Trends in spending
Many ASCs are faced with tighter budgets when it comes to purchasing capital equipment, but, understandably, they do not want to lose any of the quality to which their physicians and patients are accustomed. According to Mr. Ede, this means that many centers are looking into feasible alternatives to the products and services they are already using.
“There is an increased willingness to look at other options,” he says, “but they still want quality.” Rather than automatically purchasing what had been a favorite brand, surgery centers want to look at all of the brands available to them under contract so that they can get the best deal for their money.
“Purchasers have become cost-conscious across the board,” Mr. Ede says.
In a recent meeting of Amerinet’s surgery center member-input group, purchasers for ASCs said that they are facing more restrictions by the people who create their budgets on how much they can spend. Oftentimes, surgery centers are able to replace equipment that is faulty or buy new equipment for procedures that are new to the center; however, updating to the latest model or adding new machines may not be possible.
Currently, surgery centers may not be able to purchase “big ticket” items — such as high-end diagnostic imaging equipment — because spending $1 million or more on one item may not be in the budget during these economic times, according to Mr. Ede. “But, it can be ‘business as usual’ for smaller purchases based on need and efficiency,” he says.
Among these smaller equipment purchases are items like flat-panel monitors that are used in operating rooms for procedures such as colonoscopies and endoscopies. According to Mr. Ede, more ASCs are interested in purchasing monitors because they are relatively inexpensive and can improve quality at the center. Flat-panel monitors can also be used for PACS displays. PACS — a system that allows physicians to view radiology images digitally rather than on film — has become increasingly popular, he says, as hi-definition monitors can help physicians make more accurate diagnoses.
Similarly, many centers are interested in purchasing more information technology equipment, such as personal computers and related peripherals. This is another relatively inexpensive purchase that can increase the overall efficiency of a center, according to Mr. Ede.
Looking at the industry as a whole, Mr. Ede says that surgery centers are also interested in purchasing products that may give the center an advantage over competitors, such as creating an updated look and feel to the center’s waiting areas and efficiency in procedure rooms.
4 best practices for improving management of supply costs
GPOs such as Amerinet have identified and follow many valuable rules and strategies to help their clients to better manage supply costs, which can also be useful to those who handle purchasing at surgery centers. Here are four of these best practices.
1. Purchasing data management. A critical component to controlling and reducing supply costs is managing data related to supplies and spending habits. However, many surgery centers do not hire one person to devote themselves solely to purchasing, notes Mr. Ede. Therefore, the purchaser for the center may lack the time needed to figure out the most efficient way to manage supply costs through data analysis.
Data analysis includes information that can inform a surgery center where they are spending the most money, areas in which they are not spending effectively and where the center could be saving money.
“Looking at this data can help surgery centers make the best decisions when it comes to supply costs,” says Mr. Ede.
Often, centers may need additional guidance when it comes to collecting and analyzing this data, and it may be necessary to consider an outside source to help in these decisions. This can include data such as contract versus non-contract spending and contract optimization or selecting the best contract source among alternatives and several other factors, according to Mr. Ede.
Other data management areas exist, such as health information and insurance billing. Mr. Ede notes that these areas may require their own solutions that should be considered separately.
For example, outside companies may have access to data management tools that can help ASCs make informed choices when it comes to purchasing. Overall, if a center cannot afford to have someone whose only responsibility is purchasing, it may be useful to consider utilizing a third party such as a GPO rather than “starting from scratch” for data management services, he says.
“We act as advisers,” Mr. Ede says. “Many centers do not know all of their options or where they can save money. It can seem overwhelming; however, we can help sort through the various options.”
2. Medical supplies are not the only component to purchasing. Although medical supplies, including physician preference items, are the “meat and potatoes” of purchasing for GPOs and surgery centers, according to Mr. Ede, there are many other types of products and services that ASCs should also figure into their supply costs to identify opportunities for savings.
The recent economic situation has given many ASCs reasons to look into different types of services and products that are separate from medical supplies as they aim to maintain and improve the business they currently run, according to Mr. Ede.
Mr. Ede says. “These can be things you may not think about often, such as furniture. You need desks in administration, chairs for conference rooms and reception, and so on.”
These “other” services range from financial services to equipment planning. “Equipment planning is a third-party resource to help identify equipment needs and available means to management costs,” he says.
In addition, Mr. Ede mentions a portfolio of contracts for these services his company terms “Executive Resources.” He says, “These are services that can help surgery centers maintain and create an image in the marketplace.” Such products include Web site maintenance, freight services, communications (such as cell phones for employees) and products that can improve the interior look, operation and feel of a surgery center, such as new furniture or branding.
Other areas that can factor into overall supply costs include human resources services (finding well-trained clinical and non-clinical staff), communications, biomedical services and maintenance costs.
“These are key resources that may give an ASC a better presence in the community and perhaps a competitive advantage over others,” Mr. Ede says.
3. Benchmarking can help efficiently manage supply costs. As with other areas in the operation of your surgery center, it is important to see how supply costs compare with the national average and other centers.
“Many centers want to know ‘how I compare’ and see what everyone else is doing in the industry,” Mr. Ede says. “They want to keep up their competition.” He also mentions that this area — benchmarking metrics — was listed as a main concern by representatives in Amerinet’s surgery center member-input group.
These areas include inventory (how much of a product other surgery centers keep on hand at a given time), reimbursement data, changes in products or usage and warehouse information.
Other benchmarks can help surgery centers to measure their efficiency, which may extend into the area of supply costs. Mr. Ede suggests considering some of the following:
- How much should I charge for services?
- How many cases does my center handle (efficiency) in a give time such as a day/week, month, year?
- What are the most profitable procedures? What are the least possible procedures?
In addition, many centers choose to benchmark quality outcomes that can be beneficial to their operations and expenditures.
By comparing costs, centers are able to make appropriate adjustments and better utilize their spending budgets.
As with data management, it can be difficult for one person at a surgery center to maintain this information, and sometimes it is necessary to look to an outside source.
GPOs can often help centers obtain data on a variety of areas from inventory status to reimbursement. For example, Mr. Ede’s company recently compiled its benchmarking data into one place for its members allowing them to privately compare this data.
“This is an increasing trend in surgery centers,” he says. “With more regulation coming into the ASC side of the industry, centers want to make sure that they are ready and are meeting standards and guidelines. They want to be prepared.”
In addition to comparing data, many centers are interested in taking a look at what some best practices are for maintain supply costs at other centers. This can be accomplished by simple networking and asking others how they managed their supply costs or, as Mr. Ede notes, by consulting with an organization such as a GPO, which can provide access to many centers at once.
4. Refurbished equipment provides an alternative to buying new. Another area that representatives from ASCs in Amerinet’s surgery center member-input group were interested in was purchasing refurbished equipment. If done from a reputable refurbished equipment reseller, this can be an excellent option for a surgery center, according to Mr. Ede.
When considering used equipment, it is important to note that refurbished equipment this is not simply used equipment, which is resold without inspection and warrantied for performance. Rather, it is equipment that has been remanufactured and reconditioned by the manufacturer. “It is a process of converting it into like-new condition,” he says.
In addition, refurbished equipment can carry with it a warranty and certification that used equipment may not. “It’s like a certified pre-owned car,” Mr. Ede says. “You are paying less money, but someone guarantees the equipment.”
Used equipment is often bought from hospitals or centers that have gone out of business and may or not be in excellent condition and is not recertified by the manufacturer. This lack of guarantee is what Mr. Ede cautions against when considering used equipment versus refurbished equipment.
According to Mr. Ede, many centers that have the money for the equipment may now choose to use refurbished as they feel like they are getting more for their money.
“As long as you get the certified aspect, you can get value for your money,” he says. “That is something that makes you feel better about purchasing refurbished equipment.
Overall, Mr. Ede notes that it is important for surgery centers to be aware of what they are spending their money on when it comes to supply costs. He also notes that this includes many kinds of items that one may not think of initially.
As stated above, one of the biggest hurdles ASCs may encounter when determining and watching supply costs is that one person may not be able to pay the proper attention to the nuances of this area.
If this is the case, considering an outside source, such as a GPO, can be a good option for your ASC. As with a good manager, a good GPO should be able to help your center what types of items it spends the most money on and can help control costs and price and make the best options available for your center.
Mr. Ede is vice president of non-acute contracting for Amerinet, a leading group purchasing organization. Learn more at www.amerinet-gpo.com or call (800) 388-2638.
