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Requirements planning systems in the health care environment
IOURN Vol
*,I_ OF OPERATIONS
2. No. 4. August
MANAGEMENT
1982
Requirements Planning Systems in the Health Care Environment Earle Steinberg* Basbeer Kbumawala” Richard Scarnell”
ABSTRACT
An important problem confronting health care administration is cost containment in hospitals. Much of the current high costs can be traced directly to outdated procedures in materials management leading to waste, excessive inventory and unnecessary obsolescence of expensive short shelf life items. In this paper, we illustrate how a modern requirements planning system for surgical supplies was developedfor a private hospital in Houston and used to effectively hold inventory levels to the minimum required to support a detailed schedule of surgical procedures. We also discuss some specific problems involved in the transfer of manufacturing technology to the hospital setting.
INTRODUCTION
The federal government’s call for voluntary cost containment in health care has pressed many hospitals to examine their operational costs more closely. These efforts have led to the identification of several departments, such as nursing services, clinical laboratory, radiology, dietary, and the surgical suite, that consistently rank high in operating costs. Expenditures in the surgical operating suite can be separated into two general areas: those that deal with human resources and those that deal with the required equipment, materials and supplies. This paper addresses the cost reduction of the expenditures relating to the second area. Specifitally , we focus on how requirements planning systems concepts can be used to improve the management of expensive surgical inventory. The procedures discussed in this paper were developed for Park Plaza Hospital in Houston, ~*University
of Houston,
Journal of Operations
Houston,
Management
Texas.
Texas. The objectives of the requirements planning system in the surgical suite at Park Plaza are to accomplish three tasks: 1. The conversion of gross to net requirements of equipment, material and supplies essential to meet the demands of the surgical schedule; 2. An automated purchase order scheme for the required materials and supplies; and 3. Determine a schedule for surgical supplies that require sterilization. Additionally, these tasks are to be accomplished within four major constraints: 1. A short planning horizon for surgical procedures (about seven days); 2. A sterilization process that can require up to sixteen hours for certain instruments; 3. A limited supply (in some instances only one) of high-technology surgical instruments; and 4. An environment where the supplies (particularly instruments) required for a specific operation often vary from physician to physician. The purpose of this paper is to demonstrate how a system such as that developed for Park Plaza Hospital can lead to a reduction in the investment of inventories in the surgical suite by providing a methodology that simultaneously accomplishes these three tasks while adhering to the four major constraints. THE SURGICAL
SUITE ENVIRONMENT
Park Plaza Hospital is a privately owned 374 bed facility with a surgical suite of nine operating rooms. These operating rooms are reserved at least one week in advance by physicians with surgery privileges at the hospital. Thus, at any point in time, the schedule of planned operations for the next seven days is known with some certainty, 251
different operations take different amounts of time and furthermore, there is no set time for any procedure as they differ from case to case and physician to physician. This lack of definitive durations for the procedures is further complicated by evidence that physicians perceive that they work more quickly than they actually do. As a result, the surgical schedule, for any given operating room on any given day (and hence, for the seven day planning horizon) is not entirely fixed. A typical surgical schedule is shown in Exhibit 1. The schedule includes such information as: date, operating room number, scheduled time, patient name, patient room number, operation, physician, estimated time, and anesthesia.
while anything beyond this horizon is far less certain. After an operation has been entered on the surgical schedule, it must be confirmed on two other occasions: first, 72 hours beforehand and second, 48 hours prior to the actual operation. This scheduling process permits the assignment of staff (nursing, orderlies, etc.) and the selection of the necessary supplies and equipment for the specific procedure. The patient is generally admitted to the hospital some 12 hours prior to the operation. Surgery is, for the most part, performed during normal working hours (i.e., 7 a.m. to 5 p.m.), Monday through Friday and some Saturdays. As for the operations themselves, they generally average about 45 minutes. Obviously, however,
EXHIBIT 1 Recorded
By: Date:
Last Revision Date:
By:
PARK PLAZA OPERATING ROOM SCHEDULE DATE: O.R. STAFF ON CALL: SUPV. 620-5648 TIME ROOM I 7:30 TF TF TF
PATIENT
771_****
RM
517 504
ROOM II 7:30 TF IO:30
533 412
ROOM IV 7:30 TF 9:oo TF 1 :oo
OP OP
ORT:
864_****
ANES:
620-5534 TIME
REQ
Dr. ********** Dr. Dr. Dr.
45” 45” 1’ 1’
0 0 0 0
Dr. Dr.
1’ 45”
0 0
Dr. Dr.
1’ 2’
0 567+1
Dr. Dr. Dr.
2’ 2’ 2’
567+1 567tl 567+1
Dr. Dr.
30” 45”
0 0
Dr. Dr. Dr.
1’ 1’ 2’
0 0 2
OPERATION
Meatotomy; C. & P. T.U.R.P. T.U.R.-B.N.
SURGEON
Cysto; Cystogratn
Cysto; T.U.R.P. c. & P. Vaginal Hysterectomy;
ROOM III 7130 a:30 TF TF TF
g47_****
RN:
6205488
AN
Posterior
5130 Tonsillectomy Left Breast Biopsy; FS; Poss. Mastectomy Left Femoral-popliteal Bypass L. Breast BX; FS; Poss. Mastectomy Hiatal Herniorraphy; Cholecystectomy; Sphincterotomy 5:30 Hemorrhoidectorny Hemorrhoidectomy; Excision Ulcer Exe. Sub-Scapular Lesion Excision Nodule Left Cheek Cholecystectomy; Operative
Anal
Cholangiogram 252
American Production and Inventory Control Society
ROOM V -7:30 9:oo lo:oo
768
12:oo TF 3:oo TF
AM
TF
OP 914 OP ROOM VII &;30
OP 837
TF l:oo
ROOM VIII 7:30 TF
666
12:30
ROOM IX 7:30 TF TF TF 1 :oo
704
7:oo Secondary Implantation I.O.L. O.D. Polypectomy Exploratory Laparotomy; Right Salpingo-oophrectomy Direct Laryngoscopy; Tongue Bx Septoplasty Laparoscopic Tubal Coag’ Excision Bartholin Cyst; Cystocele Repair Pelvic Laparotomy for Ovarian 3:oo Bilateral Para w/Tubes Hemorrhoidectomy Exploratory Laparotomy; Hiatal Herniorraphy; Gastroenterostomy Extra-capsular Cataract Extr. 5:30 Abdominoplasty; Vaginal Hysterectomy; Anterior and Posterior Repair Revision Scars Right Face Left Colon Resection; Abdominal Ventral Herniorraphy 3:oo Left Shoulder Repair Rem. Pin L. Femur; Application Cast Brace Arthroscopy; Poss. Arthrotomy Right Knee 7:oo Right Carotid Endarterectomy Right Carotid Endarterectomy R. Breast BX; FS; Poss. Mastectomy Skin Graft Right Ankle Repair Bilateral lnguinal Hernia
Dr. Dr. Dr.
1.5’ 1’ 1.5’
0 0 0
Dr. Dr. Dr. Dr.
1’ 2’ 1’ 1’
0
Dr.
1.5’
1
Dr. Dr. Dr.
45” 1’ 4’
0 0 1064
Dr.
1’
0
Dr.
4’
1037
Dr. Dr.
1.5’ 2.5’
0 0
Dr. Dr.
2’ 2’
1 1
Dr.
1.5’
1
Dr. Dr. Dr. Dr. Dr.
1.5’ 1.5’ 1’ 1’ 2.5
+I +1 0 0 1037
S
0 2 2
S
X-RAY AND LABOR AND DELIVERY ADDITIONAL SPECIAL
AND EMERGENCY
SURGERY
PERMIT REQUIRED*
Supplies for any operation fall into three general categories:
prohibitive costs of these instruments (e.g., a CAT-scan, heart-lung machine, etc.).
1. disposable items that can be used only once (see Exhibit 2); 2. reusable instruments that are recycled and used again, i.e., they are cleaned, sterilized and placed back into inventory (e.g., pickups, clamps, etc.); and 3. a limited number of high-technology instruments-this limited supply results from the
In addition, the required stock for any operation not only differs with the particular procedure, but also by physician- each having their preference as to the instruments and disposable supplies to be used for a given procedure (e.g., gown, gloves, etc.). Supplies and instruments are drawn from inventory by the use of a Physician’s Preference Sheet that lists these requirements by procedure
Journal of Operations
Management
253
EXHIBIT 2 One time use items: Disposables
Surgical Schedule
The first component of the system, is the seven day horizon surgical schedule, the analog of a master production schedule. In this case, however, each product is defined as a specific physician performing a specific procedure. This definition is necessary since two physicians performing identical procedures may desire different surgical kits. Therefore, each may fill out his physician preference sheet differently. If, then, we have k physicians, each performing n procedures, we may identify as many as k x n separate products. Unlike the conventional master production schedule where the end items are physical products, here the end items represent procedures performed by a specific physician and each end item has a quantity of only one. However, in both cases, the end item remains the target of the material flow and the output of the process.
Surgical drapes Surgical gowns Varieties of dressing materials Sutures Gloves Antimicrobial skin preparations Varieties of medications Catheters Orthopedic implants Opthalmalogic implants Nontextile towels Needles Syringes Razors Electrosurgical devices Drains
and by physician. The system will therefore be concerned with the process of having these required supplies arrive at the proper place (i.e., the correct operating room), at the proper time, correctly assigned by surgical procedure and physician preference, and with the maintenance of appropriate and accurate inventory levels.
THE REQUIREMENTS
PLANNING
SYSTEM
In order to demonstrate the application of Requirements Planning to the surgical suite, a nomenclature that relates to the hospital environment is required. Exhibit 3 shows the nomenclature used in this paper and indicates how it parallels the terminology employed in manufacturing applications. The remainder of this section defines each system component in the context of the surgical suite and describes the role of each in the system.
Surgical Requirements
File
The surgical requirements file-the analog of the bill of materials contains the materials and supplies needed for the various procedures (or level 0 end items). In the traditional MRP system, the bill of materials file defines the final product in terms of its components-in the surgical suite such components are the supplies required for a particular surgical procedure in accordance with physician preference. Thus, the items on the Physician’s Preference Sheet are defined as level 1 components that must be ready for use (i.e., sterilized if appropriate) in the procedure. Extending this concept one step further, all items that require sterilization are considered level 2 subassemblies with lead times equal to their required time for sterilization (this time ranges from five minutes to, as mentioned, 16 hours) and recycling. While this concept means that inven-
EXHIBIT 3 MRP Terminology Application Categories of Requirements Demand Materials Inventory
254
Requirements
MANUFACTURING
HEALTH CARE
Master Production Schedule
Surgical
Schedule
Bill of Materials
Surgical File
Requirements
Inventory
Inventory
American Production
Item File
and Inventory
Control Society
tory records must be kept on two levels, such a scheme provides an effective method for handling items that must be sterilized. Sterilization units may be viewed as machine centers with limited capacity. One of the outputs of the system is a projected load for sterilization and a schedule of release of sterilized items to projected inventory. The procedure for systems operation is shown in Figure 1. The system operation begins with an inquiry to the surgical schedule. If capacity is available in the surgical schedule, the procedure is to update the schedule by inserting the operation in the appropriate spot. (See Exhibit 1 for a sample schedule.) The schedule is then exploded through the surgical requirements file to generate gross requirements for all necessary materials and supplies. Note that a specific product (i.e. a particular physician performing a specified procedure) is identified which is traceable to a single physician preference sheet. The gross requirements thus generated are netted against the projected on hand inventory for all items required. Note that, in Figure 2 a sample record for a reusable component is shown. FIGURE 1 System Logic
CURRENT INVENTORY STATUS \_B
STERILIZATION CENTER CAPACITY
Where: = On hand at the end of period t sterilization at end of = Completed period t SR, = Scheduled receipts by end of period t POR, = Planned order receipts due by end of period t GR, = Gross requirements by end of period t OH, s,
Whenever OH, becomes negative, a net requirement is generated, resulting in a planned order release for the item. In the example shown in Figure 2, note that all items. once used, are immediately scheduled for sterilization so that they may be returned to inventory as soon as possible. Therefore, given a sterilization lead time of two periods, the gross requirements of five for period one are due out of sterilization in period three. Also note that of the gross requirements for 15 in period six, only ten are due out of sterilization in period eight and another five in period nine. This results directly from the sterilization capacity constraint of ten for this item. With the demand pattern shown for the reusable item in Figure 2, the system will quickly increase inventory to the minimum stable level required to support the surgical schedule. As long as demand does not exceed 25 for any two adjacent periods (recall the sterilization lead time is two periods) inventory will remain at that level. If, however, demand were to increase to 40 in any two adjacent periods, one of two decisions could be made: to a mini-
Since technology dictates the total sterilization lead time, only a decision regarding increased capacity or inventory is possible. The choice, of course, depends on cost considerations and projection of future demand patterns. Now having identified the key elements in this system-the Product Identification, the Surgical Schedule, the Surgical Requirements File, the Sterilization Load Profile, the procedures, and the two-level inventory system (i.e., those items ready
!
4
Management
OH, = OH,_, + S, + SR, + POR, - GR,
1. Stabilize inventory at 40, or 2. Increase sterilization capability mum of 20 parts per period.
GENERATE STERILIZATION SCHEUULE
Journal of Operations
Note the similarity to the normal gross to net calculations in a standard MRP system. There are, however, a few significant differences. In the current period, the inventory record shows a balance of 15 blades. Normal sterilization capacity for this item is ten blades per period. Projected on hand balances are calculated as follows:
2.55
FIGURE 2 Item Record for Reusable
Part
ITEM: Blade, #lO Sterilization Lead time: 2 periods Procurement Lead time: 1 period Period
0
Gross Requirements Scheduled
1 5
2 5
3
4
5
6
8
10
10
10
15
5
5
10
10
10
10
5
0
0
0
0
10
20
20
9
10
5
10
11
12
5
10
15
25
Receipts
Projected
Sterilized
Projected
On-Hand
15
10
5
Net Requirements
5
5
Planned
Order Receipts
5
5
Planned
Order Release
5
for use in surgery as opposed to those which still must be prepared)-the remaining task is to make the policy type decisions on the lengths of the planning horizon and the time buckets. Planning Horizon and Time Buckets
The planning horizon is defined as “the span of time the master schedule covers” and “normally equals or exceeds” the cumulative lead times for components of the level 0 products (Orlicky, p. 49). As mentioned previously, the Surgical Schedule is known with some certainty one week in advance of an operation. Therefore, this seven day period is used as a “working horizon” since it is longer than the lead times of materials presently in inventory (which at the greatest possible value is less than 48 hours) and is also, the longest time period that the schedule is known with some degree of certainty. In addition, a longer planning horizon of one month can also be used to “get a jump” on the requirements of operations that are scheduled more than a week in advance and, more importantly, to assist in scheduling the limited supply of high-technology instruments. Selecting an appropriate length for the timebuckets is more complicated than establishing the planning horizon. This is because the size of timebuckets should “reflect a compromise, or tradeoff, between the desire to have planned events pinpointed in time and the cost of dividing time into very small increments” (Orlicky, p. 160). Hence the most likely choice for the length of the 256
7
10
5
systems time-buckets is 48 hours; a time period that allows substantial flexibility in the system since it is longer than the required recycling time (including sterilization) of any one instrument. Finally, it should be observed that the short planning horizon and time-buckets, when coupled with a somewhat uncertain Surgical Schedule, requires the use of a “Net Change” system as opposed to a regenerative version.
SYSTEMS
DATA BASE
Over the course of a year, the surgical suite ordinarily has to schedule hundreds of different operations as well as control the flow of thousands of disposable and reusable inventory items. This section outlines the key data elements required to implement the system in the surgical suite. The Surgical Schedule File
The Surgical Schedule File should contain all posted surgeries for a specific day and time in each operating room. It includes such data as: operation number scheduled date and time operating room number patient room number patient name procedure(s) anesthesia physician name American Production and Inventory Control Society
Inventory
Item File
The Inventory Item File is a time-phased inventory record of surgical supplies and instruments required by one or more procedures. Particular care must be taken in this file to distinguish between disposable and reusable items. Data contained in this file includes: 0 0 0 a 0
l
Level 0 element number (i.e., procedure identifier) Lower-level element numbers of common items Lower-level element numbers of preference items (for each physician associated with Level 0 element number).
Exhibit 4 outlines the two parts of the surgical requirements file for a bronchoscopy. Observe that the upper portion shows the common inventory items used and the lower portion depicts the additional inventory items preferred by a specific physician.
‘The data recorded in the file assumes that all items have been prepared for surgery. Therefore, the distinction between component levels is not important. Journal of Operations
Preference Items Dr. l ********* Flexible Bronchoscope Gloves, Size 6% Brown Dr. ********** Gloves, Size 7% Local Set
File
The Surgical Requirements File is the functional equivalent to a single item bill of materials for a procedure.’ This file identifies quantities of each item that are needed for a procedure as well as the specific size and/or brand of the item. The file is divided into two parts: the common items and the preference items. The common items represent the materials used by all physicians when performing a procedure. On the other hand, the preference items reflect physician differences in surgical material requirements. Collectively, these items establish the inventory requirements of a specific procedure in the following manner:
l
Common Materials Bronchoscopy Set, Rigid Suction Tubing Telescope, Right Angle Telescope, Forward Oblique Glass Slides Fixative Specimen Trap Table Cover Towels
unique item number description of the item level gross requirements quantity on hand (current, allocated, projected available) scheduled receipts planned order releases standard inventory ordering data (i.e., lot size, order point, lead time, vendor information) recycling time (if applicable)
Surgical Requirements
l
EXHIBIT 4 Surgical Requirements for a Bronchoscopy
Management
OPERATION
OF THE SYSTEM
In the environment for which the system was developed, the chief nurse of the surgical suite operates as the medical analog to the materials manager. She is in charge of all surgical scheduling and equipment sterilization activities, as well as responsible for inventory management of all required medical supplies for the surgical suite including all tools, instruments and equipment, (excluding medication) required for all procedures. The storeroom, sterilization facilities, and operating rooms themselves are located in one contiguous area under her control. In this area, an inventory of more than 2000 items (equivalent to SKUs), used in conjunction with the various surgical procedures, is maintained. Inventory balances are updated by an on-line transaction-driven batch processing system that provides a complete inventory status report for the 2000 items each week. In addition, a query-driven system provides access to the current level of inventory on hand for each item. Performance appraisal of the chief nurse is based on typical customer service criteria such as performance to schedule and availability of required materials. Since the surgical suite operates as a profit center within the overall hospital framework, a negotiated carrying charge is levied against total inventory maintained in the surgical suite storeroom. Inventory writeoffs due to breakage, spoilage, and obsolescence are also charged to the costs of surgical suite operation. Therefore there 257
is sufficient incentive to practice sound materials management of balancing the demands of high customer service levels with effective management of expensive inventory. Several factors unique to the health care environment make this task less difficult: 1. Lead times are very short. Most hospital supply companies can provide virtually any piece of equipment or needed material in about half a day. 2. There are virtually never uncertainty of supply problems. In any major city, a hospital can acquire almost anything they need from a vendor. It is extremely rare that a tool, instrument or other type of surgical equipment is unavailable, even if the requirement is fairly exotic. 3. Purchasing procedures are relatively simple. In most cases, if a supply problem does exist and that problem could lead to a cancellation of a scheduled procedure, the chief of the surgical suite may readily obtain the authority to directly order the needed supplies. In addition to these factors, several other considerations make operation of the system straightforward: 1. Since the database required is not large, the entire system can be operated on a dedicated minicomputer. Given only nine operating rooms in this case and an average of two procedures per day per room, the surgical schedule file is very small. 2. The analog to the bill of material (the Surgical Requirements) file never exceeds three levels (levels 0, 1 and 2) for any product. In addition to this fortunate design feature of the system, the hospital specializes in a limited number of elective procedures which result in easy standardization of products. Most physicians will not perform every one of these procedures so, in fact, the number of products offered is less than the k x n possibilities discussed earlier. 3. Sterilization is under the direct control of the chief nurse. Therefore she has control of all facets of the materials management system. The system operation is initiated by a physician request for use of a surgical suite. A query is made to the Surgical Schedule (Master Production Schedule) by a nurse whose responsibility it is to maintain the integrity of the data in the system. This nurse (customer service representative) will respond to the physician request in a manner iden258
tical to the standard “available to promise” activity found in most manufacturing firms. If available capacity can be matched to customer requirements then that portion of the calendar is “consumed” and the surgical procedure is scheduled. In the event no capacity (operating room capacity) is available at the time requested, the schedule is searched for a time and date which the physician finds convenient. Obviously, in this environment, overloading the master schedule is not acceptable since two patients arriving for simultaneous surgery in the same operating room would generate considerable consternation. Once a procedure is scheduled, a specific product is identified (a physician performing a designated operation) and surgical material requirements are generated for level 1 and level 2 items identified on the Physician Preference Sheet. Recall that level 2 items require a sterilization lead time. A two-step procedure is then utilized for determining availability of required inventory. Step 1
Examine inventory records for required items. All items available in the storeroom which are needed for the procedure are “kitted” (gathered together in a sterile kit and labeled for the date, physician, operating room, and procedure) and set aside. Step 2
Items which are not currently available because they are being used for other procedures and require sterilization before being used again are identified. Item records for these parts are of the type shown in Figure 2. When such a requirement is identified it is added to Gross Requirements for that item which immediately forces a new gross-to-net calculation and an update of Net Requirements and Planned Order Releases or Sterilization Schedule. Of course, the protocol here is to attempt to sterilize first, then order if such capacity is not available. If level 1 components are not available, a purchase order request is generated. Because the Surgical Schedule (MPS) usually has a horizon of seven days or more (made possible because of the elective nature of most procedures) coupled with the very short lead time for resupply, the hospital rarely experiences material shortages in this category .
Final confirmation of the schedule is made by the customer (physician) 48 hours prior to each operation. This represents the “planning time fence” within which the schedule is regarded as American Production
and Inventory
Control Society
rigid and cannot be changed except in the event of dire emergency. It also represents the last opportunity for a final check of inventory kits for each procedure. Such a check includes level 1 components obtained from the storeroom or outside purchases as well as level 2 components which, if not out of sterilization should at least be in process. The entire system is designed to be operated by nursing personnel. Its success and acceptance stem from two factors: 1. Generation of reliable schedules and insurance of adequate supplies. The reduction of problems in this area leads to greater physician satisfaction and a more harmonious relationship with nursing personnel. 2. Simplicity of Operation. The system outputs are: a daily schedule of surgical procedures, a list of items to be picked from storeroom, a list of items for outside purchase, and a sterilization schedule. IMPLEMENTATION CONSIDERATIONS
The key to implementing effective materials management systems in health care applications of this type is system performance as measured in two areas: 1. Customer Service-Does it give the physician what he wants when he needs it? It is our experience that unless the physician is convinced that the system will not endanger the lives or well being of his patients by saving on what he perceives as “nickel and dime” items, the system has little chance of success. Instead, customer service must be sold to physicians in the guise of a system that assures availability of needed supplies, tools, and instruments. 2. Cost Effectiveness-Does the hospital administrator believe the system will save money while still meeting customer service objectives? Elimination of costly excessive safety stocks (especially of short shelf life items), better inventory record accuracy and more reliable schedules which tend to eliminate bothersome last minute crises are important features, $ these enhancements are coupled with real cost reductions. One of the truly vexing problems in the transfer of manufacturing management technology to the health care environment has been the need for product definition. Materials management systems depend on a well-defined and structured set Journal of Operations Management
of deliverables to “drive” the entire system. At the outset of this project, considerable time and effort went into the development of such a definition. In determining that each product was a particular surgical procedure performed by a specific physician, we resolved this issue early on. In other areas of health care such as emergency room service, children’s ward operations, or others, such a product is not so clearly defined. The first step in most efforts at technology transfer is to draw parallels between the old and new environments. In manufacturing, product definition is almost always a given. in health care, the final product is not so clearly defined. Since health care remains an area of significant potential for transfer of management technology, future research that specifically defines deliverables in the health care environment could become meaningful contributions to important cost containment efforts. CONCLUDING REMARKS
The application of requirements planning to the surgical suite demonstrates how job shop related techniques can be employed in a non-manufacturing environment with resource and time constraints but without a physical final product. It furnishes hospital administrators a vehicle to better understand and control the investment in material and supplies in this rapidly increasing cost area. Furthermore, the use of MRP-based technology insures that materials will be available when needed, protects against the overcapitalization of inventory and aids in formulating and adjusting reordering policies. Because the costs of hospital care have risen far more rapidly than the rate of inflation during the past 15 years, local, state, and federal governments have escalated regulatory efforts to contain them. In such a regulated environment, hospital administrators have begun to recognize the need to borrow proven management techniques from business to survive in the health care market (Goldsmith, 1980). While MRP’s application in the surgical suite will not by itself drastically reduce the cost of health care, when combined with new forms of health care delivery, it promises to contribute to a dampening of rising hospital costs. REFERENCES Jeff C. Goldsmith, “The Health Care Market: Can Hospitals Survive?” Hanard Business Review, September-October 1980, pp. 100-l 12. Qrlicky. Joseph. ‘~ffte~~al Keqt~i~et~~~t.sP/~~t?ni~~,McGraw Hill, 1975. Plossl, George, Munufacruring Control, Reston Publishing, 1973. 259
*,I_ OF OPERATIONS
2. No. 4. August
MANAGEMENT
1982
Requirements Planning Systems in the Health Care Environment Earle Steinberg* Basbeer Kbumawala” Richard Scarnell”
ABSTRACT
An important problem confronting health care administration is cost containment in hospitals. Much of the current high costs can be traced directly to outdated procedures in materials management leading to waste, excessive inventory and unnecessary obsolescence of expensive short shelf life items. In this paper, we illustrate how a modern requirements planning system for surgical supplies was developedfor a private hospital in Houston and used to effectively hold inventory levels to the minimum required to support a detailed schedule of surgical procedures. We also discuss some specific problems involved in the transfer of manufacturing technology to the hospital setting.
INTRODUCTION
The federal government’s call for voluntary cost containment in health care has pressed many hospitals to examine their operational costs more closely. These efforts have led to the identification of several departments, such as nursing services, clinical laboratory, radiology, dietary, and the surgical suite, that consistently rank high in operating costs. Expenditures in the surgical operating suite can be separated into two general areas: those that deal with human resources and those that deal with the required equipment, materials and supplies. This paper addresses the cost reduction of the expenditures relating to the second area. Specifitally , we focus on how requirements planning systems concepts can be used to improve the management of expensive surgical inventory. The procedures discussed in this paper were developed for Park Plaza Hospital in Houston, ~*University
of Houston,
Journal of Operations
Houston,
Management
Texas.
Texas. The objectives of the requirements planning system in the surgical suite at Park Plaza are to accomplish three tasks: 1. The conversion of gross to net requirements of equipment, material and supplies essential to meet the demands of the surgical schedule; 2. An automated purchase order scheme for the required materials and supplies; and 3. Determine a schedule for surgical supplies that require sterilization. Additionally, these tasks are to be accomplished within four major constraints: 1. A short planning horizon for surgical procedures (about seven days); 2. A sterilization process that can require up to sixteen hours for certain instruments; 3. A limited supply (in some instances only one) of high-technology surgical instruments; and 4. An environment where the supplies (particularly instruments) required for a specific operation often vary from physician to physician. The purpose of this paper is to demonstrate how a system such as that developed for Park Plaza Hospital can lead to a reduction in the investment of inventories in the surgical suite by providing a methodology that simultaneously accomplishes these three tasks while adhering to the four major constraints. THE SURGICAL
SUITE ENVIRONMENT
Park Plaza Hospital is a privately owned 374 bed facility with a surgical suite of nine operating rooms. These operating rooms are reserved at least one week in advance by physicians with surgery privileges at the hospital. Thus, at any point in time, the schedule of planned operations for the next seven days is known with some certainty, 251
different operations take different amounts of time and furthermore, there is no set time for any procedure as they differ from case to case and physician to physician. This lack of definitive durations for the procedures is further complicated by evidence that physicians perceive that they work more quickly than they actually do. As a result, the surgical schedule, for any given operating room on any given day (and hence, for the seven day planning horizon) is not entirely fixed. A typical surgical schedule is shown in Exhibit 1. The schedule includes such information as: date, operating room number, scheduled time, patient name, patient room number, operation, physician, estimated time, and anesthesia.
while anything beyond this horizon is far less certain. After an operation has been entered on the surgical schedule, it must be confirmed on two other occasions: first, 72 hours beforehand and second, 48 hours prior to the actual operation. This scheduling process permits the assignment of staff (nursing, orderlies, etc.) and the selection of the necessary supplies and equipment for the specific procedure. The patient is generally admitted to the hospital some 12 hours prior to the operation. Surgery is, for the most part, performed during normal working hours (i.e., 7 a.m. to 5 p.m.), Monday through Friday and some Saturdays. As for the operations themselves, they generally average about 45 minutes. Obviously, however,
EXHIBIT 1 Recorded
By: Date:
Last Revision Date:
By:
PARK PLAZA OPERATING ROOM SCHEDULE DATE: O.R. STAFF ON CALL: SUPV. 620-5648 TIME ROOM I 7:30 TF TF TF
PATIENT
771_****
RM
517 504
ROOM II 7:30 TF IO:30
533 412
ROOM IV 7:30 TF 9:oo TF 1 :oo
OP OP
ORT:
864_****
ANES:
620-5534 TIME
REQ
Dr. ********** Dr. Dr. Dr.
45” 45” 1’ 1’
0 0 0 0
Dr. Dr.
1’ 45”
0 0
Dr. Dr.
1’ 2’
0 567+1
Dr. Dr. Dr.
2’ 2’ 2’
567+1 567tl 567+1
Dr. Dr.
30” 45”
0 0
Dr. Dr. Dr.
1’ 1’ 2’
0 0 2
OPERATION
Meatotomy; C. & P. T.U.R.P. T.U.R.-B.N.
SURGEON
Cysto; Cystogratn
Cysto; T.U.R.P. c. & P. Vaginal Hysterectomy;
ROOM III 7130 a:30 TF TF TF
g47_****
RN:
6205488
AN
Posterior
5130 Tonsillectomy Left Breast Biopsy; FS; Poss. Mastectomy Left Femoral-popliteal Bypass L. Breast BX; FS; Poss. Mastectomy Hiatal Herniorraphy; Cholecystectomy; Sphincterotomy 5:30 Hemorrhoidectorny Hemorrhoidectomy; Excision Ulcer Exe. Sub-Scapular Lesion Excision Nodule Left Cheek Cholecystectomy; Operative
Anal
Cholangiogram 252
American Production and Inventory Control Society
ROOM V -7:30 9:oo lo:oo
768
12:oo TF 3:oo TF
AM
TF
OP 914 OP ROOM VII &;30
OP 837
TF l:oo
ROOM VIII 7:30 TF
666
12:30
ROOM IX 7:30 TF TF TF 1 :oo
704
7:oo Secondary Implantation I.O.L. O.D. Polypectomy Exploratory Laparotomy; Right Salpingo-oophrectomy Direct Laryngoscopy; Tongue Bx Septoplasty Laparoscopic Tubal Coag’ Excision Bartholin Cyst; Cystocele Repair Pelvic Laparotomy for Ovarian 3:oo Bilateral Para w/Tubes Hemorrhoidectomy Exploratory Laparotomy; Hiatal Herniorraphy; Gastroenterostomy Extra-capsular Cataract Extr. 5:30 Abdominoplasty; Vaginal Hysterectomy; Anterior and Posterior Repair Revision Scars Right Face Left Colon Resection; Abdominal Ventral Herniorraphy 3:oo Left Shoulder Repair Rem. Pin L. Femur; Application Cast Brace Arthroscopy; Poss. Arthrotomy Right Knee 7:oo Right Carotid Endarterectomy Right Carotid Endarterectomy R. Breast BX; FS; Poss. Mastectomy Skin Graft Right Ankle Repair Bilateral lnguinal Hernia
Dr. Dr. Dr.
1.5’ 1’ 1.5’
0 0 0
Dr. Dr. Dr. Dr.
1’ 2’ 1’ 1’
0
Dr.
1.5’
1
Dr. Dr. Dr.
45” 1’ 4’
0 0 1064
Dr.
1’
0
Dr.
4’
1037
Dr. Dr.
1.5’ 2.5’
0 0
Dr. Dr.
2’ 2’
1 1
Dr.
1.5’
1
Dr. Dr. Dr. Dr. Dr.
1.5’ 1.5’ 1’ 1’ 2.5
+I +1 0 0 1037
S
0 2 2
S
X-RAY AND LABOR AND DELIVERY ADDITIONAL SPECIAL
AND EMERGENCY
SURGERY
PERMIT REQUIRED*
Supplies for any operation fall into three general categories:
prohibitive costs of these instruments (e.g., a CAT-scan, heart-lung machine, etc.).
1. disposable items that can be used only once (see Exhibit 2); 2. reusable instruments that are recycled and used again, i.e., they are cleaned, sterilized and placed back into inventory (e.g., pickups, clamps, etc.); and 3. a limited number of high-technology instruments-this limited supply results from the
In addition, the required stock for any operation not only differs with the particular procedure, but also by physician- each having their preference as to the instruments and disposable supplies to be used for a given procedure (e.g., gown, gloves, etc.). Supplies and instruments are drawn from inventory by the use of a Physician’s Preference Sheet that lists these requirements by procedure
Journal of Operations
Management
253
EXHIBIT 2 One time use items: Disposables
Surgical Schedule
The first component of the system, is the seven day horizon surgical schedule, the analog of a master production schedule. In this case, however, each product is defined as a specific physician performing a specific procedure. This definition is necessary since two physicians performing identical procedures may desire different surgical kits. Therefore, each may fill out his physician preference sheet differently. If, then, we have k physicians, each performing n procedures, we may identify as many as k x n separate products. Unlike the conventional master production schedule where the end items are physical products, here the end items represent procedures performed by a specific physician and each end item has a quantity of only one. However, in both cases, the end item remains the target of the material flow and the output of the process.
Surgical drapes Surgical gowns Varieties of dressing materials Sutures Gloves Antimicrobial skin preparations Varieties of medications Catheters Orthopedic implants Opthalmalogic implants Nontextile towels Needles Syringes Razors Electrosurgical devices Drains
and by physician. The system will therefore be concerned with the process of having these required supplies arrive at the proper place (i.e., the correct operating room), at the proper time, correctly assigned by surgical procedure and physician preference, and with the maintenance of appropriate and accurate inventory levels.
THE REQUIREMENTS
PLANNING
SYSTEM
In order to demonstrate the application of Requirements Planning to the surgical suite, a nomenclature that relates to the hospital environment is required. Exhibit 3 shows the nomenclature used in this paper and indicates how it parallels the terminology employed in manufacturing applications. The remainder of this section defines each system component in the context of the surgical suite and describes the role of each in the system.
Surgical Requirements
File
The surgical requirements file-the analog of the bill of materials contains the materials and supplies needed for the various procedures (or level 0 end items). In the traditional MRP system, the bill of materials file defines the final product in terms of its components-in the surgical suite such components are the supplies required for a particular surgical procedure in accordance with physician preference. Thus, the items on the Physician’s Preference Sheet are defined as level 1 components that must be ready for use (i.e., sterilized if appropriate) in the procedure. Extending this concept one step further, all items that require sterilization are considered level 2 subassemblies with lead times equal to their required time for sterilization (this time ranges from five minutes to, as mentioned, 16 hours) and recycling. While this concept means that inven-
EXHIBIT 3 MRP Terminology Application Categories of Requirements Demand Materials Inventory
254
Requirements
MANUFACTURING
HEALTH CARE
Master Production Schedule
Surgical
Schedule
Bill of Materials
Surgical File
Requirements
Inventory
Inventory
American Production
Item File
and Inventory
Control Society
tory records must be kept on two levels, such a scheme provides an effective method for handling items that must be sterilized. Sterilization units may be viewed as machine centers with limited capacity. One of the outputs of the system is a projected load for sterilization and a schedule of release of sterilized items to projected inventory. The procedure for systems operation is shown in Figure 1. The system operation begins with an inquiry to the surgical schedule. If capacity is available in the surgical schedule, the procedure is to update the schedule by inserting the operation in the appropriate spot. (See Exhibit 1 for a sample schedule.) The schedule is then exploded through the surgical requirements file to generate gross requirements for all necessary materials and supplies. Note that a specific product (i.e. a particular physician performing a specified procedure) is identified which is traceable to a single physician preference sheet. The gross requirements thus generated are netted against the projected on hand inventory for all items required. Note that, in Figure 2 a sample record for a reusable component is shown. FIGURE 1 System Logic
CURRENT INVENTORY STATUS \_B
STERILIZATION CENTER CAPACITY
Where: = On hand at the end of period t sterilization at end of = Completed period t SR, = Scheduled receipts by end of period t POR, = Planned order receipts due by end of period t GR, = Gross requirements by end of period t OH, s,
Whenever OH, becomes negative, a net requirement is generated, resulting in a planned order release for the item. In the example shown in Figure 2, note that all items. once used, are immediately scheduled for sterilization so that they may be returned to inventory as soon as possible. Therefore, given a sterilization lead time of two periods, the gross requirements of five for period one are due out of sterilization in period three. Also note that of the gross requirements for 15 in period six, only ten are due out of sterilization in period eight and another five in period nine. This results directly from the sterilization capacity constraint of ten for this item. With the demand pattern shown for the reusable item in Figure 2, the system will quickly increase inventory to the minimum stable level required to support the surgical schedule. As long as demand does not exceed 25 for any two adjacent periods (recall the sterilization lead time is two periods) inventory will remain at that level. If, however, demand were to increase to 40 in any two adjacent periods, one of two decisions could be made: to a mini-
Since technology dictates the total sterilization lead time, only a decision regarding increased capacity or inventory is possible. The choice, of course, depends on cost considerations and projection of future demand patterns. Now having identified the key elements in this system-the Product Identification, the Surgical Schedule, the Surgical Requirements File, the Sterilization Load Profile, the procedures, and the two-level inventory system (i.e., those items ready
!
4
Management
OH, = OH,_, + S, + SR, + POR, - GR,
1. Stabilize inventory at 40, or 2. Increase sterilization capability mum of 20 parts per period.
GENERATE STERILIZATION SCHEUULE
Journal of Operations
Note the similarity to the normal gross to net calculations in a standard MRP system. There are, however, a few significant differences. In the current period, the inventory record shows a balance of 15 blades. Normal sterilization capacity for this item is ten blades per period. Projected on hand balances are calculated as follows:
2.55
FIGURE 2 Item Record for Reusable
Part
ITEM: Blade, #lO Sterilization Lead time: 2 periods Procurement Lead time: 1 period Period
0
Gross Requirements Scheduled
1 5
2 5
3
4
5
6
8
10
10
10
15
5
5
10
10
10
10
5
0
0
0
0
10
20
20
9
10
5
10
11
12
5
10
15
25
Receipts
Projected
Sterilized
Projected
On-Hand
15
10
5
Net Requirements
5
5
Planned
Order Receipts
5
5
Planned
Order Release
5
for use in surgery as opposed to those which still must be prepared)-the remaining task is to make the policy type decisions on the lengths of the planning horizon and the time buckets. Planning Horizon and Time Buckets
The planning horizon is defined as “the span of time the master schedule covers” and “normally equals or exceeds” the cumulative lead times for components of the level 0 products (Orlicky, p. 49). As mentioned previously, the Surgical Schedule is known with some certainty one week in advance of an operation. Therefore, this seven day period is used as a “working horizon” since it is longer than the lead times of materials presently in inventory (which at the greatest possible value is less than 48 hours) and is also, the longest time period that the schedule is known with some degree of certainty. In addition, a longer planning horizon of one month can also be used to “get a jump” on the requirements of operations that are scheduled more than a week in advance and, more importantly, to assist in scheduling the limited supply of high-technology instruments. Selecting an appropriate length for the timebuckets is more complicated than establishing the planning horizon. This is because the size of timebuckets should “reflect a compromise, or tradeoff, between the desire to have planned events pinpointed in time and the cost of dividing time into very small increments” (Orlicky, p. 160). Hence the most likely choice for the length of the 256
7
10
5
systems time-buckets is 48 hours; a time period that allows substantial flexibility in the system since it is longer than the required recycling time (including sterilization) of any one instrument. Finally, it should be observed that the short planning horizon and time-buckets, when coupled with a somewhat uncertain Surgical Schedule, requires the use of a “Net Change” system as opposed to a regenerative version.
SYSTEMS
DATA BASE
Over the course of a year, the surgical suite ordinarily has to schedule hundreds of different operations as well as control the flow of thousands of disposable and reusable inventory items. This section outlines the key data elements required to implement the system in the surgical suite. The Surgical Schedule File
The Surgical Schedule File should contain all posted surgeries for a specific day and time in each operating room. It includes such data as: operation number scheduled date and time operating room number patient room number patient name procedure(s) anesthesia physician name American Production and Inventory Control Society
Inventory
Item File
The Inventory Item File is a time-phased inventory record of surgical supplies and instruments required by one or more procedures. Particular care must be taken in this file to distinguish between disposable and reusable items. Data contained in this file includes: 0 0 0 a 0
l
Level 0 element number (i.e., procedure identifier) Lower-level element numbers of common items Lower-level element numbers of preference items (for each physician associated with Level 0 element number).
Exhibit 4 outlines the two parts of the surgical requirements file for a bronchoscopy. Observe that the upper portion shows the common inventory items used and the lower portion depicts the additional inventory items preferred by a specific physician.
‘The data recorded in the file assumes that all items have been prepared for surgery. Therefore, the distinction between component levels is not important. Journal of Operations
Preference Items Dr. l ********* Flexible Bronchoscope Gloves, Size 6% Brown Dr. ********** Gloves, Size 7% Local Set
File
The Surgical Requirements File is the functional equivalent to a single item bill of materials for a procedure.’ This file identifies quantities of each item that are needed for a procedure as well as the specific size and/or brand of the item. The file is divided into two parts: the common items and the preference items. The common items represent the materials used by all physicians when performing a procedure. On the other hand, the preference items reflect physician differences in surgical material requirements. Collectively, these items establish the inventory requirements of a specific procedure in the following manner:
l
Common Materials Bronchoscopy Set, Rigid Suction Tubing Telescope, Right Angle Telescope, Forward Oblique Glass Slides Fixative Specimen Trap Table Cover Towels
unique item number description of the item level gross requirements quantity on hand (current, allocated, projected available) scheduled receipts planned order releases standard inventory ordering data (i.e., lot size, order point, lead time, vendor information) recycling time (if applicable)
Surgical Requirements
l
EXHIBIT 4 Surgical Requirements for a Bronchoscopy
Management
OPERATION
OF THE SYSTEM
In the environment for which the system was developed, the chief nurse of the surgical suite operates as the medical analog to the materials manager. She is in charge of all surgical scheduling and equipment sterilization activities, as well as responsible for inventory management of all required medical supplies for the surgical suite including all tools, instruments and equipment, (excluding medication) required for all procedures. The storeroom, sterilization facilities, and operating rooms themselves are located in one contiguous area under her control. In this area, an inventory of more than 2000 items (equivalent to SKUs), used in conjunction with the various surgical procedures, is maintained. Inventory balances are updated by an on-line transaction-driven batch processing system that provides a complete inventory status report for the 2000 items each week. In addition, a query-driven system provides access to the current level of inventory on hand for each item. Performance appraisal of the chief nurse is based on typical customer service criteria such as performance to schedule and availability of required materials. Since the surgical suite operates as a profit center within the overall hospital framework, a negotiated carrying charge is levied against total inventory maintained in the surgical suite storeroom. Inventory writeoffs due to breakage, spoilage, and obsolescence are also charged to the costs of surgical suite operation. Therefore there 257
is sufficient incentive to practice sound materials management of balancing the demands of high customer service levels with effective management of expensive inventory. Several factors unique to the health care environment make this task less difficult: 1. Lead times are very short. Most hospital supply companies can provide virtually any piece of equipment or needed material in about half a day. 2. There are virtually never uncertainty of supply problems. In any major city, a hospital can acquire almost anything they need from a vendor. It is extremely rare that a tool, instrument or other type of surgical equipment is unavailable, even if the requirement is fairly exotic. 3. Purchasing procedures are relatively simple. In most cases, if a supply problem does exist and that problem could lead to a cancellation of a scheduled procedure, the chief of the surgical suite may readily obtain the authority to directly order the needed supplies. In addition to these factors, several other considerations make operation of the system straightforward: 1. Since the database required is not large, the entire system can be operated on a dedicated minicomputer. Given only nine operating rooms in this case and an average of two procedures per day per room, the surgical schedule file is very small. 2. The analog to the bill of material (the Surgical Requirements) file never exceeds three levels (levels 0, 1 and 2) for any product. In addition to this fortunate design feature of the system, the hospital specializes in a limited number of elective procedures which result in easy standardization of products. Most physicians will not perform every one of these procedures so, in fact, the number of products offered is less than the k x n possibilities discussed earlier. 3. Sterilization is under the direct control of the chief nurse. Therefore she has control of all facets of the materials management system. The system operation is initiated by a physician request for use of a surgical suite. A query is made to the Surgical Schedule (Master Production Schedule) by a nurse whose responsibility it is to maintain the integrity of the data in the system. This nurse (customer service representative) will respond to the physician request in a manner iden258
tical to the standard “available to promise” activity found in most manufacturing firms. If available capacity can be matched to customer requirements then that portion of the calendar is “consumed” and the surgical procedure is scheduled. In the event no capacity (operating room capacity) is available at the time requested, the schedule is searched for a time and date which the physician finds convenient. Obviously, in this environment, overloading the master schedule is not acceptable since two patients arriving for simultaneous surgery in the same operating room would generate considerable consternation. Once a procedure is scheduled, a specific product is identified (a physician performing a designated operation) and surgical material requirements are generated for level 1 and level 2 items identified on the Physician Preference Sheet. Recall that level 2 items require a sterilization lead time. A two-step procedure is then utilized for determining availability of required inventory. Step 1
Examine inventory records for required items. All items available in the storeroom which are needed for the procedure are “kitted” (gathered together in a sterile kit and labeled for the date, physician, operating room, and procedure) and set aside. Step 2
Items which are not currently available because they are being used for other procedures and require sterilization before being used again are identified. Item records for these parts are of the type shown in Figure 2. When such a requirement is identified it is added to Gross Requirements for that item which immediately forces a new gross-to-net calculation and an update of Net Requirements and Planned Order Releases or Sterilization Schedule. Of course, the protocol here is to attempt to sterilize first, then order if such capacity is not available. If level 1 components are not available, a purchase order request is generated. Because the Surgical Schedule (MPS) usually has a horizon of seven days or more (made possible because of the elective nature of most procedures) coupled with the very short lead time for resupply, the hospital rarely experiences material shortages in this category .
Final confirmation of the schedule is made by the customer (physician) 48 hours prior to each operation. This represents the “planning time fence” within which the schedule is regarded as American Production
and Inventory
Control Society
rigid and cannot be changed except in the event of dire emergency. It also represents the last opportunity for a final check of inventory kits for each procedure. Such a check includes level 1 components obtained from the storeroom or outside purchases as well as level 2 components which, if not out of sterilization should at least be in process. The entire system is designed to be operated by nursing personnel. Its success and acceptance stem from two factors: 1. Generation of reliable schedules and insurance of adequate supplies. The reduction of problems in this area leads to greater physician satisfaction and a more harmonious relationship with nursing personnel. 2. Simplicity of Operation. The system outputs are: a daily schedule of surgical procedures, a list of items to be picked from storeroom, a list of items for outside purchase, and a sterilization schedule. IMPLEMENTATION CONSIDERATIONS
The key to implementing effective materials management systems in health care applications of this type is system performance as measured in two areas: 1. Customer Service-Does it give the physician what he wants when he needs it? It is our experience that unless the physician is convinced that the system will not endanger the lives or well being of his patients by saving on what he perceives as “nickel and dime” items, the system has little chance of success. Instead, customer service must be sold to physicians in the guise of a system that assures availability of needed supplies, tools, and instruments. 2. Cost Effectiveness-Does the hospital administrator believe the system will save money while still meeting customer service objectives? Elimination of costly excessive safety stocks (especially of short shelf life items), better inventory record accuracy and more reliable schedules which tend to eliminate bothersome last minute crises are important features, $ these enhancements are coupled with real cost reductions. One of the truly vexing problems in the transfer of manufacturing management technology to the health care environment has been the need for product definition. Materials management systems depend on a well-defined and structured set Journal of Operations Management
of deliverables to “drive” the entire system. At the outset of this project, considerable time and effort went into the development of such a definition. In determining that each product was a particular surgical procedure performed by a specific physician, we resolved this issue early on. In other areas of health care such as emergency room service, children’s ward operations, or others, such a product is not so clearly defined. The first step in most efforts at technology transfer is to draw parallels between the old and new environments. In manufacturing, product definition is almost always a given. in health care, the final product is not so clearly defined. Since health care remains an area of significant potential for transfer of management technology, future research that specifically defines deliverables in the health care environment could become meaningful contributions to important cost containment efforts. CONCLUDING REMARKS
The application of requirements planning to the surgical suite demonstrates how job shop related techniques can be employed in a non-manufacturing environment with resource and time constraints but without a physical final product. It furnishes hospital administrators a vehicle to better understand and control the investment in material and supplies in this rapidly increasing cost area. Furthermore, the use of MRP-based technology insures that materials will be available when needed, protects against the overcapitalization of inventory and aids in formulating and adjusting reordering policies. Because the costs of hospital care have risen far more rapidly than the rate of inflation during the past 15 years, local, state, and federal governments have escalated regulatory efforts to contain them. In such a regulated environment, hospital administrators have begun to recognize the need to borrow proven management techniques from business to survive in the health care market (Goldsmith, 1980). While MRP’s application in the surgical suite will not by itself drastically reduce the cost of health care, when combined with new forms of health care delivery, it promises to contribute to a dampening of rising hospital costs. REFERENCES Jeff C. Goldsmith, “The Health Care Market: Can Hospitals Survive?” Hanard Business Review, September-October 1980, pp. 100-l 12. Qrlicky. Joseph. ‘~ffte~~al Keqt~i~et~~~t.sP/~~t?ni~~,McGraw Hill, 1975. Plossl, George, Munufacruring Control, Reston Publishing, 1973. 259