Surgical Cost Containment for Hospitals and ASCs

Surgical Cost Containment for Hospitals and ASCs



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About the Author

About the Author

Maria Todd is frequently hired as a consulting expert and trusted authority on surgical cost containment. As a former OR nurse, she helps medical groups, individual physicians, hospitals and ambulatory surgery facilities and other healthcare providers tidy up their OR case costs so that prices can be lowered without killing margins.

Maria believes that if you don't have a grip on per case costs, you won't know what prices to charge or to accept.

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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. 

Results Speak for Themselves

$18 Million

saved over 5-7 years

Reduced Shipping Costs

As a consultant, Maria Todd has reduced surgical case costs for ASCs and hospitals by an average of 20%

By reducing frequency of ordering you realize about 20-25% reduction in delivery costs. But you also reduce the staff necessary to audit deliveries, unpack the boxes and put things away, and reduce your organizational carbon footprint as well. You also reduce packing waste that results in more frequent trash pickup and greater landfill mass. 

Reduction of overstocked perishables

As a consultant, Maria Todd has reduced surgical case costs for ASCs and hospitals by an average of 33%

Drugs aren’t the only things that expire. Suture, and many other supplies have expiration dates. Have what you need on hand, no more, no less.  I devised systems to rotate through stock that’s on reserve for emergencies and mass casualties, so that everything is always current and your staff won’t panic if the unthinkable happens with a natural or other event that brings mass casualties to your doorstep.

Avoiding Last Minute Case Cancellations

An empty OR that isn’t producing revenues is a liability. If surgeons cannot stay busy during their block, you’ll lose them to other facilities where they can remain busy. Patients who were all psyched out for surgery suddenly lose trust in the providers who can’t get it together to stay on schedule or cancel cases except in rare instances.  Same day cancellations should not exceed 1.5% overall, month over month. I set up systems for this to improve and maintain low same day cancellation rates.
This includes things such as calls by the anesthesia team and arrival in adequate time to re-run any stat labs that are needed. A call from a periop team nurse may not produce the same results as a call from the CRNA or anesthesiologist the day before. We also build in time to adapt so that disqualifiers aren’t the root cause of your empty OR and idle team members who cost you for every minute they are present. At an ASC the process is slightly different because you may not be able to get stat labs back quickly. Nothing in what I do seems to be one size fits all for every facility which is why I need to be present onsite to observe what’s happening, not only listen to someone else’s assessment and interpretation of what’s happening. I am one of the rare breed of business management consultant who brings hands on experience, training and expertise in surgery. Most of my competing consultants are book trained or accounting trained and don’t understand the ops of the OR environment from end to end as I do.

What can go wrong?

  • Patient ate or drank after the cutoff time
  • Patient suddenly ill
  • Arrives at the wrong location or at the wrong time
  • Patient didn’t discontinue certain medications as directed
  • Patient doesn’t have a ride home or a companion for the first 24h
  • Insurance wasn’t pre-certified, pre-authorized, or case fees were not pre-paid as required
  • Previous cases ran longer than planned without a backup plan.
  • Patient’s out of pocket responsibility becomes a “surprise” for a number of reasons
  • Equipment to do the case (implants, hardware, positioning devices not on hand or available on time
  • Messy ORs with unwieldy power cords can cause staff injury hazards that take an OR out of service and/or take out team members. 

If your hospital or ASC is struggling with internal cost containment, at risk of insolvency, or you don’t have a grasp of your costs in surgery to evaluate offers of bundled prices for surgery, call me. I can help.

I’ll find the cash to cover my fees and travel expenses…and a whole lot more!  I can also help you evaluate contracts and reimbursement offers for bundled surgical case prices and help you develop fair counteroffers that save money for payers and patients and keep margins intact. 

And if you’ve just recently opened, let me come help you set things up so you can set and accept bundled prices with confidence and avoid waste .

Get practical advice and expertise you need
from Maria Todd
on this topic and related subjects

Maria is a bestselling author and a top healthcare industry influencer and thought leader. She has excellent references and a huge project portfolio spanning 40+ years in healthcare business development and management.

She holds 25 copyrights, several trademark registrations, and shares several patent applications for software inventions.

She’s been recognized with numerous industry lifetime achievement awards for her work in contracted reimbursement, managed care, physician integration and alignment, and health tourism in the USA and 116 countries. 

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