Session: Anchoring Profits—Restructuring Inventory Practices to Secure $200 Million in Cost Savings

Editor's Note

Restructuring inventory management has slashed costs and enhanced efficiency at Massachusetts General Hospital (MGH), presenters revealed at the OR Business Management Conference, touting an initial savings estimate of $200 million.

Presented by Paul Flaherty, CRCST, Senior Manager Customer Service,   Joshua Gomez, MPH, Business Operations Manager, and Steve Spring, BA, Executive Director Finance, the session detailed how the initiative—dubbed Sustain—counters the growing challenge of operational expenses outpacing revenue in healthcare. Its primary goal is to reduce expense growth by 1% annually through continuous improvement, aligning resources, and standardizing inventory practices across MGH’s network.

Among other goals, the effort focused on identifying and reducing low-usage inventory and managing defective, open, and unused products more effectively. Presenters recalled hot supplies tended to be stockpiled as a precaution, driven by the fear of backorders or surgeon preferences. These items frequently expired before use, leading to unnecessary waste. The team responded by leveraging data analytics-(such as procurement trends and usage rates) to categorize supplies into emergency, specialty, and general-use items, then systematically clearing shelves of products deemed unnecessary.

As for defective and unused products, previous documentation practices were inconsistent, and defective devices were often discarded rather than returned for credit or replacement. As detailed in the presentation, the new system centralizes defective products in a designated repository, streamlining vendor communication to secure refunds or replacements. By implementing a structured intake process using SmartSheet technology, MGH now tracks defective items in real-time, ensuring accountability and financial recovery. Over a six-month period, the hospital documented nearly $90,000 in defective devices, successfully recovering more than $80,000 through vendor credits and replacements.

Presenters emphasized the importance of clear communication, structured check-ins, and collaboration between clinical teams and inventory managers. Regular audits and adjustments to supply levels prevent overstocking while maintaining readiness for patient care needs. Additionally, preference card reviews ensure that outdated or rarely used items are phased out systematically, further optimizing inventory control.