The administration at Presbyterian Hospital is counting its
blessings today in six figures, all achieved in the wake of an
inventory control study by Booz Allen & Hamilton Inc.
Short-term savings are being measured at roughly $300,000. But
the continuing benefits are expected to bring annual savings of
What has happened at Presbyterian, however, is more than a simple
cost-cutting exercise. Chief operating officer Dennis Millirons puts
it in perspective:
"Our economic structures are being changed. We can compete better
now. We have to compete."
Several events have crowded in on Presbyterian and most hospitals,
forcing some creative steps to ward off disaster. A new prospective
reimbursement system coupled with dynamics - more competition and a
dwindling census to name two important factors - have made life more
At Presbyterian, the work force was reduced last year as the
administration struggled to get a handle on the phenomenon of lowered
revenues and higher costs. Personnel cutbacks weren't enough, and by
early summer it was clear that something else would have to be done.
Enter Booz Allen & Hamilton.
The management consultants examined other expense items, notably
the hospital's supply costs which consumed 15 percent of
"Booz Allen did a good job," said Millirons. "They pointed out
some things we weren't looking at. We have tightened up some
policies after getting their report."
That, however, is a striking understatement. The tightening led
to a corporate purchasing policy and some massive changes in the way
supplies are handled.
Before the study, Presbyterian had no formally adopted purchasing
policy in place. Policy now defines the limits of authority at
various levels and controls the hospital's relationship to its
A multi-disciplinary task force reviewed the Booz Allen findings,
along with the recommendations. From that has come a half dozen
Jim Underwood, assistant vice president at Presbyterian, explained
these projects and the purposes behind many of them.
High on the list: inventory reductions. The long-term objective
is to develop target levels of inventory. Thus far, management has
encountered little or no resistance.
Presbyterian, it was discovered had a 52-day inventory
($1,250,000). But the industry standard is only 40-days (about
"Probably within six months we'll have established targets in high
use areas," said Underwood.
Nutrition was cited as an example of high use in the hospital
One project is reviewing inventory locations, another is aimed at
consolidating inventories, and a fifth project strives for production