Lowering Physician & Operating Room Costs Per Case at Surgery Centers: Q&A With Michael Abrams of Numerof & Associates

There are several ways a surgery center administrator can cut costs from materials management to revenue cycle review, but one of the least-charted territories has been cutting costs related to clinical decision making.

Michael Abrams"Most delivery organizations have had some kind of cost efficiency activity going on for the last decade, but the general focus has been on everything except what physicians do," says Michael Abrams, co-founder and managing partner of Numerof & Associates. "A lot of cost savings have come from consolidating and negotiating more intensively with suppliers, and from outsourcing — everything but what is going on in the operating room between physicians and patients. I think it's time to take a look at that."

Here, Mr. Abrams discusses how surgery center administrators can approach cutting cost per case by working with physicians to eliminate waste and promote efficiency in the operating room.

Q: What are the essential elements of a physician-focused cost cutting program at a surgery center?

Michael Abrams:
There are two broad considerations: one is analytics, or how you go about the analysis of your data; and the other, which is at least as important as analytics, is consensus management. No matter how good your analysis is, if you can't gain some consensus among the physicians who need to change their behavior, the best analysis in the world doesn't get you anywhere.

Q: What statistics should you gather to assess the efficiency of each surgeon?

MA: The analytic task is detective work; it's about identifying outliers and researching the cost drivers behind those outliers. Once you identify cost drivers, research alternative approaches that reduce or eliminate the cost drivers. Start by benchmarking internally to close the gap between the most and least cost effective physicians. If you can close that gap and get everyone to be as efficient as the most efficient physician on your staff, it will have a positive financial impact on the center.

I would start by selecting your five highest volume procedures and within those procedures calculating the cost per case for the highest volume physicians. You want to focus on that small number of physicians who make up roughly 80 percent of the cases in each procedure. The physicians you will focus on vary from procedure to procedure, depending on which surgeons do the bulk of the work in that particular area. For your highest volume procedures, know who the physicians are who do most of the work and complete a cost per case analysis for each of them.

However, you can't stop there — you have to dig deeper into the nature of the differences between charges typically generated.

Q: What areas typically show the biggest differences between physicians?

Typically, we see differences in charges for labs, imaging, supply costs, operating room and physician charges. Once you have the cost per case broken down for the handful of surgeons who account for most of the work, analyze your data for differences and discuss where those differences come from. One physician might be spending more time in the operating room, or another might have higher supply costs for some reason. Some physicians might drive up costs by using more diagnostics.

Once you've identified by category what the differences are, you need to drill down further and find out why one physician is more expensive; figure out which labs that surgeon is ordering that drives up the cost. If someone is an outlier on supplies, drill down on records to understand what supplies are driving that cost. I think it's also important to collect processes and outcomes data on cases by physician to understand the potential quality impact. If you find a physician who is more expensive than others, but has a better outcome as a result, you might want to have the other physicians copy his or her approach.

At this point, you really need to supplement your understanding of the big picture with some interviews with each of the physicians and speak about their protocols. Figure out what their plans are for doing this procedure and what considerations and evidence are driving these decisions.

Q: How do you usually approach these discussions?

First and foremost, surgeons are trained to be scientists and they generally respond to data. If you can show a physician that his or her costs in a particular area or category are significantly higher than his peers, and explain why they are higher, they are typically receptive. There needs to be a discussion on whether or not their higher costs have higher value in terms of safety, recovery, or other clinical outcome.

In one instance, we looked at the way a particular procedure was being done through the development of a care path that showed key activities and decisions. The care path showed routine use of three different diagnostic tests. We reviewed that with another surgeon who was also part of the group, and he said the most current scientific research showed the second two diagnostic tests were unnecessary because they didn't provide any additional information beyond the first. Sometimes surgeons need to hear that recent research offers evidence for changing their practice. They might not know some of these updates, so getting an outside point of view can help.

Q: How do you build consensus among the surgeons for cost-cutting initiatives?

If you are going to manage the consensus process, identify the most influential surgeons in the group and make them leaders in the effort to drive down cost per case. You need to bring physicians on board and make them accountable for getting it done. They should agree it needs to be done and take responsibility for driving the efforts going forward. These physician leaders should be the face of the project. You should put together a committee with influential physicians and work with them to develop a communication plan that will explain to the entire audience of physicians and other staff your strategic reason for cutting costs.

They need to understand the strategic context and objectives, and what operational path they need to follow. If you don't do a good job of communicating these things to the broader audience, they will be anxious and more resistant to it. This is part of minimizing resistant to educate them about where you are going.

Q: How do you choose the physician leaders?

MA: You can choose people as leaders because they have expertise in a particular procedure. People are more than happy to be anointed the champion based on their expertise. It is important to have one person who owns the project.

Q: How often do you meet with the surgeons to discuss the initiative and its progress?

You need to have regular meetings to share findings and discuss the next steps. Surgeons need to be engaged and have the ability to talk about the next step from their point of view. Work with the committee as a whole and with individual members to prepare them for a discussion about your findings. This is really new territory, because historically physicians have had the freedom to operate the way they saw fit, as long as they didn't cause trouble. The situation in which anyone goes to physicians and presents them with data telling them where they are is oftentimes a very compelling argument itself.

Physicians by their nature are very competitive and nobody wants to look like the most expensive surgeon in the group — at least not without justification. Being able to present data and appealing to that competitive instinct will help physicians change their approach.

More broadly, 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 the financial impact. 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

Q: When you apply external benchmarks, where do you ideally want your case costing benchmarks to be?

MA: Once you have utilized internal benchmarking to close the gap between the most and least effective physicians, you can complete the process using external data. The advantage of starting with internal benchmarking is you eliminate the argument that the differences that appear between the physician and benchmark data are attributable to some characteristics that aren't true of the benchmark, such as overhead structure, patient acuity,  or region of the country. You might also be limited in your level of specificity by the granularity of the comparative data.

When you get external data, you are getting it from everyone — people who are efficient as well as people who are not; you are getting the average of whatever is out there. You can benchmark yourself against average and strive to be average, but what you really want to be is the best. You want to be in the top quartile, if your dataset will allow you to see that.

More Articles on Surgery Centers:

10 Good Ideas to Grow Single-Specialty Surgery Center Case Volume

10 New Surgery Center Openings & Announcements

15 Statistics on Orthopedic Net Revenue in ASCs

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