While waiting for healthcare reform, managers cut costs, boost revenue

Your peers are taking the initiative to improve financial outlook

Are you wondering how health care reform is going to impact your outpatient surgery program? Join the crowd.

"Really, as far as being an industry, we're not getting a lot of information about how it will impact us," says Beverly Kirchner, BSN, RN, CNOR, CASC, president of Southlake, TX-based Genesee Associates, which develops, turns around, and manages ambulatory surgery centers and prepares them for accreditation. Kirchner is a former member of the board of directors for the Association of periOperative Registered Nurses (AORN) and serves in several leadership positions for that group.

Volumes are likely to increase, Kirchner says. "We'll see sicker patients, because a lot of people have not had healthcare and have not stayed healthy."

Increases in volume aren't likely to translate into increases in revenue, however, she says. Most of the formerly uninsured will be on a plan similar to Medicare, Kirchner says. "Even now, there are lots of procedures with Medicaid and Medicare we can't afford to do," Kirchner says.

Her comments are echoed by Bobby Hillert, executive director of the Texas Ambulatory Surgery Center Society, who adds that reform is likely to impact who participates in-network with insurance providers. "Commercial insurance companies have indicated that they will have to offer fewer providers in their network within the exchange in order to compete," Hillert says. "Some commercial insurance companies are already creating plans with smaller provider networks."

Kirchner's advice? Be cautious. Know what cases you can and can't afford to do, she says. She says that in today's environment, "you need to know your costs down to the penny."

With all of the attention to penny-pinching, preference cards will take on an added significance, Kirchner says. "Administrators have to get updated and sophisticated on technology so they can track costs, use bar coding for implants, look at supply costs almost instantly on every case," she says. "You may find yourself with revenues going down, volumes going up, and you scramble to figure out why." (For more on determining cost per case, see story below.)

4 steps to controlling your costs

Consider these steps when looking to control your costs:

• Increase percent of patients who pay upfront.

The Ambulatory Surgery Center at Kelsey-Seybold Clinic, Houston, TX, performed a process improvement project on improving collections, says Jebby Mathew, administrator. Staff call patients and have them prepay the copay and coinsurance before the day of service, which makes check-in more efficient, Mathew says. Collections have increased, he says. Although he doesn't have a specific figure, he says, "we're well over budget over what we thought we could collect."

Previously some patients would show up for surgery without money and say "no one told me." Now the center keeps detailed notes on when patients were contacted, what they were told about fees, and how they were given the opportunity to prepay or pay on the day of service. "Before, we would go ahead with the case, they would go to bad debt, and we would lose money on those cases." To avoid issues with bad debt, the staff set up payment plans with some patients.

• Ensure you are obtaining proper preapproval for cases.

A lot of outpatient surgery programs are not obtaining proper preapproval, Mathew says. "It was an issue here," he says.

Implants can cost thousands, he points out, and some insurance companies require physicians to ensure specific situations exist before the procedure is approved. By making sure the predetermination and precertification paperwork is done correctly, through utilization review, you ensure reimbursement, he says.

• Move to electronic medical records (EMRs).

"An electronic medical record is the way to go," Mathew says. They save you time and money, he adds. His center projects that their new system will save five or six minutes of duplicate charting per case. Their total projected savings is about $50,000 annually just for nursing documentation.

• Make your staffing more cost-efficient.

Although Mathew's center already was profitable, no one was looking at how much money was being left on the table, he says. Mathew cut agency use by 70% by examining his agency use, staff utilization, and productivity. He looked at utilization of per diem staff on a daily average and by doctor block time to ensure his center wasn't understaffing or overstaffing. He added some necessary full-time positions.

Some outpatient surgery leaders suggest keeping daily data on staff hours per case by staffing department, such as OR, preop, and PACU. Such data can help you determine where you might be able to reduce direct staffing times or cut agency/per diem staffing.

Having the right staff also is key, says Matt Pate, vice president of financial operations for United Surgical Partners International in Addison, TX. "With case volumes fluctuating so often, it is very important to have a staff that is willing to be flexible as volume increases and decreases," he says. [For information on adding a new product line, see story, below. For more on the impact of health care reform, see "Is Outpatient Surgery Better Off Under Health Care Reform Law?" Same-Day Surgery Weekly Alert, March 26, 2010. To subscribe to this free weekly ezine, contact customer service at (800) 688-2421 or customerservice@ahcmedia.com.]

Know your costs — focus on profitable cases

Implants are a 'huge expense'

Many outpatient surgery programs set up their Chargemaster simply by taking the Medicare list and marking it up by a set percentage, says Beverly Kirchner, BSN, RN, CNOR, CASC, president of Southlake, TX-based Genesee Associates, which develops, turns around, and manages ambulatory surgery centers and prepares them for accreditation.

Kirchner says, "They never test, so are they billing enough to cover their costs, and do they know what their cost is?"

Pricing is critical, she says. "If they are in administration, and if they don't do anything else in the course of a day, they should know what cases cost them and what they will be reimbursed," Kirchner says.

Step one: Know your inventory and what you're using, Kirchner says. Include specialty items such as pump tubing for laparoscopic procedures, she says. Kirchner says, "You also need to look at all implants. That's a huge expense in any facility."

Determine who has the same implants under a different name, and examine the cost differences, she says. Surgery centers can learn from tactics that the large hospital systems are using, Kirchner says. They are creating request for proposal (RFP) based on criteria they want addressed including cost, how they can supply the item, and terms of the contract. "Hospital systems are now calling the implant vendor and saying, `this is our price point. You can fill out the RFP, but you need to meet our price point. If you don't, we will work hard to not have you in our facility,'" Kirchner says. For vendors that don't comply, the hospitals basically are banning use of that implant.

Kirchner says hospital leaders are sitting down with surgeons and saying, "This is what we're spending in implants. If this is what we're spending when healthcare reform comes in, with the patient volume we will see, we will have to lay off staff and shut down ORs. You will operate every other week instead of every week."

"Ambulatory can learn a lot of lessons from that," Kirchner says.

Matt Pate, vice president of financial operations for United Surgical Partners International in Addison, TX, says, "Sharing cost information with your physicians can be very helpful in limiting the number of suppliers. As the number of suppliers decreases, price should also decrease."

Scripps Health in California has cut about three million dollars out of its spine implant costs by working with physicians to achieve standardization. "Therefore they will not have to lay off nurses," Kirchner says.

At the Ambulatory Surgery Center at Kelsey-Seybold Clinic, Houston, TX, there was no standardized process to ensure all cases with implants were captured properly, says Jebby Mathew, administrator. Mathew created a "universal implant calendar" that cleaned up their implant charge capture. "We're above break even," Mathew says.

Need more revenue? Add a new product line

Know your vendors, experts advise

The Ambulatory Surgery Center at Kelsey-Seybold Clinic, Houston, TX, has added revenue with new procedures, including a whole gynecology line that includes laparoscopy, diagnostics, endometrial ablation, and the loop electrosurgical excision procedure (LEEP). Several gynecology surgeons have joined the center.

"We're using OR block time better and getting reimbursed," says Jebby Mathew, administrator.

The managers are looking at expanding into other services in which reimbursement has increased. "Reimbursements are changing all the time, with healthcare reform," Mathew says. "Look at the kind of cases your program can handle. Do a pro forma on all equipment. Look at how the reimbursement, supplies, and staffing add up. In terms of making a profit, starting new lines can help."

At the center, more than 60% of the cases were endoscopies, and endoscopy reimbursement is decreasing, Mathew says. To address that change, managers performed a detailed cost analysis on every CPT code for every procedure they performed in the first six months of 2010.

"We try to understand costs per case and look at which cases are we really making money on and which are we not," based on contracts and actual collections, Mathew says. While some cases only make a profit of a few percent, others are realizing a large profit margin. "We concentrate on those," Mathew says. This information has been presented to the leadership board.

With all product lines, you must have payer contracts that provide adequate reimbursement and negotiate proper discounts with your suppliers, says Matt Pate, vice president of financial operations for United Surgical Partners International in Addison, TX. (For information on avoiding mistakes in contracts, see two-part series that ran in the July 2010 and August 2010 issues of Same-Day Surgery.)

Do you know your vendors?

Know all your vendors, and work with your group purchasing organization (GPO) to ensure it is contracted with all of your vendors, says Beverly Kirchner, BSN, RN, CNOR, CASC, president of Southlake, TX-based Genesee Associates, which develops, turns around, and manages ambulatory surgery centers and prepares them for accreditation.

Mathew has created vendor grids so the leaders can understand which vendors they are using and standardize their costs. "All help our bottom line," he says.

Mathew says his center is examining all of its vendor relationships, including ones that have been in place for years. Members of his staff have determined that in a significant number of cases, there was no follow up to ensure the center was getting the price that was negotiated.

Some vendors and products have changed as a result of this process. The center went from reusable to disposable linens and saved $100,000 a year.