Chris Klassen, vice president for supply chain at Surgical Care Affiliates, discusses how surgery centers can cut cost per case through supply chain management.
1. Consolidate suppliers. Surgery centers can reduce surgical supply costs by consolidating suppliers. Performing an analysis on the different suppliers currently used at the surgery center will help the materials manager identify which cases use the most supplies — often also the cases that are performed most frequently at the center — and work on cutting the number of companies from several down to one or two.
"The first thing surgery centers must do is pull purchase history from the system, analyze it and determine whether there is contracted versus non-contracted items the center is buying, as well as the number of suppliers that are involved in those supplies," says Mr. Klassen. "We find that when there are items that don't have contracts or we have items from multiple suppliers, there is an opportunity for savings."
Suppliers are eager to gain market share and will work with surgery centers to lower the cost of their product in exchange for an exclusive contract covering a majority of the cases brought to the center.
2. Identify and manage big ticket items. Administrators must know what they are spending per item for surgical cases. Many don't track spending levels deeply enough and as a result, there is a lot of leakage. "Our recommendation is to understand how much you are spending and where," says Mr. Klassen. "Figure out where you are fragmented or not contracted and then contract there. When we do that, our savings on average are in the 20 percent range."
Begin the analysis by determining which cases you spend the most on; usually surgery centers spend 80 percent of the money on 20 percent of their items.
"Once you identified the items in that top 20 percent, determine how many you normally use and order only enough to maintain that volume," says Mr. Klassen. "A lot of people try to take this on with everything they buy. That's your goal, but the first step is to manage a smaller number of items and once you are good at that you can expand the number of items you are managing."
3. Conduct a cost comparison with physician preference items. Physician preference items often cost the surgery center a great deal if the physicians don't partner with the ASC to reduce materials costs. Choose a CPT that can be optimized and gather the preference card information for all surgeons. Compare the items and costs between surgeons and share opportunities.
"Determine which surgeons are using which items in the specialty," says Mr. Klassen. "Document those surgeons side by side and compare what supplies are being used across the center. You'll begin to have best practices emerge. Then expand one by one to other CPTs so you can optimize best practices is in your facility."
As you determine which suppliers have the best deals, work with surgeons to consolidate their preference items for the lowest cost high quality provider. "If one surgeon is using a different supplier than another, and surgeons are open to moving to one supplier or less suppliers, you can reach out to them and seek better discounts," says Mr. Klassen. "That's a great way to optimize supply costs."
4. Benchmark your costs against yourself and others. Benchmarking is a good way for surgery centers to see their progress from one month to the next and compare themselves to other surgery centers from around the country. After you have gathered data on your supply costs and cost per case, figure out where others in your area are and how you compare.
"Reach out to other centers and ask them to join you in saving. Leverage benchmark data on the same CPTs in your area and a broader set of best practices will emerge," says Mr. Klassen. "At our centers, we do 80,000 cataract surgeries per year and we spend an enormous amount of time comparing the cost of cataracts for each surgeon over multiple centers."
There will be some variation between centers based on their location and size, but looking at your ASC against others can help you find areas that need more attention. Bring the surgeons onboard for more effective change. "Performing the analysis is the first step, you also need to engage surgeons to determine what will work for everyone and what is an optimal approach," says Mr. Klassen.
5. Figure out how the total cost per case impacts your center. For some cases — such as orthopedic cases — there are capital costs, supplies costs and service costs associated with the total cost per case for supplies.
"When you are considering a capital acquisition or disposables, analyzing the total cost of ownership for those items becomes really important because there are always trade offs between the capital you are using and other aspects of the case," says Mr. Klassen. "When making a capital equipment decision, be sure to include disposable supplies and services when factoring the costs to reduce costs per case."
More Articles on Surgery Centers:
7 Steps to Fix a Broken Physician/Hospital ASC Joint Venture
6 Points on Orthopedic Cases Moving to ASCs
6 Goals for ASCs for the Remainder of 2012
1. Consolidate suppliers. Surgery centers can reduce surgical supply costs by consolidating suppliers. Performing an analysis on the different suppliers currently used at the surgery center will help the materials manager identify which cases use the most supplies — often also the cases that are performed most frequently at the center — and work on cutting the number of companies from several down to one or two.
"The first thing surgery centers must do is pull purchase history from the system, analyze it and determine whether there is contracted versus non-contracted items the center is buying, as well as the number of suppliers that are involved in those supplies," says Mr. Klassen. "We find that when there are items that don't have contracts or we have items from multiple suppliers, there is an opportunity for savings."
Suppliers are eager to gain market share and will work with surgery centers to lower the cost of their product in exchange for an exclusive contract covering a majority of the cases brought to the center.
2. Identify and manage big ticket items. Administrators must know what they are spending per item for surgical cases. Many don't track spending levels deeply enough and as a result, there is a lot of leakage. "Our recommendation is to understand how much you are spending and where," says Mr. Klassen. "Figure out where you are fragmented or not contracted and then contract there. When we do that, our savings on average are in the 20 percent range."
Begin the analysis by determining which cases you spend the most on; usually surgery centers spend 80 percent of the money on 20 percent of their items.
"Once you identified the items in that top 20 percent, determine how many you normally use and order only enough to maintain that volume," says Mr. Klassen. "A lot of people try to take this on with everything they buy. That's your goal, but the first step is to manage a smaller number of items and once you are good at that you can expand the number of items you are managing."
3. Conduct a cost comparison with physician preference items. Physician preference items often cost the surgery center a great deal if the physicians don't partner with the ASC to reduce materials costs. Choose a CPT that can be optimized and gather the preference card information for all surgeons. Compare the items and costs between surgeons and share opportunities.
"Determine which surgeons are using which items in the specialty," says Mr. Klassen. "Document those surgeons side by side and compare what supplies are being used across the center. You'll begin to have best practices emerge. Then expand one by one to other CPTs so you can optimize best practices is in your facility."
As you determine which suppliers have the best deals, work with surgeons to consolidate their preference items for the lowest cost high quality provider. "If one surgeon is using a different supplier than another, and surgeons are open to moving to one supplier or less suppliers, you can reach out to them and seek better discounts," says Mr. Klassen. "That's a great way to optimize supply costs."
4. Benchmark your costs against yourself and others. Benchmarking is a good way for surgery centers to see their progress from one month to the next and compare themselves to other surgery centers from around the country. After you have gathered data on your supply costs and cost per case, figure out where others in your area are and how you compare.
"Reach out to other centers and ask them to join you in saving. Leverage benchmark data on the same CPTs in your area and a broader set of best practices will emerge," says Mr. Klassen. "At our centers, we do 80,000 cataract surgeries per year and we spend an enormous amount of time comparing the cost of cataracts for each surgeon over multiple centers."
There will be some variation between centers based on their location and size, but looking at your ASC against others can help you find areas that need more attention. Bring the surgeons onboard for more effective change. "Performing the analysis is the first step, you also need to engage surgeons to determine what will work for everyone and what is an optimal approach," says Mr. Klassen.
5. Figure out how the total cost per case impacts your center. For some cases — such as orthopedic cases — there are capital costs, supplies costs and service costs associated with the total cost per case for supplies.
"When you are considering a capital acquisition or disposables, analyzing the total cost of ownership for those items becomes really important because there are always trade offs between the capital you are using and other aspects of the case," says Mr. Klassen. "When making a capital equipment decision, be sure to include disposable supplies and services when factoring the costs to reduce costs per case."
More Articles on Surgery Centers:
7 Steps to Fix a Broken Physician/Hospital ASC Joint Venture
6 Points on Orthopedic Cases Moving to ASCs
6 Goals for ASCs for the Remainder of 2012