March 10, 2000

Over the last year, the MGH has made significant progress in controlling the supply expenses that increased dramatically in fiscal year 1999, when supply costs grew by nearly 15 percent. Addressing this issue was essential to balancing the fiscal year 2000 budget. Initiatives adopted hospitalwide during the second half of fiscal year 1999 have produced some favorable results.

Last March, James J. Mongan, MD, president of the MGH, established a supply expense task force comprised of senior management, key department heads and representatives from Materials Management. The goal of the task force was to evaluate hospitalwide supply expenses, determine what was causing the higher-than-expected costs and make recommendations to solve these problems.

According to Katie Hope, MGH budget director, the task force found that the MGH was not alone in facing skyrocketing expenses. "Teaching hospitals in the Boston area and around the country are experiencing the same thing we are," says Hope. "With changes in technologies, new devices, better drugs and advanced therapies, clinical supply costs are becoming higher and higher. And in some cases it is utilization that has driven up the costs."

Cost-reduction efforts have long existed throughout the hospital. The goal of the task force was to coordinate these efforts and to develop a more defined plan and structure for committees to work together to control expenses without compromising the quality of patient care.

One example of an already-established committee that has focused on cost reduction is a Patient Care Services committee led by Karen Miguel, RN, co-chair of the Nursing Practice Committee, and Joanne Empoliti, RN, advisor for the Nursing Practice Committee. For the last two years, the committee has evaluated the expense, utilization and clinical effectiveness of supplies.

"This has been a collaborative effort with Materials Management to bring up questions and suggestions for changes in our supply vendors," says Empoliti. "When Materials Management suggests a new product that is less expensive, our group tests the product to make sure it is clinically sound. We don't want to change just for the sake of changing." This particular group has streamlined products, reduced special ordering and refined utilization practices to help control costs while maintaining the same high quality of patient care.

Materials Management has led efforts to implement several cost-savings initiatives, such as using remanufactured toner cartridges in printers, resulting in $55,000 in savings over four months. The hospital changed its primary shipping vendor to UPS, a move that generated a 30 percent savings and resulted in improved services. And using Staples as the primary vendor for office supplies gives Partners hospitals a significant discount on office products.

According to Hope, another effort that resulted from the task force's evaluation was the initiation of an employee training program for PeopleSoft, the integrated financial and procurement software system that was implemented in 1998. The goal of the program, called PeopleSoft University (PSU), is to help managers understand information they receive from the PeopleSoft financial reports and take steps to better interpret and manage their own costs. PSU began in December, and the response so far has been good, says Hope.

With all of the cost-containment efforts — both large and small — being made throughout the hospital, members of the task force and hospital leadership are optimistic that supply expenses will be better contained. "Work still has to be done to get our expenses under more reasonable control," says Mongan. "I am pleased to see, however, that everyone at the hospital has taken this matter very seriously. Together we have implemented thoughtful solutions to some of our problems."