10 Steps to Immediately Improve Surgery Center Profits: Cost Reduction & Benchmarking

Conference Session 3At the 11th Annual Orthopedic, Spine & Pain Management-Driven ASC Conference in Chicago on June 14, Senior Vice President of Operations at Ambulatory Surgical Centers of America Ann Geier and Chief Financial Officer Robert Westergard gave a presentation titled "Cost Reduction and Benchmarking: 10 Steps to Immediately Improve Profits."


1. Manage your evolving workforce. Define the evolving workforce market, depending on what age group of employees you have at your centers and maximize the generational differences. "The baby boomers are aging out and will need healthcare," said Ms. Geier. "There also may be a 30 percent shortfall in young workers and that could last for a long time."

Surgery center administrators should be aware of the different attitudes, goals and job training between the generations of employees. Use multiple types of communication tactics and talk to each employee based on where Conference Session 4they come from. "Adopt a management style for each generation," she said. "Draw on the strengths of each generation."

2. Manage change.
It's difficult to convince surgeons to change their behavior as the healthcare environment changes, but your success depends on whether you are able to motivate them to make that change. Know who spearheads change within the organization and acquire their buy-in to help convert others.

"Figure out what motivates the surgeons and employees — money or acceptance," said Ms. Geier. "What information do they need from you? What is the best way to receive that information? What is the current opinion of your work? Is it based on good information? Use the 'ladder of influence' within the organization to recalibrate the way people think."

3. Materials management.
Supply — along with labor — is among the largest costs for an ASC. These costs are controllable, but they must be monitored and administrators should have checks and balances in place. For inventory management, use a software program that keeps everything updated, including physician preference cards, and adjust bulk items as needed.

"Hire a good materials management person with a Type A personality," said Ms. Geier. "ASCs cannot afford to ignore the computerized inventory management system. Assign one person to enter data and keep preference cards updated."

She also suggests limiting inventory on hand and work closely with vendors to consign as much as possible. However, for drugs that are in a shortage, empower a nurse to order large quantities when available so the ASC doesn't have to cancel cases when it goes in short supply again.

4. Case costing.
Do monthly reviews of case costing and time in the operating room to really understand what each procedure costs. "The revenue generator for the center is the minutes spent in the operating room," said Mr. Westergard. "Total OR minutes is how we look at things because it's the best way to tie the revenue to the operating room per minute."

Surgeons with different case costs can discuss best practices and find an opportunity to cut costs wherever possible. "Find where your opportunities are — usually in supply costs — and pursue them," said Ms. Geier.

5. Recruit new physicians.
It's becoming more difficult to recruit new physicians because many are either already invested in an ASC or becoming employed by the hospital. "Target specialties like orthopedics, pain and spine," said Ms. Geier. "Have the surgeons trial cases at your center and give them the VIP treatment protocol. Make sure top managers at your center work with new physicians and talk about how you can do things differently."

6. Staffing.
An ASC's core staff of full time employees is based on scheduling assumptions; business office staff are usually full time, but with clinical staff Ms. Geier doesn't guarantee set hours. ASCOA centers supplement with part-time and per diem staff members. Make sure you have experts available in all parts of the business.

"At ASCOA we believe that your collector is the most important person at the ASC," said Ms. Geier. "If you match a good biller with the collections office, your AR days will go down."

7. Schedule compression.
ASC leaders should determine preferred schedule times for each surgeon, but also educate them about vertical scheduling models. "Involve your nurse manager to see if you can sell the surgeons on schedule compression," said Mr. Westergard. "Meet with the schedulers often and make sure they know how to coordinate with a compressed system."

8. Financial management.
Healthcare reform is meant to increase access to care and reduce cost, and new insurance models will have an impact on surgery centers. "There will be continued downward pressure, so administrators should do financial management, benchmarking and billing strategy," said Mr. Westergard. "Have your ear to the ground at all times. For a good relationship with accountants and managers of the company and report on the center's progress so everyone has a sense of what is going on."

It's important to have a relationship with a bank and a line of credit for a "rainy day." Do periodic reporting to the bank and protect yourself from check fraud.

9. Billing and collections.
This part of the center cannot be neglected; things might be tight, but if you tighten where billing and collections are concerned things will be worse everywhere else. The transcription and coding should be turned around quickly and makes sure everyone on the billing and collections side has updated training.

"The administrator has to be responsible for everything," said Mr. Westergard. "You have to know what the AR process is and figure out why they are high or low. Track your success and report on the results daily. Let patients know what their payments will be and collect from them as soon as possible."

10. Participate in benchmarking.
Compare yourself to your peers and hold yourselves above the standard. "Benchmarking isn't perfect, but we can improve what we are doing poorly and focus on holding the line on what we are doing well," said Mr. Westergard. "Do it to improve quality, performance and profit, and it's required for accreditation."

Also benchmark financial statistics, such as EBIDTA margin and case volume, and stick to your goals for the day. Payroll is another area where it's important to benchmark and avoid overtime and nursing agencies.

"If you don't manage your finances, they will manage you," said Mr. Westergard. "Know what is going on and exercise the control you can."

More Articles on Surgery Centers:

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Politics in Healthcare: What ASC, Orthopedic Leaders See Coming Down the Pike

12 Recent Surgery Center Openings & Announcements

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