Effective Cost Cutting and
Benchmarking for Your ASC
Tom Mallon, CEO
[email protected]
Danger!
• Getting Carried Away
With Cost Cutting
• Disruptive Cost Cutting
• ASC Relocation
Benchmarking
Start
Know How You
Did It
Know the Way
Forward
Know the
Difference
Know
Yourself
Know Others
Know
Best in Class
The Problem with Benchmarking
• REGIONAL VARIABLES:
• Wages, Taxes, Facility, Payor Contracts
• CASE VOLUME & ACUITY
• % NET REV vs. PER CASE
Benchmarking
•
•
•
•
•
•
•
•
Region
Net Rev
Percent of Net Rev
Number of OR’s
Case Volume
Per Square Foot
Per Case
Percent of Ortho > 50%
Benchmarking
• Region
• Case Volume
• Per Case
• % of Net Rev
Benchmarking By Region
5.2 Common Size Income Statement
Operating Expense Analysis
% OF NET REV
WEST
MIDWEST
SALARY / WAGES
25.90%
15.70%
OCCUPANCY
7.40%
3.90%
SUPPLIES
17.60%
17.80%
ADMINISTRATIVE
15.40%
13.40%
TOTAL OP EXPENSES
93.00%
70.40%
By Region
Operating Expense Analysis
PER CASE
WEST
MIDWEST
SALARY / WAGES
$357
$288
TAXES / BENEFITS
$72
$55
OCCUPANCY
$114
$65
SUPPLIES
$263
$301
ADMINISTRATIVE
$246
$265
$1,362
$1,328
TOTAL OP EXPENSES
By Region cont.
Operating Expense Analysis
% OF NET REV
< 3,000
>6,000
23%
23%
9%
6%
SUPPLIES
19%
20%
ADMINISTRATIVE
16%
16%
TOTAL OP EXPENSES
93%
89%
SALARY / WAGES
OCCUPANCY
By Case Volume
Operating Expense Analysis
PER CASE
< 3,000
>6,000
SALARY / WAGES
$426
$296
TAXES / BENEFITS
$83
$64
OCCUPANCY
$165
$77
SUPPLIES
$286
$284
ADMINISTRATIVE
$332
$212
TOTAL OP EXPENSES
$1,711
$1,194
STAFF HRS PER CASE
15.5
10.6
By Case Volume cont.
Operating Expense Analysis
MEAN
% NET REV
PER CASE
SALARY / WAGES
23.8%
$344
TAXES / BENEFITS
5.0%
$73
OCCUPANCY
7.3%
$109
SUPPLIES
19.7%
$307
ADMINISTRATIVE
7.2%
$268
TOTAL OP EXPENSES
89.0%
$1,344
By Aggregate
Benchmarking: Drowning in Data
• Track it
• Present it
• Act on it
Track It
A Single ASC
Track It
Multiple ASCs
Act On It
Chase The Big Money
Act On It
Chase The Small Money
Labor
< 3,000 CASES
3 – 6,000 CASES > 6,000 CASES
FTE’S
13.7
20.8
27.9
HOURS PER
CASE
15.5
12.8
10.6
Labor Statistics Summary
Labor
• Favor per Diem Hiring
• Educate MD’s re Cost
of Starting Late
• Compress Schedule
into Fewer Rooms
• Flex Labor: Staggered
Arrival Times
• Send Staff Home
when done
• Close ASC if < 6 Cases
• Plan Staffing using a
Staffing Calculator
• Technology & Education
• Consider Outsourcing
• Coding
• Insurance Verification
• Billing
Reducing Hours Per Case
Labor
• Per Diems
• Will they be there?
• Will the Surgeon pull
his/her cases?
• Can you keep staff if they
don’t get their hours??
Reducing Hours Per Case
Labor
Reducing Hours Per Case
Supplies
•
•
•
•
•
•
Hire the Right Materials Manager
GPO vs. Individual Vendors
Inventory Software
Implants: Third Party Biller
Consignment & Bulk Purchases
Reprocessing, Refabricated,
Refurbished
• Don’t forget bargaining on Shipping
• Perform a Waste Inventory
20% of Net Revenue
Supplies
• Get to know your account rep
• Always evaluate competing
bids from individual vendors
• Consolidate supply purchases
with fewer vendors
• Standardize brands across
physicians
GPO
Supplies
• Electronic ordering that matches
pricing to promised discount
• Secondary Vendor Selection is
Effortless
• Won’t miss expiration of contracts
• Reduces Labor Hours
• Track Usage: Decrease Inventory
on Site
• Perform Accurate Case Costing
Inventory Software
Supplies
• Useless if not kept up
• Update supply lists and
preference cards
• How is usage data
entered?
Inventory System
Supplies
• Implants: Third Party
Biller
• Not if you are paid
Invoice + 10%
• Don’t forget bargaining
on Shipping
• Use the Power of your
Surgeons: Play the
Vendors
• Consignment & Bulk
Purchases
• Reprocessing,
Refabricated, Refurbished
Implants
Supplies
• Use the Power of your
Inventory System
• Compare Surgeons
• Compare ASC’s
• Pair up with your
Contracts to Calculate
Profit
• Weed out unprofitable
cases
Case Costing
Case Costing Analysis
• Will the surgeon move
• Is the reimbursement
cases elsewhere?
adequate to forgo the
battle?
• Investor vs. Non Investor
• Is the surgeon out of line on • Politics with Vendors:
AMO vs Alcon
all case types or just one?
• Different case
complexity?
Does Not Take Place in a Vacuum
Ortho M
Shoulder Avg Cost: $1661
High: $2514
Other Ortho: $600 to $1000
BUT…
Ortho M
Non Investor courted by other ASC’s
Well Respected
OON cases bringing in $30,000!
Her other case types are in line
You make the call
Using the Data
• Present MD Case Costing • Use Case Costing to
at Board and send to all
Evaluate Potential
Partners
Investors
• Distribute Cost of Items by • Pair up Case Costing
Specialty
with your Payer
Contracts
• Place Stickers on High Cost
Items
• Use Fully Loaded Case
Costing to Negotiate
• Distribute Income
with Payers
Statement to All Partners
Technology
• Utilities: Computer
controlled Lighting
• Electronic Health
Records
• High Speed Scanning:
Scan Charts, Invoices,
EVERYTHING!
• Linens: Warming Gowns
• Self Controlled
• VOIP phone systems
• Education of Staff: Mail
Merge, Data Bases, PDF
forms and files
• Internet Faxing: Efax,
MyFax
Spend Money to Save Money
Have you ever
done a waste
inventory?
Elimination of Waste
Judicious process improvement, by elimination of
waste, would free time and resources for the
decision making, reflection, expert management,
discovery of unique patient goals, and
relationship building that are central to excellent
patient care.
Reducing Waste in US Health Care Systems
Roger W. Bush
Waste of Overproduction
Producing what is unnecessary, when it is unnecessary, in
an unnecessary amount
• Making photocopies of a form that is never used
• Providing copies of reports to people who have not
asked for them and will not actually read them
• Processing piles of documents that then sit at the next
work station
• Cc’s on e-mails
Waste of Time on Hand (Waiting)
Waiting for materials, operations, conveyance, inspection.
Idle time attendant to monitoring and operation
procedures, rather than just-in-time supply or “pull
production”
• Holding on the phone to schedule cases
• Holding on the phone for insurance verification
• Admitting patients too early before surgery
Waste In Transportation
Conveying, transferring, picking up/setting down, piling
up, and otherwise moving unnecessary items; problems
concerning conveyance distances, conveyance flow, and
conveyance utilization rate
•
•
•
•
Moving Supplies in and out of OR’s
Moving Equipment in and out of OR’s
Searching for Charts for A/R
Searching for Invoices
Waste of Processing
Unnecessary processes and operations traditionally
accepted as necessary
•
•
•
•
•
•
Hard copies of memos sent by email
Redundant Capture of Info
Multiple Recording and Logging of Data
Searching for Invoices
Writing Envelopes by Hand instead of Mail Merge
Credentialing Forms NOT populated from databases and
mail merging
Waste of Inventory
When anything—materials, parts, assembly part—is
retained for any length of time
• Expensive supplies/implants that can be ordered on a
just-in-time basis
• Unnecessary Instruments/Supplies in OR packs
• Office Supplies left in Hallways
Waste of Movement
Movement that is unnecessary, that does not add
value, or that is too slow or too fast
• Doc or Nurse leaving room for Supplies
• Doc or Nurse leaving room for Information
• Need computer access in room
• Need common supplies in room
Waste Making Defective Products
Waste related to costs for inspection of defects in
materials and processes, customer complaints, and
repairs; passing defects down to a coworker or patient,
rather than the defect producer “feeling the pinch”.
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•
•
•
•
•
Fixing errors made in documents
Payment Denials
Misfiling documents
Mistakes caused by bad communication
Handwritten Orders
Dealing with Complaints
Summary
• Benchmarking
• Track, present and act on
your data
• Labor
• Consider your options
• Supplies
• Case Costing
• Analyze
• Understand the data
• Use available
technology
• Waste
• Do a waste inventory
• Hire the right manager
• Work with the right suppliers • Eliminate
unnecessary waste
• Put the proper systems in
place
Thank You
Tom Mallon, CEO
Regent Surgical Health
Office: 708.492.0531
Fax: 708.731.5134
E-mail: [email protected]