Country level cost saving with hospital inventory system.
Country Level Cost Saving with Integrated Health IT System:
A Case Study from Turkey
M. Said YILDIZ, M. Mahmud Khan, PhD
Health Services Policy and Management Department, Arnold School of Public Health, University of South Carolina
Turkey has achieved remarkable reforms with Health Transformation Program
(HTP) which started in 2003. In recent years various aspects of healthcare
services were targeted by HTP to achieve higher level of efficiency and
effectiveness of the system. It is interesting to note that most of the intended
objectives of the reform initiatives were achieved.
Institutional structure of health system is transformed with a continuous political
commitment and result oriented approach. Constructing a more robust and
conveniently accessible healthcare system has become possible with central
coordination of institutions.
This case study analyzes effects of policy changes and tries to reach some
implications for effects of hospital level implementations on country-level
financial outcomes with centralized IT system.
First problem: High stock levels
Hospitals confronted with excessive inventory costs because of having to require large warehouses and
waste of unneeded medications and medical supplies by time with expiration.
Reason of high stock level problem was conventional stocking rules and behaviors. Hospitals were
obtaining all of the materials they needed for one year at the beginning of the fiscal year and they were
taking over the stocking responsibility for whole inventory from provider companies.
Central and interdependent Health IT Systems and
CRMS-Central Resource Management System
Data sources and Limitations
Evaluations and analysis are based on Turkey’s annual amount of total hospital
expenditure and value of stocks kept at the hospital level compared to total
number of inpatients for same year
Second Problem: Unneeded stocks
Information technology systems which are operated in interconnection for
stocks, accountings and human resources (CRMS-Central Resource
Management System, SAS-Standardized Accounting System and HRMS-
Human Resources Management System) were started in 2009 for more than
800 MoH hospitals.
Unneeded medicines and medical supplies was another problem besides excessive stocks which were
grown out of ineffective estimations for usage, unforeseeable changes in medicine needs(seasonal or
epidemics) and high physician turnover rates.
MoH released a regulation and mandated to hospitals to limit stock levels at the level of
materials’ “3 months needs”. Hospitals have purchased all of the materials and medicines at
the beginning of each year but they have taken the supplies, devices and medicines partially
instead of taking one budget year need in one time and tried to not to excess maximum
stock level. This regulation created a pressure over hospital stock managers and targeted to
generate a consciousness for decreasing stock levels.
First solution: Limiting with 3 months need
Solution for both of the Problems: Transfers between hospitals
MoH wanted from hospitals which have exceeded and unneeded stocks to make declaration
by IT system – CRMS. At the same time MoH declared to hospitals not to purchase anything
before having inquiry on IT system and be sure that other hospitals haven’t the same
material in exceeded or unneeded status.
Hospitals which had exceeded stock(each material which exceeds maximum stock level -
need of 3 months) or unneeded stock(because of other reasons like seasonal changes in
usage etc.) were supposed to have data entry about these materials to system, so that other
hospitals can see and demand before purchasing. Whenever hospitals have needed a
material, initially they made an inquiry in IT system for other hospitals’ unneeded and
exceeded stocks. If they couldn’t provide materials from other hospitals’ unneeded or
exceeded stocks they opened bidding to market.
HOSPITAL B determines
maximum stock level for
HOSPITAL B Determines
the maximum level
them to IT
of transfers (USD)
A + B
2009 44,024,213 64,035,219 108,059,432
2010 42,067,765 22,939,795 65,007,560
2011 29,516,233 35,519,535 65,035,768
2012 27,623,826 36,664,240 64,288,066
2013 48,750,505 27,684,419 76,434,924
Total 191,982,542 186,843,208 378,825,750
Country level saving without compromising quality and limiting access to health
services were achieved with this hospital level policy. Regarding gratitude of health
expenditure allocated to medicine and materials and their import dependent nature
for developing countries like Turkey, saving from hospital inventories can be
evaluated to be critically important.
Total health expenditure as a percentage of GDP increased rapidly from 4.8 to
5.4 from 1999 to 2012. Since hospital sector accounts for 40% of total health
care costs (43.9% of health expenditure in 2008) and since 64% of
hospitals(more than 800 hospital with different sizes) are directly administered
by the Ministry of Health, it was hoped that significant country-level cost-savings
will be achieved because of the cost containment policy implemented by the
Ministry in the MoH owned hospitals.
In order to increase access and to improve efficiency, HTP triggered some
policy implementations in Turkey one of which is being presented and analyzed
here. The new policy change was the adoption of centralized and web based
information technology system that connected more than 1000 health facilities.
The system addressed two important problems, high inventory levels of hospiital
drugs and supplies and waste of medical products.
CRMS-Central Resource Management System was generated as an integrated
web based system which gives MoH the ability of monitoring, controlling and
policy making over more than 1000 health facility inventory systems. With
advanced functions of CRMS, hospitals and MoH could make price inquiries,
macro analysis and they could plan for future usage.
More convenient implementation of macro policy changes was another
acquisition of integrated-centralized IT system generation. MoH could plan and
implement a policy and spread successful experiments to all other health
facilities with integration of hospital record and report systems. The inventory
projects which this case study subjected, could have been implemented through
that newly generated IT system.