Utilize Cost-Saving Devices to Economize on Supply Expenses

In the competitive ASC market, you must control supply costs in order to thrive financially. Most ASCs have implemented successful strategies to reduce costs. For example, ASCs typically standardize supplies and avoid overstocking them. However, in this evolving industry with so many skillful professionals, it is useful to share ideas and learn new strategies to employ or simply be reminded of old approaches that might need to be invigorated. Here are six tips experts suggest to control supply costs.

1. Perform cost analyses. ASCs can use the data from case costing to educate physicians and staff about the supply and equipment expenses associated with certain cases. "One of the best ways to manage supply costs is to create awareness amongst physicians and staff of the cost of certain supplies and the impact of those costs on the ASC’s profits," says David Moody, RN, BA, administrator at Knightsbridge Surgery Center in Columbus, Ohio.

ASC consultant Sandra Jones, CASC, FHFMA, LHRM, agrees: "By comparing the costs of a procedure performed by different physicians and presenting the comparison in a clear graphic form, staff and physicians are reminded about the ways costs can be minimized."

Ms. Jones recounts an ASC physician, who after being presented with a case analysis, recognized that his case cost the most and later asked the administrator how he could perform the surgery more economically. Mr. Moody describes a similar success story at Knightsbridge. He performed a cost analysis of different hernia meshes used by his physicians, which revealed a wide disparity in the cost of the meshes. Mr. Moody then reported the study to physicians and staff. After hearing the results, physicians opted for a lower-cost, but equally clinically beneficial mesh, and the ASC saved over $15,000 annually.

2. Benchmark costs against other ASCs. Benchmarking costs by CPT code amongst a company’s individual ASCs or against outside centers can help ASCs compare costs and staffing requirements to ascertain where expenses can be trimmed. "WoodrumASD has had great success using benchmarking amongst its twenty-seven centers to cut costs throughout its network," Ms. Jones reports. Single-entity ASCs that aren’t part of a bigger network can join with non-competing centers to benchmark costs per case with each other. "Creating a network of eight to 10 ASCs in different market areas to compare data on a quarterly basis is a great way for independent centers to regularly evaluate any atypical costs," advises Ms. Jones.

3. Update supply lists regularly. Update surgical packs and supply lists regularly in order to meet current needs. "Because physicians often change their surgical techniques and supplies, an ASC needs to ensure that it is not squandering money by ordering items that are no longer used," says Ms. Jones. "For this reason, an ASC should meet frequently with physicians and staff to ask them what supplies or drugs they do need, as well as those they do not need anymore."

This is particularly true with surgical packs. "Custom surgical packs are a huge drain on your bottom line if all of the items in the package are not being used," adds Mr. Moody.

Periodically, ASCs should also perform comprehensive inventory reviews to ensure that all stocked supplies and medications will be used. Mr. Moody usually performs a detailed inventory three times a year but notes that every ASC has different needs. In addition, inventory case-costing software (see tip No. 4) may allow for perpetual inventories.

4. Use inventory case-costing software. Inventory-management software can help an ASC manage supply costs on a case-by-case basis and succinctly report that information to the physicians and staff. "A system that captures every item used on every case with the ability to run in-depth case cost analyses is indispensable. By tracking inventory on each case, an ASC can easily identify outlying costs and streamline efficiencies," says Josiah Lamz, the director of marketing for OptOR Systems. In addition, by automating purchase orders, receiving, and email notifications, an ASC can have more control over inventory and ordering. Lastly, an inventory management system that provides an itemized cost breakdown of supplies per-case can be a valuable tool for billing and collections.

"One of our clients, Pacific Heights Surgery Center in San Francisco, estimates a per-case increase in revenue of 10 to 15 percent, or about $50,000 per month, by utilizing cost reports for each case," says Mr. Lamz. A cost breakdown of each case is also extremely valuable in establishing or renegotiating managed care contracts.

5. Work with different vendors to control supply costs. While working with a group purchasing organization is critical to getting discounts on supplies, there are also other methods that can help decrease supply costs. First, developing good relationships with vendors can motivate them to agree to offer volume discounts and/or provide free shipping. Talk to colleagues as well. "Networking with other ASCs on pricing can provide necessary information for an ASC to use in negotiating prices with vendors," says Gary Malinowski, ORT, the materials manager at Santa Barbara Surgery Center in California.

Second, purchase as much supplies and implants through consignment vendors as possible, especially higher priced items. "By purchasing lenses, slings and nuts, bolts and screws on consignment, our ASC has been able to stock expensive necessary supplies without disrupting our cash flow," says Mr. Moody.

Third, for high-ticket items like implantables, work with a device benefit management vendor that will assume the cost of the items and then work with the patient’s payor itself to obtain reimbursement. "This allows an ASC to use an expensive item without having to float the $10,000 to $20,000 cost of it for 60 days or have the administrative reimbursement burden," Moody adds. Moody says he has had success working with Access Mediquip (www.accessmediquip.com).

6. Use two low-tech methods to effect change. Some cost-cutting solutions are quick and easy, but make a huge impact on supply costs. For one, ASCs have had success changing supply use behavior by placing sticky notes on particular high-expense, often-used supplies in order to bring awareness to the costs of those items.

"One ASC placed sticky notes on their high-priced sutures," recounts Ms. Jones. "Upon seeing the notes, nurses reminded the physicians of the sutures’ high cost and many physicians decided to instead use the tail end of a previously opened pack of sutures."

In the aggregate, this saved the ASC tremendously on their supply expenses. Two, have the costs of each supply used in a procedure printed out on the pull ticket. "With the costs set out on the pull ticket in black and white, we found our physicians and staff were often inclined to pick their supplies more economically," Moody explains.

Sources:
Sandra Jones, CASC, FHFMA, LHRM: Director of Management Services and Development Consultant, Woodrum/ASD and Principal, Ambulatory Strategies, Inc., 13981 Paradise Lane, Dade City, FL 33525 (352) 567-6502; sjones@aboutascs.com.

Josiah Lamz: Director of Marketing, OptOr Systems, 2927 De la Vina Street, Santa Barbara, CA 93105; (805) 679.7591; jlamz@optorsystems.com; www.optorsystems.com.

Gary Malinowski, ORT: Materials Manager, Santa Barbara Surgery Center, 3045 De la Vina Street, Santa Barbara, CA 93105; (805) 569-3226; www.santabarbarasugerycenter.com.

David Moody, RN, BA: Administrator, Knightsbridge Surgery Center, 4845 Knightsbridge Boulevard, Columbus, OH 43214; (614) 273-0400; dmoody@kbsurgery.com; info@kbsurgery.com.

Matt Sweitzer: President, Alpine Surgical Equipment, Inc.; 5176 Hillsdale Circle, Suite 200, El Dorado Hills, CA. 95762; (800) 394-6911; sales@alpinesurgical.com; www.alpinesurgical.com.

Robert Welti, MD: Medical Director, Santa Barbara Surgery Center, 3045 De la Vina Street, Santa Barbara, CA 93105; (805) 569-3226; www.santabarbarasugerycenter.com.