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Managed care contracts and shrinking budgets have forced same-day surgery program managers to be more aware of costs, say experts interviewed by Same-Day Surgery.
"Surgery program managers who have a method to gather cost information can produce performance and trend analyses, cost management reports, physician profiles, and documentation for managed care contract negotiations," says R. Craig Lind, managing director of Lind/Fitzsimons, a San Francisco-based management consulting firm.
If you don’t already have a method of gathering cost information, start simple, says Lind. "Focus on three easily identifiable areas at the beginning," he says. (See story on collecting costs, p. 6.) "Keeping your efforts limited to staff, supplies, and a general category titled all other costs’ will enable you to focus on information that is easy to obtain and affect." There are a number of resources to help you collect this information, he says. (See box on cost information software vendors, p. 5.)
The primary goal of gathering information should be to get your costs identified to the CPT or the case level, suggests Lind. By looking at your costs on a CPT level, you can see trends more clearly and identify potential problems, he adds.
Looking at costs on a procedure-specific basis enabled the staff at Landmark Medical Center’s same-day surgery program to save more than $100,000 annually by streamlining orthopedic equipment and supplies, says Sandra Bucci, MSN, director of patient care services at the Woonsocket, RI, facility. Bucci’s staff used reports that show all the costs on a per-procedure, per-physician basis. Costs for orthopedic procedures varied widely because physicians were requesting a wide range of equipment from several vendors.
Using the cost information, Bucci worked with physicians and materials management staff to identify which equipment was effective and acceptable to the physicians. They developed a streamlined list of equipment and supplies that would be kept on hand for orthopedic cases.
Use info to predict revenue
Bucci also uses her cost-management system to evaluate potential costs as she recruits physicians to her surgery program. "We gather costs on elective procedures that physicians want to perform so we will know how our costs compare to our potential reimbursement," she says. This information helps when she is discussing which types of procedures can be handled, especially when the procedure is new to the surgery program.
Adding one or two new procedures wasn’t the issue for Randy Tabor, project manager at Central Georgia Medical Center in Macon, GA. The hospital is planning a freestanding ambulatory surgery center that will move most of the outpatient surgery procedures out of the hospital’s surgery department. As part of the planning process for the center and for the certificate of need application, the staff looked at existing information to determine potential costs and reimbursement level for procedures offered in the planned surgery center.
"We pulled the information based on ICD-9 and CPT codes to produce a list of outpatient surgical procedures," he explains. "Then we went to the financial services reports for these procedures to see what direct and indirect costs are allocated to each of them." Tabor took his analysis one step further to look at reimbursement for each procedure so he could generate an estimated cost and revenue projection for the planned surgery center.
In addition to using cost information to help plan a freestanding center, the staff at Central Georgia Medical Center also uses the information to negotiate managed care contracts, he says.
Info strengthens contract negotiations
Using specific, documented cost information is very helpful in contract negotiations, says Craig Veach, vice president of Health Information Systems, a Wallingford, CT, company that offers cost accounting and other management information systems for ambulatory surgery centers.
"Several of our clients report successful negotiations to change reimbursement levels because they were able to show a managed care company exact cost breakdowns for individual procedures," adds Veach.
Landmark Medical Center is one of the lowest cost hospitals in Rhode Island, and that status attracts managed care companies, says Bucci. But the state also has historically received the lowest reimbursement levels within the Medicare payment system, she adds.
Because of the low reimbursement levels, the staff at Landmark are taking proactive steps to evaluate potential reimbursement for different procedures. "We look at where the procedure is performed and whether or not reimbursement is affected," she says.
"For example, if a surgical case can be scheduled in either an operating room or a procedure room, what will the reimbursement level for each location be?" explains Bucci. If there is no difference in patient care but the reimbursement level is higher in a procedure room, the case is moved, she adds.
While collecting costs can be tedious and does require staff time to collect the data and produce reports, it is an essential part of monitoring the financial health of your day-surgery program, says Lind.
"Monitoring costs can’t be a one-time project, it needs to be ongoing," he says. "A good cost management program is like a gas gauge in a car. It gives you a chance to take action before you run into trouble."
For more information about knowing your costs, contact:
• R. Craig Lind, Managing Director, Lind/ Fitzsimons, 44 Montgomery St., Suite 500, San Francisco, CA 94104. Telephone: (415) 955-0550. Fax: (415) 673-4042. E-mail: firstname.lastname@example.org.
• Sandra Bucci, MSN, CNA, Director of Patient Care Services, Landmark Medical Center, 115 Cass Ave., Woonsocket, RI 02895. Telephone: (401) 769-4100. Fax: (401) 767-3189.
• Randy Tabor, Project Manager, Medical Center of Central Georgia, 777 Hemlock St., Macon, GA 31201. Telephone: (912) 633-1864. Fax: (912) 633-1702.