Although expense management is always something leaders consider when managing ASCs, in recent years cutting costs has become even more important to grapple with ongoing supply disruptions, increasing costs of supplies and labor and decreasing reimbursements.
Hospitals and large health systems are struggling with the same issues, but many ASCs do not have the resources available to their larger counterparts. Becker's recently connected with ASC leaders to see how they are managing to stay afloat.
Editor's note: These responses have been lightly edited for length and clarity.
Question: What is your strategy for dealing with rising practice costs?
Suzi Cunningham. Administrator of Advanced Ambulatory Surgery Center (Redlands, Calif.). Honestly, at AASC, we are mindful of every expense. Staffing, supplies, medication, service agreements, and so on. Expenses are reviewed monthly, quarterly, annually and year over year. The saying is true, be careful not to be penny wise and dollar foolish. For example, it costs a lot more time, resources, and in the end, money to keep hiring and re-training staff. We are finding it is wiser to pay our staff well and keep them long term rather than deal with the high cost of turnover.
We also have been reconsidering the wisdom of service agreements. The cost of our equipment is high enough; then to have to pay for it over and over again in the form of an annual service agreement to keep it working is just ridiculous. I realize the manufacturers don't want to hear this, but we simply can't afford to pay $100K for a piece of equipment and then pay another $60K or more for a service agreement.
Stephen Gilkeson. Executive Administrator at Young Eye Institute (Lawton, Okla.). To deal with rising costs in our practice, we typically focus on three main areas: reducing expenses, improving efficiency and expanding our service offerings.
While there are a myriad of ways to reduce overall expenses, some of the more impactful areas we focus on include continuous human resource management, price negotiation with vendors, using volume ordering when practical and managing our public utility costs. While we don't expect to "cut our way to profitability," controlling our expenses is increasingly important every year.
To improve our efficiency, we continually optimize our patient schedules, implement advanced technology that improves our patient flow, and conduct studies to reduce and/or eliminate burdensome and unnecessary steps to all processes including medical, surgical and business related areas.
Finally, one of the most important ways to deal with rising costs has been to increase revenues through expansion of our service offerings. As an ophthalmology practice specializing in the treatment of cataracts, this expansion includes offering premium intraocular lens implants, such as multi-focal and light adjustable technology, as well as the utilization of laser services in cataract surgery.
Aaron Greenspan, MD. Gastroenterologist at Metro East Gastroenterology (Belleville, Ill.). I'm currently an independent gastroenterology provider. It is impossible to survive in the fee for service environment given rising costs, especially after COVID-19, and decreasing reimbursement. The overhead is crushing and the workload is overwhelming. Being an employee is not something I want to do, so I am closing my practice. I will be doing some work at a small, community hospital under a professional service agreement and working two days a week for one of our local medical schools at their GI faculty. And I am looking towards retirement in a few years.
Robert Lerma. Administrator at Coronado Surgery Center (Henderson, Nev.). These are strategies that I employ routinely:
1. Assess where the pricing costs have risen and compare to the prior year and question the vendor for the increase in price.
2. Ensure that GPO (group pricing organization) agreement is compliant to leverage optimal pricing.
3. I frequently call the vendors and suppliers and negotiate better pricing. Especially if it is a surgeon that prefers their service.
4. I negotiate shipment costs — meaning I have the vendor as often as possible — pick up the cost if we use their service.
5. Negotiate implant costs with payers if possible for at least pass through costs.
Sara Meinke. Senior Director of Enterprise IT Ambulatory Network Innovation at Baptist Health (Jacksonville, Fla.). A close partnership between medical staff, nursing, IT and other key stakeholders is the cornerstone of our collaborative efforts at Baptist Health System. To ensure that we are well-positioned to continue providing exceptional quality care that is affordable, we have focused on enhancing surgical services' analytics capabilities, specifically preference card optimization and standardization. Cost containment is key; we have a highly skilled data analytics team that has done a phenomenal job of creating real-time surgical services dashboards. Clinical and administrative leaders are better equipped to make informed decisions, backed with productivity and financial data, that will improve efficiency and reduce clinical variance. No doubt, with their engagement we will make a marked difference with curtailing costs.
Leo Spector, MD. Spine surgeon and CEO of OrthoCarolina (Charlotte, N.C.). Rising practice costs are a real issue for medical practices. Unlike many other businesses, medical practices are unable to simply pass along these rising costs to the consumers — our patients. In fact, many would argue that healthcare costs are already too high and unsustainable. Our strategy is to look for alternative sources of revenue to offset our rising costs. One of our key strategies is the adoption of value-based care, for example bundle payments. Bundles enable us to both lower the total cost of care for our patients while providing an alternative source of revenue for our practice.
Steven Winkler. Executive Director of Orthopedic Surgery Center (Baton Rouge, La.). You can only cut so much from the expense side of the profit and loss spreadsheet, so we have taken the following steps to either cut costs or increase revenue:
1. Carefully review each and every expense item.
2. Asked our vendors, "Are there any other ways to save on our costs?" i.e. supplier branded versus name-brand products, Medline versus Johnson & Johnson, etc.
3. Approached our implant vendors with this question: If we move to a sole vendor for implants, what would that do to the price of the implants?
4. How can we make our OR more efficient, increase throughput and/or reduce work hours?
5. Become involved with the local industry to educate them about the lower costs of an ASC when compared to the acute care hospitals and thus to steer their staff to us.
6. Work closely with the local occupational medicine providers, to ensure that we are their providers of choice for any orthopedic needs.
7. Develop relationships with plaintiff attorneys.
8. Develop relationships with the chiropractic providers.
9. Benchmarking.
10. Talk to other ASCs and read the literature for ideas from others.