ASCs do not operate in the traditional ‘fee for service’ world. Although medical services are performed, rarely is a center paid in full. Providers are significantly limited in what steps they can take to improve the reimbursements they receive. In an increasingly competitive industry this requires that all costs be tightly controlled. Even then, volume needs to be high and costs need to be low. In addition, without the staff working at peak efficiency a surgery center will not turn a profit from one month to the next.
Certain costs incurred by the center, although quite substantial, are necessary for an ASC to succeed. Expensive equipment needs to be secured, everincreasing staff salaries and benefits must be paid, and disposable supplies have to be purchased and used. Creative loaner/lease options can help shoulder the heavy equipment load. Hiring employees who value flexibility, and will accept this in exchange for not being given the benefits of an FTE, can eliminate a costly expense. However, focus is rarely given to the importance of establishing tight inventory controls, or to establishing ways to see disposable supplies as more than simply sunken surgery costs.
From the beginning, opening a surgery center is no small task: physician partners must be found, brought together and pass the feasibility test. Land must be secured and permits to build a facility need to be obtained. Staff must be hired and trained. All of these hurdles and more must be overcome well before a center can open its doors. Quite often, the fact that surgery supplies must be purchased before cases begin is a mere afterthought.
It is not uncommon, amid the chaos of an impending opening date, for a price to be quoted and paid without ever shopping around. With numerous GPOs (group purchasing organizations) eager to increase their purchasing power and vendors needing to match their competitors’ prices, neglecting this step is a missed opportunity to save thousands of dollars each month. Once a price agreement is reached, renegotiation should occur at least once per calendar year.
Once equitable supply procurement contracts are reached, a method for tracking items ordered, and their unit of measure price, is an absolute must. Tracking the issuance and receipt of all purchase orders guarantees that negotiated contract pricing is, in fact, what is being billed. Centers frequently realize that contract pricing will mysteriously disappear, and a center will be charged for months at a vendor’s retail price. A system to cross-check invoices will help eliminate expensive and time consuming vendor mistakes. In addition, without a system to track all issued POs, a center is left with nothing to verify that every order was fully received.
Although a surgery center may pride itself on negotiating rock bottom prices, inventory control should never end there. The efficient use of disposable supplies is just as important, if not more, than purchasing them at the lowest available prices. If inventory is being wasted without restraint, purchase price only serves to show how much money is being needlessly thrown away.
Purchasing supplies is a cost of doing business at every ASC. However, supplies that sit on the shelf are simply wasted capital. Without direct communication between surgery staff and ordering personnel, an excessive amount of stock will be purchased without need. Conversely, if necessary items are somehow overlooked, someone will have to answer to the displeased surgeon asking for the supplies needed to finish the case. A center must devise an efficient system to capture all inventory items used in each and every case as well as report the total amount of inventory simply sitting on the shelf. Staff in all phases of care must be responsible for recording inventory use. This will ensure that ordering personnel purchase only what will be needed and used.
Case costing is an incredibly valuable exercise that is all too often overlooked. Either due to a lack of information or too little time, a surgery center will neglect one of the most effective cost-cutting procedures in the ASC field. Case costing is most commonly done by totaling up the line items on a surgeon’s preference card. However, this is not a truly accurate ‘real-cost’ reflection because a preference card lists only a procedure’s projected use.
Without an actual report of used disposable supplies, case costing will be a rough estimate, at best. Capturing each disposable or implantable item as it is opened and used is necessary to report on the actual cost of a case. This information should then be documented in reports to compare and contrast inventory use with all surgeons for each surgery type. By accumulating surgery summary reports that document each item used in every case, a real number average can be calculated and discussed. Case costing is only effective if it motivates surgeons and staff to cut costs and eliminate waste.
A report of all items used in a case can also be a valuable collections tool. A surgery summary report sent alongside the claim and Op Report is an effective cost justification piece. Doing so not only increases reimbursements for out-ofnetwork claims, but also provides a significant reduction in back-end work for the A/R department. One of the most challenging issues facing surgery centers today is collecting cash on the claims that they send. When the workload of the collections staff can be lightened, the bottom line is positively affected.
Though these tasks can be completed with pen and paper in-hand, with all of the new technology available today there certainly is a better way. Finding a software system that will assist employees in completing these tasks without significantly altering their daily workflow is an efficient alternative. Although the implementation of such a system may take a substantial amount of work at the onset, the payoff is both long-lasting and lucrative. When used correctly, current software tools will significantly increase the efficiency and profitability of your ASC.
Dave Odell is Founder and CEO of MedBridge Development, a medical facility development and management company. He can be reached at dodell@medbridgedevelopment.com or by telephone at (805) 679-7560.
