Holy Family Hospital, on Spokanes North Side, has received a mostly clean bill of health from a high-profile industry consultant that evaluated its performance earlier this year and even suggested that the hospital increase, rather than reduce, its staffing level, says President Tom Corley.


The consultant, Chicago-based Navigant Consulting Inc., completed its report several months ago, but Holy Family has withheld disclosing details about it until it could inform its roughly 1,100 employees of Navigants findings.


They suggested the hospital is very much on track, Corley says, and that it doesnt have serious or major problems with respect to its revenue or expenses or overall organization plan.


The consultants report likely comes as a relief to Holy Family employees, considering that affiliate Sacred Heart Medical Center earlier this year took a number of steps to cut staffing following a Navigant analysis there.


At Holy Family, Navigant did cite two main areaslabor costs, specifically excessive overtime, and supply purchasingwhere it believed the hospital could reduce expenses significantly, and the hospital has implemented the consultants recommendations in those areas, Corley says.


One of the recommendations was we need to hire more people, not less to reduce overtime costs, and the hospital has hired probably a couple dozen more employees in response to that recommendation, he says.


We are fine-tuning still, he adds. Yes, we will be hiring (more), but weve got the staffing pretty well polished. I do suspect there are certain areas of the hospital yet that will need additional tuning.


In supply purchasing, Corley says, Navigant recommended that Holy Family begin buying its supplies jointly with Sacred Heart and the other hospitals that are part of the Spokane-based Providence Health Care network to obtain greater volume-based discounts. Those hospitals include Deer Park Hospital, in Deer Park; St. Josephs Hospital, in Chewelah; and Mount Carmel Hospital, in Colville.


We did that and, as a result, have been able to reduce our supply costs, with savings of $700,000 expected this year alone, Corley says. Holy Family already had been doing some joint purchasing with other Providence hospitals, but now is doing almost all of it in that fashion, he says.


Corley says one of the main reasons Holy Family fared well in the Navigant analysis is that it had implemented a number of cost-cutting and system-streamlining measures before Navigant representatives arrived.


We actually found ourselves experiencing some financial problems in the first quarter of 2004, he says. It was then that we put in a number of system changes, so that by the time Navigant got here, our house was pretty much in order. Our financial situation had turned around.


The hospitals response to the financial troubles early last year was to accelerate a lean-management program it had begun in 2002 and through which it used what it called Rapid Process Improvement teams to improve efficiency.


We worked with a group of Toyota-trained people. Theyre here at the hospital on a full-time basis. Theyve been working with us on the same production techniques as Toyota uses, Corley says.


Holy Family didnt lay off any employees last year, but reduced hiring and whittled down its work force through attrition, Corley says. As a result, despite the recent hiring, the hospitals current staffing of about 837 full-time-equivalent employees is down slightly from last year.


In all, Holy Family has implemented probably 30 to 35 of the recommendations contained in Navigants inch-thick report, with most of those recommendations involving minor issues, and well probably implement that many again over the next 12 months, Corley says.


He says he is overall very pleased with how the hospital fared in the analysis, but we recognize also that we have a lot of work to do before we achieve the level of efficiency that Navigant says were capable of.


In a recent internal newsletter report outlining Navigants findings, Corley thanked employees for their efforts in improving the hospitals operating efficiency. He noted that some of those improvements included increasing revenue through point-of-service collections and creating or expanding several services, such as the hospitals continence center, sleep center, bone and joint center, and anticoagulation clinic.


Holy Family last year had an operating marginequivalent to net incomeof about $4 million and total revenue of about $112.3 million. For 2005, its projecting an operating margin of about $4.5 million and total revenue of about $119 million.