In preparation for changes, ASC cuts 10% of supply costs

As ambulatory surgery centers (ASCs) face the stark reality that their upcoming payment system will provide less money for many specialties, managers are looking at their expenses to determine where they can cut costs. The Ambulatory Surgery Center of Spartanburg (SC) has taken steps that have resulted in a 10% reduction in total supply costs.

"I went to the distributor and said, 'I'm not happy with what I'm paying,'" says Mike Pankey, RN, MBA, administrator of the center. Pankey told them that due to cuts in Medicare payments, which account for 35% of their business, they needed a 10% discount on their supply costs. "I couldn't afford to continually pay him more when I was being reimbursed less," he says.

The supply manager at the center's hospital partner was a major help, Pankey says. That supply manager pressured the hospital's group purchasing organization, Premier, to aggregate the supply usage of the hospital and the surgery center so that the center could access better tier levels and obtain significantly larger discounts. "That gave us major savings," Pankey says. Over a year's time, the center saved $73,000 on custom sterile packs and at least $35,000 on sterile put-ups, including drapes and gowns.

Those centers that don't have a hospital partner and don't mind changing suppliers can start by obtaining a report of their highest-cost supply items. Focus on the top 20, Pankey suggests, then go to vendors to obtain competitive bids.

With other changes he made, Pankey has cut $134,000 from his supply budget, "all based on the fact that we think we will be reimbursed less," he says. The center isn't stopping there. Since individual CPT reimbursement is not yet known, the managers are looking at costs specialty by specialty. They now are looking at how to increase physician efficiency in the OR, including block utilization.

Also, Pankey is looking at future reimbursement by specialty. For example, reimbursement experts estimate that obstetrics will realize a 38% increase in payments. Pankey decided to be conservative in his estimate and count on a 30% increase for obstetrics. "That's how we budgeted to get moving forward," he says.

Additionally, Pankey is working with his billing company to ensure that future changes will be managed appropriately. He has been in constant contact with the company directors to ensure they have heard about the changes and are educating their staff. Pankey is working with them on an action plan so that the company is ready when the Centers for Medicare & Medicaid Services (CMS) moves to the new system. "When they flip the switch, I want to make sure we're ready to flip our switch too and go into billing. We want to be ready."

By being proactive, he hopes to avoid cash flow interruptions and overpayments from CMS that have to be paid back to the agency.