How to Determine the Exact Cost of a Procedure

At the 18th Annual Ambulatory Surgery Centers Conference in Chicago on Oct. 29, Terry Woodbeck, CEO of Tulsa (Okla.) Spine and Specialty Hospital, discussed how surgery centers can determine the exact cost of a procedure.

Mr. Woodbeck explained the true cost calculated by surgery centers incorporate differing factors:

•    Profit per case
•    Supply costs
•    Supply costs and direct labor
•    Supply costs and direct/indirect labor

The critical key, however, is that surgery centers enter every expense into their P&L, including general maintenance such as mowing services and costs for attending conferences. In addition, the required information for calculating the true cost of a procedure includes monthly P&L statements and minutes by physician by month for each revenue department such as pre-op, OR, PACU, radiology, pain management and others, as determined by the facility. 

There is also a range of methods for dividing costs, including by square footage of each revenue department or number of employees by revenue department. Mr. Davis said whenever a surgery center begins populating this information, no matter the variation of information, it must be shared with others.

"You can use these measurements to compare cost by physician, cost by procedure or compare physicians' contribution to facility," Mr. Woodbeck said. "You have to know your costs in order to communicate and deal with contracts. Also use this information to inform physicians."

Read More from the ASC Conference:
Surgical Care Affiliates CEO Andrew Hayek: 6 Observations on the State of the ASC Industry
5 Best Practices for Revenue Capture at Endoscopy ASCs
Why Benchmarking Data is Critical for GI Centers