4 Strategies for Lower Supply Costs in Ambulatory Surgery Centers

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Supply costs are one of the two biggest expenses for surgery centers, the other being staffing. Here four surgery center experts discuss how ASCs can lower supply costs while maintaining quality and keeping physicians happy.

1. Track medical supply costs per case. Keep track of average cost per case, which would include the cost of disposable supplies and implants. This is important because supplies are one of the two biggest costs for surgery centers, and high supply costs can easily eat away at case profitability. Nick Newsad of HealthCare Appraisers recommends drilling down and looking at average medical costs per specialty or per physician.

For example, you might look at medical supply costs per physician and discover one of your ophthalmologists is a significant outlier because he or she uses a particular type of cataract lens that the others don't use. "You would then need to determine if you can collect a little more from the patient on that [lens] if it's not [fully covered]," he says

2. Understand your vendor and distributor relationships.
Vendors and distributors can be great assets to surgery centers if they make the effort to work with them. For example, distributors can provide reports on service levels, stock levels and shipping rates — information that can help ASCs identify pricey services and thereby reduce costs. She says it's important to have a "go to" person from your distributor who can explain your options and communicate price changes.

Ann Geier with ASCOA says vendor relationships are equally important, since sales reps can be allies or enemies in the ASC. She says it's important that reps understand aseptic technique, as well as what they can touch and not touch. Many centers are now requiring the use of The best vendors will train their sales reps on these standards. Ms. Geier says it's also important to build a good relationship with your sales reps, since they are generally close to your surgeons. You need a vendor who will really work with you to find the lowest price at the best quality, instead of undermining your authority by going straight to the surgeon.

3. Continuously renegotiate supply contracts. Dedicate one person at the surgery center or management company to track the most commonly used items at the center and review those contracts annually. Renegotiating high volume contracts stands to save surgery centers the most money in the future.

"We use a lot of sutures in our surgery centers, and they cost a lot of money," says Charles Dailey, vice president of development at ASD Management. "We renegotiate those contracts all the time for better pricing. A lot of centers also have a high volume of eye implants. I make a special contract for those and look very closely at negotiating the best rate for our volume."

These renegotiations take a lot of focus, so zero in on a few items and develop a relationship with those manufacturers and distributors. Also work with physicians to streamline implant choices.

"Some vendors will provide you the device and assist you in informing and training your physician as to the benefits of the lower cost device," says Mr. Scott. "You can also put the surgeon in touch with other physicians and specialists in the area that are using a particular implant so they can talk amongst themselves about the benefits of a particular device.  Keeping the physicians informed and getting their buy-in is what counts."

4. Be flexible about switching suppliers or reducing the number of suppliers.
Narrowing the number of suppliers from whom specific supplies are purchased can also be an effective strategy, says Richard Peters, senior director of surgery services for Provista. However, before journeying down this path, make sure you are fully aware of physician sensitivities and loyalties to specific products. Recognize that suppliers often have long-standing relationships with physicians that strongly influence the final decisions about product selection and utilization. If a single source contract just won't fly, work with them to reduce the number of suppliers for that product to as few as possible.

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