We operate hospitals in a market that is as challenging as any in the nation. This inescapable fact is paired with the reality that parties to the merger would not have been better off in isolation. As a merged entity, if we bite the bullet, we may come out of this episode stronger and more effective than we could have imagined. In the meantime, I won't pretend that these are the best of times.

We have identified specific benchmarks throughout the organization that will help us bring our staffing and resource use to levels comparable to other academic medical centers that are similar to ours, both in the types and severity of patients and in the positive patient outcomes they report. Benchmarking allows us to avoid across-the-board cuts, which might endanger those areas already operating at highly efficient levels. Instead, we will pinpoint specific areas where we can make improvements.

An obvious place to begin is with the $250 million we spend annually on drugs and supplies. Our immediate goal is to reduce that expenditure by 10 percent, thereby saving $25 million. Physicians will lead this effort.

Physician/administrator teams are now in place to identify and implement site- specific reductions in the following areas:

Anesthesia Drug Costs and Albumin Used Housewide: Ron Miller, M.D., and Jeff Katz, with Clifton Louie, UCSF; and Frank Sarnquist, M.D., with Betsy Williams, Stanford.

Oncology Infusion Drug Costs and Protocols: Charlotte Jacobs, M.D., Stanford, with Mary Ellen Fontana, Stanford, and Sharon Coleman, UCSF.

ICU Drug Costs, Length of Stay, and Practice Patterns: Neal Cohen, M.D., with Catherine Wittenberg, UCSF; and Norm Rizk, M.D., with Dennis Kneeppel, Stanford.

Cardiac Drug Costs, Cath Lab Supply and Practice Patterns: Bill Grossman, M.D., with Brigid Ide, UCSF; and Bruce Reitz, M.D., with Karen Rago, Stanford.

Antibiotic Use: Dick Jacobs, M.D., and Larry Mintz, M.D., with Joe Guglielmo, UCSF; and Julie Parnonnet, M.D., with Sara White, Stanford.

OR Supply and Equipment Standardization: Ted Schrock, M.D., with Deborah Avakian, UCSF; and Thomas Krummel, M.D., with Joann Rickley, Stanford.

Radiology Supply Costs: Ron Arenson, M.D., and Ernie Ring, M.D., with Ron Lipsy, UCSF; and Richard Barth, M.D., with Kathy VanCamp, Stanford.

Transplant Drug Costs: Nancy Ascher, M.D., with Clifton Louie, UCSF; and Carlos Esquivel, M.D., with Sara White, Stanford.

We are expecting these teams to identify savings opportunities in their areas and complete the necessary changes within three months. Drug and supply costs appear to be the most immediate and accessible cost savings opportunities available to us.

And while we look for new savings opportunities, I think we would be remiss if we did not take a look at a few of our recent achievements:

* A UCSF team of physicians, pulmonary specialists, pharmacists, nurses and respiratory therapists has saved more than $1,000 per patient by standardizing the approach to caring for patients with community-acquired pneumonia.

* Prior to the merger, Stanford's cardiac service line evaluated and selected a single vendor to provide UCSF Stanford's heart valves, saving $1,000 per patient in return for volume purchasing.

* Efficiency efforts by a pathway team at Lucile Packard Children's Hospital have resulted in a reduction in length of stay by 0.4 days and patient cost by $2,000.

These examples illustrate that many positive clinical results can emerge from a thoughtful analysis of our processes. The culture I would like to help create is one in which self-scrutiny and continuous improvement become habitual aspects of clinical practice. The kind of housecleaning activities we are engaged in can never be seen as complete, just as no methodology for treating patients is ever perfected.

Each year, we should ratchet our practice forward by discovering new and more effective ways to deliver clinical services. Once it becomes a habit, it may even become a satisfying experience.