Here are five ways ambulatory surgery centers can streamline or reduce supply costs, according to administrators and consultants.
1. Consolidate suppliers. Surgery centers can reduce surgical supply costs simply 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," said Chris Klassen, vice president for supply chain at Surgical Care Affiliates. "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. Track medical supply costs per case. Keep track of average cost per case, which would include the cost of disposable supplies and implants. This is important because supplies are one of the two biggest costs for surgery centers, and high supply costs can easily eat away at case profitability. Nick Newsad of HealthCare Appraisers recommends drilling down and looking at average medical costs per specialty or per physician.
For example, you might look at medical supply costs per physician and discover one of your ophthalmologists is a significant outlier because he or she uses a particular type of cataract lens that the others don't use. "You would then need to determine if you can collect a little more from the patient on that [lens] if it's not [fully covered]," he said.
3. Educate physicians on supply costs and present alternatives. John Brock, administrator at NorthStar Surgical Center in Lubbock, Texas, said 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 said. "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," said 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."
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," Mr. Klassen said. "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," he said.
5. Continuously renegotiate supply contracts. Dedicate one person at the surgery center or management company to track the most commonly used items at the center and review those contracts annually. Renegotiating high volume contracts stands to save surgery centers the most money in the future.
"We use a lot of sutures in our surgery centers, and they cost a lot of money," said Charles Dailey, vice president of development at ASD Management. "We renegotiate those contracts all the time for better pricing. A lot of centers also have a high volume of eye implants. I make a special contract for those and look very closely at negotiating the best rate for our volume."
These renegotiations take a lot of focus, so zero in on a few items and develop a relationship with those manufacturers and distributors. Also work with physicians to streamline implant choices.
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1. Consolidate suppliers. Surgery centers can reduce surgical supply costs simply 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," said Chris Klassen, vice president for supply chain at Surgical Care Affiliates. "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. Track medical supply costs per case. Keep track of average cost per case, which would include the cost of disposable supplies and implants. This is important because supplies are one of the two biggest costs for surgery centers, and high supply costs can easily eat away at case profitability. Nick Newsad of HealthCare Appraisers recommends drilling down and looking at average medical costs per specialty or per physician.
For example, you might look at medical supply costs per physician and discover one of your ophthalmologists is a significant outlier because he or she uses a particular type of cataract lens that the others don't use. "You would then need to determine if you can collect a little more from the patient on that [lens] if it's not [fully covered]," he said.
3. Educate physicians on supply costs and present alternatives. John Brock, administrator at NorthStar Surgical Center in Lubbock, Texas, said 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 said. "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," said 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."
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," Mr. Klassen said. "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," he said.
5. Continuously renegotiate supply contracts. Dedicate one person at the surgery center or management company to track the most commonly used items at the center and review those contracts annually. Renegotiating high volume contracts stands to save surgery centers the most money in the future.
"We use a lot of sutures in our surgery centers, and they cost a lot of money," said Charles Dailey, vice president of development at ASD Management. "We renegotiate those contracts all the time for better pricing. A lot of centers also have a high volume of eye implants. I make a special contract for those and look very closely at negotiating the best rate for our volume."
These renegotiations take a lot of focus, so zero in on a few items and develop a relationship with those manufacturers and distributors. Also work with physicians to streamline implant choices.
More Articles on Improving Profits:
5 Tips to Increase ASC Revenue From MediGain & ASC Billing Specialists
North Carolina ENT ASC Participates in Cost & Quality Demonstration
5 Improvements to Make Good ASCs Great