• San Francisco General Hospital has not adequately implemented the Omnicell materials management system, which consists of automated supply dispensing cabinets that can be integrated with a health facility’s information systems. Prior to our audit, the Hospital was not generating reports that allow the nursing units to track their use of supplies and identify errors in using the Omnicell system. Although San Francisco General Hospital has not analyzed the costs and savings from implementing the Omnicell system, the Hospital has proposed increasing the number of OmniCell units. In FY 2002-2003, the Hospital proposes to implement eight additional OmniCell units, for a total of 20 units, with estimated annual lease costs of $184,680, which is $72,790, or 65 percent more, than the FY 2001-2002 annual $111,890 lease costs for 12 OmniCell units. The Hospital should not expand the system until it has documented the system’s cost-effectiveness and has ensured that staff training is reinforced and the system reports are routinely generated and analyzed.
  
  
• The Hospital could potentially achieve cost savings from the OmniCell system through improved inventory control, including decreased supply wastage and protection from theft, if the system were used properly. However, the Hospital has not adequately trained or monitored staff in the system’s use and has not used the system’s reporting capabilities to manage inventory.
  
  
• Although the Hospital estimated annual cost savings of $15,384 per unit for each of the four OmniCell units in the Hospital’s Emergency Room, the Hospital did not include the annual OmniCell unit lease costs of $9,324, which reduces annual savings per unit to approximately $6,060 per unit, or more than 39 percent less than the savings that had been estimated by the Hospital.
  
  
• San Francisco General Hospital has also included one new Systems Administrator II position in the FY 2002-2003 budget with annual salary and fringe benefit costs at salary step 5 of $84,000 to manage the automated system. Therefore, the automated system would result in increased staffing costs if the Hospital employs both system administrators and storekeepers for managing inventory.

Proving the Cost Effectiveness of the OmniCell Systems

Use and Monitoring of the OmniCell System

The OmniCell units are automated supply dispensing cabinets that can be integrated with a health facility’s information systems, such as accounting, medical records, and billing. San Francisco General Hospital first acquired OmniCell units in 2001, and in FY 2001-2002 leased twelve units at a total annual cost of $111,890, or approximately $9,234 per unit. Materials Management anticipates leasing 48 additional units in the next five years, for a total of 60 OmniCell units, costing approximately $550,000 annually in lease costs.

Although the OmniCell units are capable of integrating hospital information systems, until recently, they have been used only for their automatic reordering function. The OmniCell units can reorder inventory automatically from the prime vendor via automatic download from the OmniCell units to the server. The OmniCell server interfaces with the inventory management system, which then automatically creates a purchase order and electronically transfers the order to the prime vendor’s information system. Supplies ordered from the OmniCell units are delivered the next day via the Just-In-Time delivery system.

Commencing the week of October 12, 2002, the Hospital began integration of the OmniCell system with the patient billing system, allowing patient charges to be downloaded from OmniCell to the patient billing system.

OmniCell Policies and Procedures

Included in the OmniCell policies and procedures manual are recommendations for optimizing the performance of the OmniCell System. These recommendations range from supply and par level revision recommendations to guidelines for generating reports. Recommendations for optimizing the OmniCell System’s performance include:

• Developing a formal document for requesting supply and par level adjustments. When Materials Management receives this document from the clinical unit Nurse Manager, a Par vs. Usage and Inventory Aging report should be generated for the item;
  
  
• Establishing a procedure for the replacement of contaminated or defective supplies;
  
  
• Defining which items are included in the charge account for the clinical unit;
  
  
• Establishing a written policy requiring every user to keep their PIN confidential;
  
  
• Establishing a written policy, authorizing only designated staff to manually override access to the OmniCell unit; and
  
  
• Generating regular reports to track and analyze usage, including:
  
  
  1. the null transaction report daily for the first four weeks, then as needed,
  2. the Transaction Report daily for the first two weeks, then as needed,
  3. the Discrepancy Report daily for the first four weeks, then weekly,
  4. the Par vs. Usage Report quarterly, and
  5. the Inventory Aging Report quarterly.

San Francisco General Hospital has not fully implemented most of the policies and procedures recommended by OmniCell. In fact, clinical unit staff appeared to be largely unaware of the contents and existence of the OmniCell Policies and Procedures manual. Implementing OmniCell recommended policies and procedures would provide for the consistent and appropriate use of the OmniCell units among the various departments, and would dictate the allocation of OmniCell system responsibilities.

Materials Management should review the OmniCell Policies and Procedure manual and implement the manual’s recommendations. San Francisco General Hospital’s adopted policies and procedures should, at a minimum, address functions of the OmniCell system such as restocking, cycle counts, supply and par level revision, stock revisions, replacing defective supplies, floor charge account, user identification, PIN numbers, and use of reports.

OmniCell Inventory Control

For every supply stored within each OmniCell unit, the actual inventory level has been programmed into the automated system. When authorized staff use the OmniCell unit, the staff should enter the transaction into the system. For example, staff should record in the automated system that a specific item has been removed from the OmniCell unit when removing supplies from the cabinet. The OmniCell automated system will track the inventory level for each supply and instigate the reorder of those supplies on a daily basis.

According to the OmniCell Policies and Procedures manual, supply shortages and overages occur if the number of supply transactions recorded in the OmniCell automated system differ from the actual transactions. During our restocking observations, we observed instances when:

• The OmniCell automated system recorded fewer items below par than actual. For example, the automated system recorded six pairs of latex gloves below par rather than the actual nine pairs of latex gloves below par. The clinical unit manager stated that this likely occurred because staff retrieve supplies without recording the transaction in the OmniCell system.

• The OmniCell automated system recorded more items below par than actual. For example, the system recorded four syringes below par rather than the actual two syringes below par. The clinical unit manager stated that this likely occurs when staff charge supplies and then return them to the cabinet without reversing the charge.

The clinical unit manager performs a periodic cycle count to check the physical amount of each supply item in the OmniCell cabinet against the amount recorded by the OmniCell automated system. If the two amounts differ, the discrepancy is corrected by adjusting the amount in the automated system.

Materials Management and clinical unit staff do not regularly track or analyze OmniCell discrepancies. Although Materials Management can generate two OmniCell reports that would allow managers to better track usage ("Par vs. Usage" and "Null Transaction" reports), at the beginning of our audit, Materials Management was not routinely generating and the clinical units were not routinely requesting these reports.

Use and Analysis of OmniCell Reports

Because staff misuse or error are the chief causes of discrepancies in the OmniCell units, the Hospital should ensure that staff use the OmniCell units correctly. The OmniCell automated system can only track inventory correctly and generate accurate data if the system is used correctly. San Francisco General Hospital should regularly generate and analyze the two most useful OmniCell reports, the Par vs. Usage report and the Null Transaction report, to monitor staff use of the system and to encourage staff to comply with OmniCell operating procedures.

• The Par vs. Usage report shows the movement of supplies in each OmniCell unit. This report would assist the clinical unit managers to correctly adjust the supply and par levels for each supply based on actual usage figures. Materials Management has begun generating Par vs. Usage reports for the cost centers on a regular basis as result of this audit.

• The Null Transaction report identifies which staff person has not performed related tasks when adding and removing supplies from the OmniCell unit. This report would assist enforcement of OmniCell manual procedures.

Since San Francisco General Hospital first acquired OmniCell units in 2001, Materials Management has only produced these critical reports when requested by the clinical units. Materials Management should produce the Par vs. Usage report and the Null Transaction report on a schedule as recommended by the OmniCell Policies and Procedures manual, and reinforce training provided to the clinical unit managers to analyze OmniCell reports on a regular basis.

Analysis of OmniCell Savings

San Francisco General Hospital has not conducted a cost analysis of expanding the OmniCell system. Currently, the Hospital is leasing 12 OmniCell units and proposes to lease an additional eight OmniCell units in FY 2002-2003. The annual lease cost of each OmniCell unit is $9,324, resulting in FY 2002-2003 lease costs for 20 OmniCell units of $186,483. Over the next five years, the Hospital proposes to expand the OmniCell system to 60 OmniCell units.

The Hospital reviewed nine months of materials and supplies costs for four OmniCell units in the Emergency Room in FY 2001-2002, but did not include OmniCell lease costs in the cost savings estimate. The Hospital estimated total annual savings of $61,536 for the four OmniCell units, or approximately $15,383 for each unit, due to decreased wastage of materials and supplies. However, the actual savings varied significantly between units, indicating that expansion of the OmniCell units would not result in uniform savings.

Table 11.1

Estimated Annual OmniCell Unit Savings

Source: San Francisco General Hospital

San Francisco General Hospital included one new 1022 Systems Administrator II position in the FY 2002-2003 budget to provide systems support for expanding the OmniCell system. Annual salary and fringe benefit costs for this position at salary step five are approximately $83,000. As noted in Table 11.2, total annual savings for implementing 20 OmniCell units in FY 2002-2003 would be approximately $37,969. However, actual savings for each OmniCell unit vary significantly. Although one Emergency Room OmniCell unit had estimated annual cost savings of $36,919, one unit had estimated annual cost savings of only $998 and the other two units incurred losses. Therefore, implementation of 20 OmniCell units could result in minimal cost savings or actual losses.

Table 11.2

Estimated Cost Savings of Implementing 20 OmniCell Units

To offset the increased costs of the new 1022 Administrator II position, the Budget Analyst recommended and the Board of Supervisors approved designating one existing storekeeper position for deletion when the position becomes vacant. San Francisco General Hospital has not analyzed if Materials Management staff can be reduced through implementation of the automated OmniCell system. The automated system could result in increased staffing costs if the Hospital employs both system administrators and storekeepers for managing inventory.

San Francisco General Hospital should submit a report to the Board of Supervisors during the FY 2003-2004 budget review, with a detailed analysis of net savings to the Hospital from implementing the OmniCell automated system, which includes:

2. savings from reduced materials and supplies usage for all OmniCell units,

3. leasing costs for all OmniCell units,

4. staffing costs of Systems Administrator position, and

5. proposed reductions in Materials Management staffing resulting from implementation of the OmniCell automated system.

Conclusions

San Francisco General Hospital has leased the automated OmniCell materials management system without adequately implementing the system or analyzing the system’s cost-effectiveness. The Hospital could achieve cost savings from the OmniCell system if the system is used properly to manage inventory. However, the Hospital has not adequately trained or monitored staff in the system’s use and has not used the system’s reporting capabilities to manage inventory.

San Francisco General Hospital has proposed expanding the OmniCell system from 12 units to 20 units in FY 2002-2003. The Hospital should not expand the system until it has documented the system’s cost-effectiveness and ensured that staff training is reinforced and the system reports, including the Par vs. Usage and Null Transaction reports, are routinely generated and analyzed.

The Hospital plans to implement 60 OmniCell units in total over the next five years. Full implementation of the automated OmniCell system could result in minimal cost savings or actual losses if not properly managed.

The Hospital reviewed savings in materials and supplies usage in four OmniCell units in the Emergency Room and estimated annual cost savings of approximately $15,384 per unit. However, these savings were distributed unevenly among the units, with one unit showing large savings and the other three units showing small savings or losses. If the Hospital were to review materials and supplies savings for all 12 OmniCell units, the average cost savings per unit could be significantly less than $15,384. Also, the Hospital did not include annual OmniCell unit lease costs of $9,324, which reduces annual savings per unit to approximately $6,060 per unit.

San Francisco General Hospital has also included one new Systems Administrator II position in the FY 2002-2003 budget with annual salary and fringe benefit costs at salary step 5 of $84,000. San Francisco General Hospital has not analyzed if Materials Management staff can be reduced through implementation of the automated OmniCell system. The automated system could result in increased staffing costs if the Hospital employs both system administrators and storekeepers for managing inventory.

Recommendations

San Francisco General Hospital should:

Costs and Benefits

Our recommendation to conduct a thorough cost analysis of the OmniCell automated system should result in better cost controls over the expansion of the system.