8 Steps to Cut Cost Per Case in Surgery Centers
1. Gain support from physicians. When you embark on a cost cutting initiative, it's critical to bring the surgeons onboard. You can earn their support by presenting current data and future analytics to illustrate cost savings; you should also work one-on-one to win the support of informal leaders within the group, and other surgeons will likely to follow.
"Consensus management is about building support for the initiative," says Michael Abrams, co-founder and managing partner of Numerof & Associates. "This can't be something that's done by one person because physicians will perceive it's being done to them; if that's the case you aren't likely to see much of a result no matter how convincing your analytics may be. If you are going to manage the consensus process, identify the most influential surgeon in the group and make them leaders in the effort for driving the cost per case initiative."
Build as many allies as possible and make specific physicians responsible for driving the initiatives forward. "You need to bring the physicians onboard and make it their accountability to get it done," says Mr. Abrams. "They need to be the face of the project. Put a committee in place with the influential physicians and work with them to develop a communication plan that will explain to the broader audience of physicians and other staff the strategic reason for cutting costs. They need to understand the strategic context, objectives and operational paths that will be followed."
Without proper communication, staff are more likely to resist change and the project is more likely to fail.
2. Benchmark your procedures internally for improved efficiency. Collect data on cost per case at the center for each procedure and physician to see where the surgery center needs to improve efficiency. "Start by selecting your five highest volume procedures and then calculate the cost per case for each physician within those procedures," says Mr. Abrams. "Focus on the small number of physicians that make up roughly 80 percent of the cases in each procedure."
Once the numbers are crunched, determine who is most efficient and share process with other surgeons.
"The larger objective would be to close the gap between the most and least efficient physicians," says Mr. Abrams. "If you can close that gap to make everyone as efficient as possible, you will do better financially as a result."
After internal benchmarking, you can use national statistics to benchmark your center against others. However, keep in mind that national statistics are the average of surgery centers across the country and you want to be well above average. "You are benchmarking yourself against the average, so strive to be much better than those numbers," says Mr. Abrams. "You want to be in the top quartile. If possible, find data sets allowing you to do that."
3. Figure out cost per case for each physician and find outliers. Calculate the cost per case for each physician at the surgery center and compare them to find any outliers on the high end of the spectrum. When there are surgeons costing the surgery center significantly more per case, speak with them privately to discuss their costs and devise a plan to lower those expenses.
"I will often take the surgeon aside and let them know a particular procedure they perform costs $500 more than other surgeons at the center," says Erika Horstmann, Director of Operations for Pinnacle III. "We provide them with ideas on how to bring their cost per case closer to the center's average. Because surgeons don't want to be known as the most expensive one in the practice, they are often willing to try alternatives. Sometimes we ask them to use a new product, and if they don't like it after trying it out we go back to the old item."
In some cases, the higher cost may be justified because the surgeon is achieving higher quality by using a different device or process. If that's the case, work with the other surgeons to bring them up to speed.
"If you find the physician is more expensive than others but you can show he or she has better outcomes as a result, you might want to have the other physicians copy his or her approach," says Mr. Abrams. "It's all about whether there is value in the high costs."
4. Cut costs on top items. Look at the 10 or 20 top items used at the surgery center — such as syringes and tubing — and determine if there are ways you can cut those costs. Ms. Horstmann notes in some cases you can achieve a cost savings by purchasing products with private labels from your distributors instead of name brand products.
You can also work with physicians to standardize products. "If you have three different types of gloves, ask your surgeons to try them on and choose which one they like best," says Ms. Horstmann. "Standardizing these products will provide you with cost savings."
5. Eliminate waste in custom packs. If your surgeons have custom packs, make sure they are using everything in the packs. If something goes unused, the surgical team should not open the package. "If there is something we don't use on the physician preference cards, we don't open it. That saves on costs for items like shaver blades," indicates Ms. Horstmann. "We include surgeons on the decisions about what should and should not be opened. When surgeons want everything opened just in case, we tell them how much it costs just to open an item as well as the cost burden on our surgery center when it's wasted."
You can also go a step further by eliminating the unused item from the custom packs.
"We look at custom packs annually to ensure we are using everything in the pack and not wasting any of it," states Ms. Horstmann. "We also obtain bids from different vendors to ensure we are receiving the most competitive pricing. Last time we did this, we saved $100 per pack, which is significant savings."
6. Review costs often to ensure you are paying the lowest price. Review your contracts for surgery center items and make sure vendors are charging you the correct amount. You should also compare costs with other vendors in the area to make sure you're paying the lowest price possible.
"We make sure what we are actually paying for our items matches the contract. We also compare vendors to ensure we are paying the lowest amount overall," says Ms. Horstmann. "If a 5 percent increase is incurred in materials and we determine savings can be achieved, we switch to a new vendor. Our materials coordinator is extremely important in making sure the pricing is actually what is outlined in our contracts."
During the cost review, also review contracts and make sure vendors aren't sneaking in any additional fees. "If you detect additional fees they didn't tell you about, call them on it and make sure they remove them," suggests Ms. Horstmann.
If your surgery center contracts with a group purchasing organization and you discover a difference between your contracted and billed rate, contact the GPO about downloading the correct contract from your vendor. "Sometimes your contract isn't in their system. We know what the pricing should be but the distributor or vendor does not have the contract loaded properly in their system which results in higher costs," says Ms. Horstmann. "They need to download that contract to ensure correct pricing."
7. Maximize staff costs per case. After materials costs, the most significant costs per case are staffing. Review staff hours to make sure there isn't any unnecessary overtime or wasted time per case. In some instances, staff members may need to demonstrate flexibility by taking on more hours or leaving early. Flexing staffing with actual work flow helps keep staff costs low.
"I move staff around almost daily. In some cases they may be scheduled for a day off but a surgeon schedules a last minute case so I need them to come in," says Ms. Horstmann. "My staff expects to be moved around frequently. I tell potential staff during the interview process that ASCs are different from hospitals and we work when surgeons are working."
Ms. Horstmann initially schedules her staff on a staggered schedule so they come in at different times and fill in where needed. "Employees are our biggest cost besides supplies, therefore we monitor their time very closely," she states. "Staff who typically work in surgery centers are familiar with this type of scheduling and the flexibility that is required with their hours."
8. Communicate expectations and results effectively. It's important to communicate effectively with the center's surgeons about your cost cutting initiatives. This means speaking to them in terms of data and the financial impact these initiatives will have on the surgery center and their investment.
"You need to analyze the financial impact of the cost per case differential on the performance of the ASC and be prepared to talk about the initiative in terms of that financial impact," says Mr. Abrams. "If you modeled out what it would mean to the performance of the ASC to close the gap between the most and least cost-effective surgeon on high volume procedures, this will translate meaningfully to the surgeons. Show them how it would impact the bottom line; that will go a long way to winning support for your effort."
After implementing your initiative, maintain regular communication with the surgeons to remind them about the initiative and share the real impact with them.
"Have regular communication that focuses on cost per case so you can show historical trends and real time results," says Mr. Abrams. "You want to make sure you are showing them the impact. Just by shining a light on what is being done and raising people's awareness, you will make them think harder about what they are doing to drive down costs."
More Articles on Surgery Centers:
6 Ways to Prevent Physicians From Leaving Your ASC
How Many Surgery Centers Do Management Companies Oversee? 44 Statistics
Bundled Payments, Narrow Networks & Acquisitions: 5 ASC Reimbursement Trends to Expect in 2013
© Copyright ASC COMMUNICATIONS 2012. Interested in LINKING to or REPRINTING this content? View our policies by clicking here.
To receive the latest hospital and health system business and legal news and analysis from Becker's Hospital Review, sign-up for the free Becker's Hospital Review E-weekly by clicking here.
- How Physician Thinking Changes After Working in ACOs
- 2014 Financial Impact Analysis Doesn't Stop With CMS' Final Rule: Don't Neglect CMS NCCI Edits
- 4 Drivers of Recent M&A Activity in Healthcare
- 8 Reasons to Outsource Medical Billing Services
- 5 ICD-10 Transition Considerations Medical Practices Have Likely Not Thought About