Effective ASC Case Costing Processes Critical to the Bottom Line

In the healthcare sector, very often services are rendered without a detailed understanding of the associated costs. Case costing enables us to determine how much a specific surgery either improved or reduced the bottom line of an ASC. For instance, at a Regent facility, a surgeon recently performed a knee arthroscopy (CPT 29880) in which the commercial payor paid approximately $1,800. Unfortunately, the supply costs for this procedure amounted to $3,400 and labor costs totaled $300. As such, simply by performing the case, the surgery lost $1,900 for the facility. We all know that an ASC could not routinely perform such cases for it to remain in business.

Applications of case costing

Aside from thoroughly understanding where an ASC loses and makes money, case costing can have a variety of applications. Through looking at case costing reports, one of our facilities noticed they were consistently underpaid by a specific payor. They audited the operative reports on these cases, appealed the payments, and recovered thousands of dollars in collections. Another ASC noticed they consistently lost money on joint aspirations. Based on the data, they could recommend to their orthopedic group to purchase their own C-Arm and perform the joint aspirations in their office rather than utilize ASC capacity, which can be used for more profitable procedures. If a physician tends to use much more expensive supplies than his peers on the same clinical procedures, case costing will enable us to share such details with the physician and the ASC board.

Prerequisites of case costing

Because of the widespread benefits enabled by case costing, Regent has launched an initiative to assist our ASCs with case costing analytics. However, in order to accurately case cost, various processes must be in place.

A complete audit of your item master must be performed to ensure that each inventory item has the correct unit of measure, accurate unit of measure pricing, dosage of medication per case and detailed product information including manufacturer number and appropriate product description.

Once this is complete, preference cards should be reviewed with clinical staff to ensure that they are up to date and accurate. Preference cards should include all costs associated with anesthesia, pre-op, PACU and implants. A process for tracking supplies used by clinical staff as the patient moves thru the facility is a critical step in allocating all costs by case.

Updating this information in your HIS system is the final step in preparing your center for case costing.

Preparing your center for case costing is laborious and maintaining the data is an ongoing project. Because there is multiple staff contributing to the process, it is critical that a detailed policy be put in place and reviewed quarterly.

The case costing imperative

Given the reimbursement trends the ASC industry faces, the practice of case costing will be crucial in order to for ASCs to remain viable as an industry. In the report for the recently released reimbursement rates for 2011, CMS indicated that it will increase payments to HOPDs by 2.15 percent but that payments to ASCs will remain flat. Furthermore, with the recent passage of healthcare reform and the creation of the Independent Payment Advisory Board, whose sole mandate is to reduce Medicare spending, the reimbursement environment for ASCs will likely become even more challenged. In the future, not only will case costing be important in order to stay competitive and continue to serve our patients, it also will be necessary.

Learn more about Regent Surgical Health.

Read more articles by members of the Regent Surgical Health leadership team:

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- Maximize Reimbursement: 4 Strategies for Success