The cost of medical supplies has been rising due to shortages, supply chain issues and inflation. In conjunction with declining reimbursements and rising practice costs, ASCs are forced to grapple with a tumultuous financial landscape — all while ensuring quality care, patient satisfaction and more.
Here are three leaders' thoughts on the state of supply costs in 2024:
Stephen Gilkeson. Executive Administrator at Young Eye Institute (Lawton, Okla.). To deal with rising costs in our practice, we typically focus on three main areas: reducing expenses, improving efficiency and expanding our service offerings.
While there are a myriad of ways to reduce overall expenses, some of the more impactful areas we focus on include continuous human resource management, price negotiation with vendors, using volume ordering when practical and managing our public utility costs. While we don't expect to cut our way to profitability, controlling our expenses is increasingly important every year.
To improve efficiency, we continually optimize our patient schedules, implement advanced technology that improves our patient flow, and conduct studies to reduce and/or eliminate burdensome and unnecessary steps to all processes including medical, surgical and business related areas.
Finally, one of the most important ways to deal with rising costs has been to increase revenues through expansion of our service offerings. As an ophthalmology practice specializing in the treatment of cataracts, this expansion includes offering premium intraocular lens implants, such as multi-focal and light-adjustable technology, as well as the utilization of laser services in cataract surgery.
Raghu Reddy. Chief Administrative Officer at SurgCenter of Western Maryland (Cumberland). Whether you're losing money on the revenue side because of reimbursement issues or not, I think any ASC should absolutely not leave any penny on the table. I personally operate under the assumption that a penny saved is a penny earned.
I think most agencies should focus on their high-cost areas and go after them because 20% of the costs on the ASC business costs 80%, and the bulk of it is your staffing costs and your supply costs. Capital costs, on the other hand, are a one-time payment, get negotiated, you get a deal and you move on. But this regular recurring cost of goods that are associated with supplies and implants is the area where you need to hone in.
Obviously all ASCs are struggling with the staffing costs, especially in bigger metropolises where their salaries are already at the high end of the pay scale. You're gonna have to be creative, like bringing in LPNs, who cost less than registered nurses, and augmenting their roles as a support staff for the nurses. This way, the nurses can focus more on what they are hired to do and also some of the burden is lessened by the LPN who can offset the cost there.
Additionally, it's key to have very lucrative group contracts and address pricing with vendors or manufacturers directly as much as you can. The leaner you are, the more profitable you are, and from materials management to scheduling to anything else in between, creating those efficiencies and just paying attention to detail will be key.
Leo Spector, MD. Spine surgeon and CEO of OrthoCarolina (Charlotte, N.C.). Rising practice costs are a real issue for medical practices. Unlike many other businesses, medical practices are unable to simply pass along these rising costs to the consumers — our patients. In fact, many would argue that healthcare costs are already too high and unsustainable. Our strategy is to look for alternative sources of revenue to offset our rising costs. One of our key strategies is the adoption of value-based care. [Take,] for example, bundle payments. Bundles enable us to both lower the total cost of care for our patients while providing an alternative source of revenue for our practice.