ORGANIZATION: The Hillel - Yaffe Medical Center, a 410 bed, secondary acute care, teaching hospital ,owned by the Israeli government. PROBLEM OR ISSUE ADDRESSED: The constant increase in health-care costs owing to technology advances accompanied by annual price rise and the lack of an adequate external, government funding lead the Hillel - Yaffe Medical Center management, to implement policies for reducing expenditure while maintaining the quality of care. Consequently, during 2002 – 2007 two intervention strategies were developed and implemented to solve this dilemma. The issues targeted and selected were laboratory organization and institutional tests ordering and drug use process. GOALS: Constraining or decreasing laboratory and pharmacy budgets while maintaining quality of medical care and introducing new technologies. OUTCOMES ITEMS USED IN THE DECISION: Measures used in the decision process, its monitoring and analysis were cumulative follow up budgetary and epidemiological data including: total laboratory and pharmacy budgets, Daily Defined Doses (DDD), standardized average daily and length of stay, standardized patient medication expenditures, laboratory test ordering utilization rate, average length of stay and overall mortality and re-hospitalization rate. IMPLEMENTATION STRATEGY: Two fields of high expenditure production floors (laboratories and pharmacy), accounting for 25% of the purchasing budget were identified. A prospective drug and laboratory test utilization evaluation was conducted to profile consumption, ordering and prescribing behavior patterns. The results were formulated into two intervention programs (IPs): laboratory organization and institutional test ordering (LOTO) and drug use process (DUP). 1. LOTO IP: a. Test ordering behavior: changing to discrete test ordering, rescheduling and automatically restricting retests time. b. Reagents purchasing outline: moving from bulk reagents purchasing to "tick on a meter" payment allowing for better on-line control on test utilization. c. Organizational change consolidation of three laboratories (biochemical, urgent and endocrinology-nephrology) into one integrated laboratory system using a modular analyzer for the entire serum work area, upgrading hematology, biochemical and microbiology analyzers, minimizing number of suppliers and contracting for long term agreements thus restraining price rise. 2. DUP IP – developing and implementing a rectangular total pharmacy practice management program, using pharmacy staff as change agents concentrating on: a. Rational evidence based purchasing. b. Changing internal and external logistic process, decreasing stock levels through using min-max systems and just in time concepts. c. Employing clinical pharmacy services focusing on rational use of antibiotics, changing prescribing behavior and altering intravenous fluids prescribing patterns as well as applying on-line feedback mechanisms. d. Staff education for promoting cost effective behavior and risk management. RESULTS: The IPs were implemented and enforced throughout 2002 and onwards. In both scenarios it was possible not only to maintain the budget frames, while sustaining the quality of care and introducing new technologies, but also attaining a modest, but substantial, 6% total decrease in cumulative pharmacy and laboratories expenditure budgets which accounts for approximately 5 million NIS. These savings are even more impressive when considering the 11% cumulative increase in the Israeli inflation rate during the above mentioned period. LESSIONS LEARNED: In today's limited resources healthcare systems there is a constant conflict between budgetary constraints and technology expansion. Internal tactics as described above can be used successfully to overcome financial restrictions, introduce new technologies without jeopardizing quality of care.