Surgery centers looking to trim their budgets should assess all aspects of the center's operations — including office supplies, property taxes, staff efficiency and surgical supply costs — in order to pinpoint where and how to effectively cut costs. Here are four key financial points to consider.
1. Engage in a fresh RFP process to reduce office supply and utility costs. "In our experience, indirect overhead costs are an area that is frequently overlooked by a center, but can have dramatic effects on the profitability of the center," says Jason Smith, vice president of marketing for Alliance Cost Containment, a financial efficiency company providing cost management solutions. These can include office supplies, janitorial supplies, insurance and utilities, to name a few. "Typically an ambulatory surgical center will spend up to 15 percent of their expenditure on these overhead costs, so reducing them can have a dramatic effect on the profitability of the center," he says.
Surgery centers interested in reducing these supply costs can follow several key steps taken by cost-cutting firms like Alliance Cost Containment. When working with outpatient surgery centers to cut costs, Alliance Cost Containment will examine expense categories including medical supplies, telecom, utilities, waste removal, payroll services, printing and general insurance. With each category, the company will compare the prices paid for supplies through the current vendor with prices proposed from new vendors after issuing a request for proposal.
When reviewing janitorial supply expenses for an ASC, for example, Alliance Cost Containment totaled the yearly expenses allocated to supplies such as toilet tissue, paper towels, cleaners and waste liners with the center's current vendor. They documented hundreds of recent common purchases in this category alone from the current vendor. With this purchase history at hand, they created an RFP that was sent out to the current vendor and two competing vendors. In this case, Alliance Cost Containment was able to negotiate a reduced price with the current vendor through the RFP process, and the center was able to save approximately 34 percent on janitorial supplies per year.
2. Educate physicians on medical supply costs and present alternative products. John Brock, administrator at NorthStar Surgical Center in Lubbock, Texas, an ASC's two greatest expense line items are salaries and medical supplies. "We absolutely do not standardize medical supplies because our physician owners should be able use their preferred products," Mr. Brock says. "However, we educate the physicians as to cost and let them decide whether a less expensive product will be acceptable. We are also very careful as to waste and are constantly looking at new vendors, the possibility of price renegotiation when contracts expire and whether things such as reprocessing are applicable."
Along those lines, at Physicians Day Surgery Center in Naples, Fla., employees are trained to avoid unnecessary financial burdens for the center by paying close attention to supply costs and reimbursement, particularly when working with physicians during surgery.
"Our staff is very much aware of the fact that you can make an otherwise profitable case in the OR unprofitable by opening too many surgical trays if you're not sure that you need them," says Karen Cannizzaro, CASC, administrator at Physicians Day. "They may suggest an alternative product to physicians, or wait to open something so that 12 trays of instruments and implants aren't opened unnecessarily for one procedure."
3. Request a reduction of or exemption from property taxes. "If you own the building that you're in or even if you rent and are responsible for property taxes, you may want to consider a tax abatement," says Randy Hagen, CEO of Precision Surgical Partners, an ASC management company. Tax abatement requests are increasing due to the state of the economy and the fact that the commercial real estate market is rebounding, he says, and many are being granted. "More municipalities understand this and are willing to grant these types of abatements to help businesses stay in business," Mr. Hagen adds.
To begin the process, a surgery center administrator should speak to the tax assessor at the local municipality and ask for the appropriate paperwork to file a tax abatement. "In a situation where you're looking to squeeze and save any way you can, an extra $2,000 to $3,000 per month can make a big difference to someone in terms of breaking even versus being profitable, especially to those smaller centers" Mr. Hagen says. "Municipalities would rather have a performing ASC paying taxes going forward than have an empty space where they've got nothing."
4. Cut down on administrative tasks by going digital. ASCs can maximize staff efficiency by asking patients to fill out registration documents and surveys online rather than in the center. This reduces the center's paper usage and allows staff to focus on tasks other than dispensing and collecting paperwork, Mr. Hagen says.
"The process of completing registration paperwork in a facility can take anywhere from 10 minutes to half an hour, depending on the patient," he says. "This can slow your process down,."
Online patient registration systems are often available for a small cost that is offset by the resulting gains in staff efficiency, Mr. Hagen says. With these systems, patients are granted access to a HIPAA-compliant database enabling them to fill out registration information weeks in advance of their surgery. Registering remotely can be particularly useful for senior citizens, who may be taking multiple medications and will have to recall specific information when filling out paperwork, says Mr. Hagen. "The faster you can get all that information prepared, the faster you can get the patient prepared, and the faster you can get them going through the surgical process."
Surgery centers can also cut down on administrative tasks by implementing all patient surveys online. This will not only save time for the staff, Mr. Hagen says — the convenience of electronic feedback will also increase the likelihood that patients will view and respond to surveys.
Sending electronic surveys requires minimal effort from the center. The patient's email address should be collected during registration, and they must authorize the center to send electronic communication. Then, Mr. Hagen says, once the patient's procedure is completed, the survey is sent out automatically to the patient. "This will lead to an increase in the utilization of surveys, and a better understanding of patient feedback," according to Mr. Hagen. "There are services that facilitate that for around $100 per month."
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1. Engage in a fresh RFP process to reduce office supply and utility costs. "In our experience, indirect overhead costs are an area that is frequently overlooked by a center, but can have dramatic effects on the profitability of the center," says Jason Smith, vice president of marketing for Alliance Cost Containment, a financial efficiency company providing cost management solutions. These can include office supplies, janitorial supplies, insurance and utilities, to name a few. "Typically an ambulatory surgical center will spend up to 15 percent of their expenditure on these overhead costs, so reducing them can have a dramatic effect on the profitability of the center," he says.
Surgery centers interested in reducing these supply costs can follow several key steps taken by cost-cutting firms like Alliance Cost Containment. When working with outpatient surgery centers to cut costs, Alliance Cost Containment will examine expense categories including medical supplies, telecom, utilities, waste removal, payroll services, printing and general insurance. With each category, the company will compare the prices paid for supplies through the current vendor with prices proposed from new vendors after issuing a request for proposal.
When reviewing janitorial supply expenses for an ASC, for example, Alliance Cost Containment totaled the yearly expenses allocated to supplies such as toilet tissue, paper towels, cleaners and waste liners with the center's current vendor. They documented hundreds of recent common purchases in this category alone from the current vendor. With this purchase history at hand, they created an RFP that was sent out to the current vendor and two competing vendors. In this case, Alliance Cost Containment was able to negotiate a reduced price with the current vendor through the RFP process, and the center was able to save approximately 34 percent on janitorial supplies per year.
2. Educate physicians on medical supply costs and present alternative products. John Brock, administrator at NorthStar Surgical Center in Lubbock, Texas, an ASC's two greatest expense line items are salaries and medical supplies. "We absolutely do not standardize medical supplies because our physician owners should be able use their preferred products," Mr. Brock says. "However, we educate the physicians as to cost and let them decide whether a less expensive product will be acceptable. We are also very careful as to waste and are constantly looking at new vendors, the possibility of price renegotiation when contracts expire and whether things such as reprocessing are applicable."
Along those lines, at Physicians Day Surgery Center in Naples, Fla., employees are trained to avoid unnecessary financial burdens for the center by paying close attention to supply costs and reimbursement, particularly when working with physicians during surgery.
"Our staff is very much aware of the fact that you can make an otherwise profitable case in the OR unprofitable by opening too many surgical trays if you're not sure that you need them," says Karen Cannizzaro, CASC, administrator at Physicians Day. "They may suggest an alternative product to physicians, or wait to open something so that 12 trays of instruments and implants aren't opened unnecessarily for one procedure."
3. Request a reduction of or exemption from property taxes. "If you own the building that you're in or even if you rent and are responsible for property taxes, you may want to consider a tax abatement," says Randy Hagen, CEO of Precision Surgical Partners, an ASC management company. Tax abatement requests are increasing due to the state of the economy and the fact that the commercial real estate market is rebounding, he says, and many are being granted. "More municipalities understand this and are willing to grant these types of abatements to help businesses stay in business," Mr. Hagen adds.
To begin the process, a surgery center administrator should speak to the tax assessor at the local municipality and ask for the appropriate paperwork to file a tax abatement. "In a situation where you're looking to squeeze and save any way you can, an extra $2,000 to $3,000 per month can make a big difference to someone in terms of breaking even versus being profitable, especially to those smaller centers" Mr. Hagen says. "Municipalities would rather have a performing ASC paying taxes going forward than have an empty space where they've got nothing."
4. Cut down on administrative tasks by going digital. ASCs can maximize staff efficiency by asking patients to fill out registration documents and surveys online rather than in the center. This reduces the center's paper usage and allows staff to focus on tasks other than dispensing and collecting paperwork, Mr. Hagen says.
"The process of completing registration paperwork in a facility can take anywhere from 10 minutes to half an hour, depending on the patient," he says. "This can slow your process down,."
Online patient registration systems are often available for a small cost that is offset by the resulting gains in staff efficiency, Mr. Hagen says. With these systems, patients are granted access to a HIPAA-compliant database enabling them to fill out registration information weeks in advance of their surgery. Registering remotely can be particularly useful for senior citizens, who may be taking multiple medications and will have to recall specific information when filling out paperwork, says Mr. Hagen. "The faster you can get all that information prepared, the faster you can get the patient prepared, and the faster you can get them going through the surgical process."
Surgery centers can also cut down on administrative tasks by implementing all patient surveys online. This will not only save time for the staff, Mr. Hagen says — the convenience of electronic feedback will also increase the likelihood that patients will view and respond to surveys.
Sending electronic surveys requires minimal effort from the center. The patient's email address should be collected during registration, and they must authorize the center to send electronic communication. Then, Mr. Hagen says, once the patient's procedure is completed, the survey is sent out automatically to the patient. "This will lead to an increase in the utilization of surveys, and a better understanding of patient feedback," according to Mr. Hagen. "There are services that facilitate that for around $100 per month."
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