6 Effective Steps to Lower ASC Materials Costs

Amy Gagliardi on ASC materials managementAmy Gagliardi, Vice President, Supply Chain for Regent Surgical Health, discusses six steps to lower materials costs at ambulatory surgery centers.

1. Optimize reprocessing potential.
There are some products that can be reprocessed, which has the potential to save surgery centers 50 percent on the purchase price of each item. Companies that provide reprocessing services, such as Medisiss and Stryker Ascent, must withstand a rigorous FDA clearance process to ensure their products are safe to reuse.

"When you look at the facts of what the FDA requires, the integrity of a reprocessed item faces tougher scrutiny than the original item," says Ms. Gagliardi. "The guidelines for reprocessing an item are as strict — if not more strict — than the manufacturer's initial production specifications. You are getting an item back that is, at a minimum, twice as compliant as the original product."

To bring reprocessed supplies into the surgery center, the ASC administrator must:

•    Investigate each reprocessing company within the market and decide which is most closely aligned with the ASC's needs;
•    Educate clinical staff about reprocessing and its benefits;
•    Involve physician partners to gain buy-in ;
•    Hold a reprocessing in-service day where your company representative talks to the staff;
•    Conduct an assessment of workflow to find and eliminate potential waste;
•    Invite reprocessing representatives to present at your board meeting to engage physician partners in the process.

"Tout the integrity and potential cost savings to physicians," says Ms. Gagliardi. "The beauty of reprocessing is that there is minimal work effort on the surgery centers part because we can toss everything into the bin and the reprocessors will sort it out and make the decision about whether it can be reprocessed or disposed of. Even when a product is disposed of, the organization will take care of it in an environmentally sound way. We are being socially conscious, and that is a big selling point."

2. Continuously evaluate and update GPO contracts. Continually evaluate group purchasing organization contracts to optimize savings opportunities. Most GPO organizations have multiple tier levels, meaning the more you purchase, the more you save. As your surgery center grows and changes, make sure you are reaching the maximum tier level within your contract.

"If your ENT use was low last year but is reaching $50,000 this year, see if you can qualify for a new tier," says Ms. Gagliardi. "At Regent we have worked with our GPO to recognize us at the right tier so we can aggregate 99 percent of all surgery centers to optimize the highest possible tier level and best possible pricing."

When you are contracted with a GPO they must honor the savings at a set level once you reach that threshold. However, the ASC should track their bills and make sure the company is charging appropriately based on those contracted rates.

"You want materials management and the business office to make sure every item you purchase is being billed at the correct price," says Ms. Gagliardi. "At Regent, we use a software program that tells us if something doesn't match. For example, if we place an order for $10 and the invoice comes back for $20, our software won't allow that invoice to be paid until it is rectified. Make sure your business office and accounts payable department are working closely and intertwined with materials management."

3. Work on a rebate for non-GPO items.
There are some companies and manufacturers that don't participate in GPO portfolios, which means you aren't realizing savings for their products. These are usually high-dollar items, such as orthopedics and spine devices, so continually re-evaluate your spending to see if you can negotiate a better price with vendor representatives.

"Every six months you can take a look at your spend as a whole center and go back to the company to see what they can do for you," says Ms. Gagliardi. "We have so many moving parts that we are doing this constantly. I would recommend an ASC re-evaluate these contracts annually at a minimum."

If you aren't able to negotiate  prices you should try to negotiate a rebate program. "For X amount of dollars you spend, you will get a percentage back to lower the overall cost with rebate programs," says Ms. Gaglierdi. "We'd rather have the lower cost upfront, but if that isn't doable it's worth your time and effort to get the rebate."

4. Negotiate beneficial service agreements.
One of the major expenses that often goes unknown and unseen at ASCs are service agreements and Preventative Maintenance contracts. These agreements are really critical to the center's profitability and there is typically of room for negotiation, so don't take the first price companies quote.

"The first number should be thrown out," says Ms. Gagliardi. "I review just about every service contract in conjunction with our ASCs when we have new capital orders and I factor in a 15 percent discount on the first proposal."

In some cases there are companies that offer one-stop shopping for service agreements and if you can negotiate with a third party to service all of your service agreements you can realize up to a 30 percent discount."  The third party company will send a single representative who can help service all equipment; this can instantly drive down cost.  

"For anything from the C-arm to the video equipment there will be one specialist instead of 10 different people coming in and repairing at different levels," says Ms. Gagliardi. "We also keep a service log of when PMs are due, and at least 90 days prior to the end of the agreement we evaluate the agreement and re-negotiate. Not every agreement ends on the same day so keeping an updated log and negotiating continually on those agreements is key."

5. Negotiate freight savings.
Surgery center administrators are beginning to find ways to save on freight costs. In some cases, administrators can negotiate with a company such as OptiFreight, which has a set price with companies like UPS and FedEx which will save  up to 65 percent off inbound and outbound shipping .cost

"It requires about five hours of work on the back end from the surgery center to set up the system, but once this program is set up, the process manages itself," says Ms. Gagliardi.

These services have been around for awhile, but have only gained traction over the past few years. "The company provides online access and savings tracking with very intuitive systems," she says. "You can continually monitor what you save and evaluate those savings on a monthly basis."

6. Purchase less expensive commoditized implants from small companies.
There are some implants and materials that are truly commodities and ASCs can purchase quality products at a reduced cost from wholesale suppliers. These companies are able to offer a cost savings because they don't place device representatives in the operating room during cases.

"The newest emerging trend, which I think will be gaining market share over the next two years, with smaller companies that have obtained FDA approval on items such as  plates, screws and K-wires," says Ms. Gagliardi. "We will be able to realize significant savings once we can work with our physicians and get them comfortable with a product that doesn't have a big name behind it. Regent is in the process of trialing these products.  They key is engaging clinical staff, administration and surgeons."  t

For simple cases, surgeons can train clinical staff to assist them without device company representatives, which eliminates the cost of commission. However, make sure patient safety and quality aren't compromised with these devices.

"If we can prove this is acceptable clinically for patient safety, we can use common products from these one-off companies," says Ms Gagliardi. "I see that coming in the future, specifically for those centers that are fiscally minded and want to attack costs at the ASC at every level. Purchasing from one-off products can realize a 30 to 50 percent savings on implants and high cost disposables."  

More Articles on Surgery Centers:

8 Good Ideas for More Efficient ASC Operating Rooms

5 Big Out-of-Network Myths Debunked for ASCs

5 Reasons to Conduct Regular ASC Valuations

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