Case Study: Optimizing Reductions in ASC Supply Costs

The reduction and control of supply costs has always been critical to a surgery center's success and profitability. The Lexington Clinic Ambulatory Surgery Center (ASC), part of central Kentucky's oldest and largest multi-specialty medical group, which is made up of a 200-provider, 18-facility network, continuously strives to identify ways to reduce its medical/surgical supply costs and per unit transaction costs.

Lexington Clinic ASC has more than 40 physicians and surgeons who perform outpatient surgery, endoscopy and interventional pain management procedures in more than 15 different specialties. The center performs an average of 9,500-10,500 procedures annually.

By utilizing case costing information, exerting large group buying power through a group purchasing organization (GPO) and optimizing the use of their contracts with vendors, Lexington Clinic was able to reduce the ASC medical/surgical supply costs by 6 percent in one year and was able to reduce its bulk supply inventory by 29 percent.

This achievement resulted in the center's recognition by Amerinet, a leading group purchasing organization, at its annual member conference this year.

Cari Scordo, purchasing director of the Lexington Clinic and Ashley Karathanasis, administrator of the Lexington Clinic ASC, discuss the following three ways in which their organization was able to reduce supply costs successfully.

1. Standardizing a large practice
One of the biggest challenges for the Lexington Clinic ASC was handling the physician preference variations. Each physician had unique item preferences, and ordering according to those preferences led to a growing number of bulk supplies on hand. The need to have a unified organizational approach for product standardization became necessary. 

Reviewing case costing data across specialties and identifying areas of improvement were crucial to the success of Lexington Clinic ASC's cost saving challenge. "We looked at lowering costs and entering into consignment agreements with companies," Ms. Karathanasis says.

Lexington Clinic ASC also ran trials on products to determine the differences, if any, between the brands used and if any could be consolidated. "The goal was to make the best purchase by matching products to clinical criteria, while standardizing brands and achieving cost savings," Ms. Scordo says.

Once all of the data was collected, the information was shared with the physicians and clinical staff. "When we used the data to show the potential savings and effects on procedures, the physicians and staff were receptive to fully implementing the standardization," Ms. Scordo says.

2. Maximizing medical/surgical distributors and contracts
When Lexington Clinic ASC opened, both national and local distributors were used for medical and surgical supplies. As staff learned more about the ASC supply industry, Lexington Clinic ASC decided to look into new options for controlling costs. After shopping around at national, regional and local levels and gaining experience with exclusive relationships at those levels, Lexington Clinic chose to work with a regional distributor. "They had more offices and the markup was less," Ms. Scordo says. "We started with the surgery center and saw an almost seamless transition. Six months later, we switched all of Lexington Clinic's medical/surgical supply business over because it worked very well at the ASC."

Lexington Clinic ASC also used the contract service provided by its GPO, Amerinet, to see if they could extend their cost savings. "We saw that our pricing could change on the products we purchased based on the brands offered through our GPO, while not compromising quality," Ms. Scordo says. "Often, contracts were already in place, so we did not have to go to the drawing board every time we wanted to renegotiate," she says. In addition to using contracts through the GPO, Lexington Clinic worked on renegotiating other local vendor contracts to help further reduce costs.

For example, Lexington Clinic ASC used this technique to reduce prices on implants, especially those used for orthopedic surgeries. It worked with two companies who manufacture very similar products. "By providing annual quantities and opportunities for them to increase their business, both companies were very willing to provide better pricing," says Ms. Scordo.

"Vendors are more inclined to go through the process now," Ms. Karathanasis adds. She notes that many vendors are starting to work better with surgery centers to reduce costs. "They are looking at fitting our needs and developing long-term relationships," she says.

3. Working with the right partner
Both Ms. Scordo and Ms. Karathanasis say that researching and identifying a good purchasing partner was critical for the ASC to better manage their costs. Through the GPO, the Lexington Clinic ASC was able to improve its case costing.

For surgery centers that choose to use a GPO, it is important to find one that best meets the needs of the center. "We tried four different GPOs before deciding to use Amerinet as our sole GPO," Ms. Scordo says. "You have to perform your due diligence and see which company is the right fit." 

"We submitted our information to Amerinet who then matched that information to their contract portfolio to provide us with contract pricing for the product and/or an equivalent in order to maximize our savings," Ms. Scordo says. If a surgery center chooses to use this feature through their GPO, she notes that it is important to supply the GPO with detailed and accurate information.

Learn more about Lexington Clinic Ambulatory Surgery Center.