break down,
(healthcare organisations), physicians, med-
available when needed. thereby causing interrup-
tions in various services.
ical suppliers, insurance, telemedicine,
pharmaceutical industries and e-learning
Table 1 summarises some advantages and disad-  ERP as a mobile device integration, which
vantages of ERP systems, as discussed in the litera- takes into consideration mobile healthcare
ture review. The table provides examples on how an systems and telemedicine.
organisation may benefit from specific advantages Huq et al. (2006) pointed out that having access
and indicates how disadvantages can affect the or- to information in healthcare organisations is im-
ganisation that has implemented or intends to im- portant as they depend on information to provide
plement an ERP system. services. ERP systems bring various changes and
In conclusion, ERP systems are expensive to benefits to healthcare organisations. Therefore, ERP

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systems help to streamline the processes of an or- tion, Stefanou and Revanoglou (2006) stated that
ganisation. This helps the healthcare organisation ERP systems support several critical functions relat-
manage and control various departments, as the ed to clinical, administrative, financial, and daily
information is immediately available. Furthermore, processes, such as patient flow, versatile reorders at
ERP systems are known to help organisations reduce clinics, and billing. They also pointed out that the
operational costs. (Bose, 2003.) implementation of ERP in a healthcare organisation
According to Stefanou and Revanoglou (2006), may result in the organisational reengineering of the
healthcare organisations handle huge amounts of organisational processes and applications, leading to
data that often is also sensitive, and information in organisational change.
different departments on the different information Despite the assertion that ERP systems promote
systems currently being used. This information is transparency (Kumar et al. 2003; Klaus et al., 2000),
meant for various departments, and it must be shared Stefanou and Revanoglou (2006) stressed that ERP
if it is processed and used by various stakeholders. systems cannot entirely be integrated and used in the
Each department collects data intended for pro- healthcare sector because healthcare organisations,
cessing and planning their work. This information is such as hospitals, are complex and have several
shared among the departments according to need. specialised clinical systems, such as the EAI tech-
Padhy et al. (2012) demonstrated the need for the nologies used in operating theatres and laboratories,
connectivity of healthcare organisations, such as which seemingly can only be integrated with ERP
those in urban and rural areas, in order to provide systems.
quality service and share vital information that might
be lacking in remote healthcare centres. Therefore,
ERP systems and other integrated technologies 5 CONCLUSIONS
would be important in meeting such challenges be-
cause they can be used through web technologies
The focus of the study was to find out how ERP
that promote connectivity, such as WAN technolo- systems have been used in the healthcare sector and
gies. Figure 2 illustrates a solution that enables con-
how they could be used. This was done by applying
nectivity within an organisation. literature study.
The results of the literature review showed some
aspects of what has been done in the healthcare sec-
tor with regard to ERP systems. For example, Stefa-
nou and Revanoglou (2006) described how hospitals
started to implement SAP’s R/3 ERP software.
Stefanou and Revanoglou (2006) also asserted that
improving the availability and quality of information
in the healthcare organisation may lead to better
decision making processes, thereby improving the
quality of healthcare.
Healthcare organisations are knowledge-based
and depend on information to execute their services
(Bose, 2003). Healthcare organisations tend to be
complex and have become more complex in recent
Figure 2: ERP integration in a healthcare organisation. decades, now handling huge amounts of data.
Healthcare providers depend on these data to attend
Figure 2 shows an example of connectivity among their patients. Thus, it is important for healthcare
integrated healthcare departments that share infor- organisations to manage data and share them with
mation for different purposes through the ERP cen- stakeholders. This could help them to reduce costs
tral database, as suggested by Huq et al. (2006), and the duplication of tasks and improve the
Stefanou and Revanoglou (2006) and Padhy et al. healthcare services offered to patients.
(2012). The study further found that ERP systems could
Furthermore, the ERP system shown in Figure 2 help healthcare organisations improve their services.
integrates various business units connected to the Tarn et al. (2002) asserted that technologies play an
central database, thereby giving each one access to important role in organisations and have the capacity
the information from other business units in the to improve services. Hence, ERP systems could have
organisation and promoting transparency. In addi- a positive effect on healthcare organisations because

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