Tony Tye, Post-Gazette Jim Szilagy, chief supply chain officer at UPMC, at the organization's warehouse.

By Corilyn Shropshire
Pittsburgh Post-Gazette Hospitals are notoriously bad spenders.

Purchasing must-have medical supplies is often an ordeal for employees, a process commonly riddled with red tape and no guarantee that the needle, scalpel or even gauze will be in hand when needed.

		The changing face of business From iPods to video cell phones to Palm Pilots and wireless laptops, we all know how technology has changed the way we live. But an even bigger change has occurred in the world of business -- a change that bodes well for our economy and our future livelihoods. Significant increases in productivity over the past decade in many ways reflect the payoff from businesses utilizing new technologies to improve the way they do business. In both little and big ways, technology is making this country more efficient. Starting yesterday and continuing through Saturday, the Post-Gazette will look at ways companies are using technology to change the way they do business. Steve Massey Business Editor Monday: No more phone trees Tuesday: Eat'n Park wants to know Wednesday: 'Paperless' medicine Thursday: Making steel smarter Friday: Building faster and better Saturday: Banking on computers

That was a common scenario at the University of Pittsburgh Medical Center, which until this year, was stuck in a time warp -- using old-fashioned carbon-copy order forms to purchase ultramodern tools used to conduct state-of-the-art medical research.

To do more than put a bandage on the problem, the rapidly growing health care system had to do what much of corporate America tackled more than a decade ago -- chuck the paper.

"We weren't able to keep to keep up with growth because we didn't have the technology that allowed us to," said Robert DiMichiei, UPMC's chief financial officer.

He turned to a seasoned executive from Pittsburgh's "old economy" to usher this "new economy" medical giant into the digital age.

Using UPMC St. Margaret, near Aspinwall, as the guinea pig last spring, Chief Supply Chain Officer Jim Szilagy, a former Alcoa executive, spent the year automating UPMC's previously jumbled approach to buying, tracking and storing medical supplies -- upgrading it from pen and paper to a computer screen and keyboard.

The new electronic system -- now used in seven UPMC hospitals and expanding in January to its Presbyterian and Shadyside locations -- aims to making shopping for medical supplies not much different from filling up a virtual shopping cart at online retailer Amazon.com.

The revamped system even allows employees to track a product from the seller to their door.

In 2007, an online catalogue of medical supplies will begin a trial run, with descriptions and photos of products and a search tool for locating rare items such as incubator-like "monkey warmers" used in medical research.

But an employee shopping spree it isn't the goal since a main objective of UPMC's new "e-purchasing" tool is reigning in "rogue spending" -- a once common practice where employees would take purchasing into their own hands rather than relying upon UPMC's staff of 70 who are dedicated solely to purchasing.

"Anybody could go out and call a supplier and get it delivered," said Mr. Szilagy, leaving the purchasing department to pay the bill -- and shrinking UPMC's leverage to negotiate discounts and deals with suppliers.

"There's a huge opportunity" for us to lower the costs of health care, Mr. DeMichiei said, "by getting more aggressive in our supply chain practices."

Technology, in part supplied by UPMC's for-profit software spinoff company CombineMed, has allowed the company not only to keep better tabs on its inventory, but also to drum up competition among its suppliers and negotiate larger, more lucrative deals that benefit both UPMC and the supplier, said Mr. Szilagy.

It's opened the door to new, smaller vendors "who wouldn't have otherwise had the chance to bid," said Mr. DiMichiei, and for current suppliers to sell additional products to the health care system. The competition is driving "some real wins," although just how much money it is saving, UPMC declined to say. "We expect to save millions this year," said CFO Mr. Szilagy.

UPMC isn't the only health care organization upgrading its purchasing methods.

Smaller health care groups such as Heritage Valley Health System, which operates both the Medical Center at Beaver and Sewickley Valley Hospital, have embraced their own paperless systems for managing medical records this year in an effort to drive down costs and boost the bottom line.

But doomsday prophets who fear a world where businesses and perhaps even hospitals are run by computers needn't worry, supply chain experts say.

"That's the cool thing," said Lisa Kustra, chief executive officer of Plan4Demand, a North Side-based supply chain management consulting firm. "Technology comes and goes, but in the end decisions will always have to be made by people."