Surgical Cost Containment for Hospitals and ASCs

19 rural hospital closures occurred in 2019 and the circumstances could get worse with over 450 rural hospitals out of about 2000 that are vulnerable to closure… and the phenomenon isn’t limited to only rural hospitals. 

Specifically, the greatest area of rural hospital vulnerability is in the Southeast and lower Great Plains. Mississippi, Missouri, Oklahoma, Tennessee, and Texas are also featured across the rural hospital vulnerability space as well. But those states who have yet to see closures should expect to see closures in the future. 

Hospitals that closed had a common plight: Declines in median operating margin and negative operating margins.  At a point where the hospital is bleeding cash at the rate of $1m a month, the handwriting is on the wall and the grim reaper is at the door. Are you vulnerable?

A few other indicators:

• Do you know your costs?
• Do you know your time in OR per surgeon?
• Do you waste supplies and re-sterilize and re-pack instruments you didn’t need?
• Are you in an older physical plant that costs more to maintain while delivering lower efficiencies?
• Case mix index – A broader array of service lines has the potential to create opportunities to treat – or capture – more cases and market share.
• + Government Control – more funding and access to resources you would not otherwise have.
• + Capital Efficiency (Net Patient Income/Total Patient Revenue) get greater financial value from services you provide
• + Occupancy percentages – Higher occupancy helps reduce risk of overstaffing and fluctuations in consumption for high volume cases and services.
• + Percentage of outpatient surgical revenues – As care transfers to outpatient
  settings, a greater percentage of patients purchasing outpatient service lines counters the losses from declining of inpatient volumes and lower occupancy. If we can’t get higher prices from payers, lets extract more margin through internal shifts in practices and ordering patterns and procurement costs.
• If you are a stand alone brand or part of a health system – stand alones tend to pay more for everything.

Reducing Inventory

As a consultant, Maria Todd has reduced surgical case costs for ASCs and hospitals by an average of 35%

Some of my projects involved reduction of excess stock and variable stock (each surgeon wanting something different to be “on hand” ) which leads to out of date inventory, more shelf space and cash tied up that shouldn’t be.

Streamlining Ordering and Inventory Management

As a consultant, Maria Todd has reduced surgical case costs for ASCs and hospitals by an average of 52%

By examining the data on past cases, I am able to learn which cases to target as a priority and leave others for the hospital or ASC to continue on their own without me present as their time permits once they have the system in place.

After we tidy up the case preference lists, we streamlined order and inventory management by conferring with the surgeons and getting them to agree to agree. 

By integrating ordering with any other partner or sister facilities, you’ll have access to better volume discounts.  You may find it possible to reduce procurement staff as well and transition staffers to a new role with some additional training and professional development. The money for the training will come from savings just like the money for the consulting help.