10 Surgery Center Cost-Cutting Measures That Work

Here are 10 ways ambulatory surgery centers have reduced their costs and grown their bottomline.

 

1. Count inventory weekly. Amarillo (Texas) Endoscopy Center uses a specific protocol that allows the center to only order and have on hand enough supplies to last through one week. By setting the goal of counting inventory every month, the facility can then make a reasoned judgment of what items are needed for the next week.

"We counted how many patients we have per month and came up with numbers for each item we need on a weekly basis," says Freida Toler, administrator. "So each week, for example, we need to have eight bags of gauze sponges. If we're down by two bags, we order six to meet the quota of eight bags. It's based on case volume so that we don't keep a stock of any certain item for a long time and let it expire."

 

2. Keep inventory low. Linda Ruterbories, nurse practitioner and director of surgical services at OA Surgery Center in Portland, Maine, says overstocking shelves with inventory is a surefire way to tie up those precious dollars. She entered into a working agreement with vendors, who agreed to house supplies at a nearby warehouse so the center would not have to pay expenses for overnight delivery of supplies.

"The vendors promise to have a certain level of inventory stored away in those warehouses, so in case we have any weather-related or back-order problems, the center avoids the risk of being low on supplies needed to run the facility," he says. "On the other hand, that also means we are not paying double the cost to have extra inventory."

 

3. Take advantage of free trials. Surgery centers can actively pursue free trials of equipment and supplies before committing to a big purchase. "We're always open to hearing what new product a vendor may have, especially if it's at a lower cost than one we're already using," says Jaime Wilber, director of nursing at Ashtabula (Ohio) Surgery Center says. "One time, we had a vendor come in with a new product for rotator cuff repair, and we asked to try them for free. After one of our orthopedic physicians tried them out, we agreed to purchase the implants from that vendor."

In aggressively pursuing better deals with different vendors, Ms. Wilber says there may at times be an added incentive in the form of free accompanying equipment to go with the purchase. "There's equipment a physician needs to drill holes to put the shoulder cuff implant into place," she says. "After we purchased the new implants for rotator cuff repair, they gave us the accompanying equipment for free."


4. Package special deals with vendors. Sometimes an ASC can negotiate special deals to lower costs, such as bundling products, according to Mike Pankey, RN, administrator of Ambulatory Surgery Center of Spartanburg (S.C.). Under this arrangement, the ASC could lease an arthroscopy tower at little or no upfront charge in return for committing to buying the company's shaver blade or high energy wand for a period of time. In each purchase of a disposable, the ASC pays the company an extra fee toward the cost of the tower. To save more money, the ASC could them negotiate a lower unit cost of the disposable, so that the new total price with the fee included is equal to the previous price.

 

5. Reap benefits of using credit cards. Making your supply and equipment purchases with credit cards can yield savings in a few ways. If you agree to pay for all of your purchases by credit card, some vendors may waive shipping and freight fees, says Lori Vernon, regional vice president of operations of Health Inventures. "Just the same as we sometimes ask our patients to provide a credit card which we will hit with their patient balance when their EOB comes in, the vendor will allow the ASC to do the same thing and they hit [the ASC's credit card] as invoices occur," she says. "Obviously you still need to monitor those invoices carefully for accuracy. But the vendor is getting their money in a very quick turnaround and you can leverage some of that negotiation for shipping and freight."

 

As you make these purchases, and any purchases with a credit card, if you are using a card with a rewards program, you can apply these rewards to other expenses such as travel, supply discounts or cash. "With the dollar amounts ASCs put on those, there's really some potential there," says Ms. Vernon.

 

6. Focus on creative vendor relationships. ASCs should consider how to make creative business relationships work for both the center and vendors. One way OA Surgery Center in Portland, Maine, has achieved successful vendor relations is by promising their business and sharing costs for delivering supplies.

"If your center is having inventory delivered three days a week, paying for freight expenses can really add up," says Linda Ruterbories, nurse practitioner and director of surgical services. "If you can get vendors to share the expenses for shipping, it can help tremendously. That way, the vendor gets the ASC's business and the center doesn't have to pay for all freight expenses."

Another way OA Surgery Center is making vendor relationships work for them is through supply storage. Overstocking shelves with inventory is a surefire way to tie up those precious dollars. Ms. Ruterbories says she entered into a working agreement with vendors, who agreed to house supplies at a nearby warehouse so the center would not have to pay expenses for overnight delivery of supplies.

"The vendors promise to have a certain level of inventory stored away in those warehouses, so in case we have any weather-related or back-order problems, the center avoids the risk of being low on supplies needed to run the facility," she says. "On the other hand, that also means we are not paying double the cost to have extra inventory."


7. Maintain staffing expenses. As one of the more easily controlled costs in operating an ASC, closely monitoring staffing expenses is critical in keeping costs low, according to Administrator Parth Zaveri and Clinical Manager Susan Rahn of the Endoscopy Center of St. Louis. Work schedules at the center are managed in an efficient manner to make sure physicians, nurses and technicians alike are only at the facility at the times they are needed. This includes sending staff home after procedures are done for the day, controlling when exactly staff members are scheduled to work and having the right associates there for the right tasks.

"ASCs have more flexibility with hours, so you don't want to pay staff when patients aren't here," Ms. Rahn says. "Part of the way to contain cost is having the correct [staff member] there at the correct times. You want registered nurses there for [scheduled procedures registered nurses can do] or utilize technicians for other procedures such as scope reprocessing and data entry."

 

8. Cut lock box fees. Stephanie York, director business office operations, of Health Inventures, says a significant portion of the Health Inventures' centers have saved substantial costs on lock box and banking fees by implementing electronic check deposits along with electronic funds transfers and electronic remittance. "Electronic checking was fairly new a few years ago but now I find it nationally at banks," she says.


9. Consider commodity implants. Prices of commodity implants are typically less than 50 percent of the average market cost of premium implants, according to Richard A. Kube, MD, CEO of Prairie Spine & Pain Institute in Peoria, Ill. The commodity implant can be used for a variety of cases, such as one-level lumbar fusion, basic rotator cuff repair or a basic suture anchor. For example, the commodity implant for a one-level lumbar fusion costs $2,500-$3,000, compared with $14,000-$15,000 for full invoice price for the premium version for a savings of $12,000 on one case. Even with typical hospital and provider discounts, the surgeon can still save $5,000-$7,000 per case. "A spine surgeon who uses commodity implants for most of his surgeries could realize a half million dollars in savings a year," says Dr. Kube.

 

10. Renegotiate your real estate lease. According to Brien Fausone, administrator of Michigan Endoscopy Center in Farmington Hills, renegotiating a real estate lease in a down economy can produce significant savings. His ASC was three-quarters of the way through their 10-year lease, and property values in the surrounding area had plummeted. To determine a reasonable property value in his neighborhood, he called a local broker and asked for price comparisons on similar office space based on square footage. "I got a ton of data back, and I started looking at it and realized we could save 10-20 percent," he says.

Armed with that crucial information, he met with his landlord and and asked for 3,000 square feet of additional building space, as well as a lease renegotiation. "I said, 'I'm going to break my lease and move if you don't renegotiate a better lease,'" he says. "I got somebody's attention because we got another contiguous 3,000 feet that I needed to expand my waiting room, and then I renegotiated the square footage rate." Through presenting the landlord with appraisals of similar land — and threatening to move, thereby removing the landlord's biggest building tenant — Mr. Fausone was able to add 3,000 square feet and produce a lower overall rental rate.

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