Bonus system helps reduce costs, boost satisfaction

With the help of a quarterly bonus system for physicians and staff, one South Carolina surgery center achieved a cost per case (medical supplies, implants, and drugs) of $159 in July 2007, and it has averaged a cost per case of $227 for 2007 at press time. Additionally, the center is able to maintain its inventory below $205,000 for 450 cases a month, as well as maintain patient satisfaction at 99.85%, which it measures as patients who respond positively that they would use the surgery center again.

Surgery Center at Pelham, based in Greer, has a bonus system based on five criteria: inventory (below $205,000 to receive full 20% of bonus), net revenue per case ($1,500 or above to receive full 25% of bonus), patient satisfaction (above 98% to receive full 25% of bonus), physician satisfaction (above 98% to receive 20% of bonus), and full-time equivalents (FTEs) per case (13 or fewer to receive full 10% of bonus). Physician satisfaction is measured with a 20-question survey that covers scheduling time, scheduling ease, helpful staff, and turnover time, among other topics. [A copy of the physician survey is available here.]

Every quarter, the surgery center distributes funds to the physician and hospital owners. The managers take up to 5% of this payment and split it equally among all staff, regardless of their hourly wages.

The center takes a team approach to reducing costs, says Bill Hazen, RN, administrator. The surgery center first targeted orthopedics and podiatry, which generally had the highest cost because of implants, he says.

The center uses Vision Software (Source Medical, to determine live charges in the OR. "When the case is over, I can meet [the surgeon] at the door and show him what the case cost," Hazen says. While the software requires a lot of input, including "perfect" preference cards, he says, the outcome is extremely detailed information on case cost. "We can track it down to four cents for a thermometer cover," Hazen says.

Consider these other suggestions for reducing costs:

• Hire an OR tech as your materials manager. Surgery Center at Pelham hired a materials manager who had years of experience as an OR technician. Martina A. Lamb, CST, materials manager, says, "Having an OR tech in this position, especially one at least seasoned with a few years, saves money astronomically. If you have someone who doesn't know what everything is used for, they don't know what to ask."

• Educate staff and physicians. Every physician and staff member is educated about the cost of equipment and supplies, Lamb says. Staff are told not to open items in the OR; instead, they're taught to wait for the doctor to ask for them. "But they're accessible, so it doesn't even take a second to open on the field," Lamb says. At monthly meetings, staff members are told what cases actually cost and what the managers think they should cost.

Suture costs are posted in each OR on a flip book, Hazen says. "My surgery techs know what each suture costs," he says.

Managers sit down with physicians and show them printouts with all detailed costs, such as the price for 9 inches of tape to put in an intravenous line. "With drugs, we try to limit the inventory and use what's most cost-effective and also best for the patient," Hazen says. To reduce prices of equipment, physicians are told informally about comparable pieces of equipment that are less expensive, and they are told they will be tried on a trial basis.

Physicians are given anonymous comparisons of their costs by specialty and by procedure, which "prompts productive discussions," he says.

• Develop good relationships with your vendors, and monitor them. Lamb has developed positive relationships with her supply vendors over several years. "When they know you know their product, and you have a good relationship, it helps out extensively," Lamb says. They often call Lamb first about a good deal, she says. To develop a good relationship, meet vendors, keep in contact with them on a regular basis, and give them time to talk to you, she suggests. "They e-mail me on a regular basis and ask, 'Do you need anything?'" Lamb says. She even negotiates with vendors, which frees Hazen to focus on other administrative duties.

Hazen has a policy that a vendor must have approval from him or the clinical director before bringing in a piece of equipment. "If doctors say, 'I want to use [specific should anchors], they have to discuss the cost with me before they ever use it," he says. "It's not like at a hospital where a rep shows up with something."

• Obtain supplies on consignment. The center has saved "thousands" by obtaining many supplies, including implants, mesh, and anchors, on consignment, Lamb says. "It's one of the biggest keys" to cost savings, she says. Vendors often are reluctant to use this arrangement, so be tough and tell them you'd prefer to use their product if they can let you have it on consignment, Lamb advises.

• Use custom packs. Once you obtain a consensus on what will be used, custom packs allow you to streamline, Lamb says. Converting to custom packs for all specialties has resulted in significant cost savings, says Hazen, who points to the reduction in his cost per case from $446 in early 2005, just after the center opened. "You might not use everything in the [custom] pack, but it's just cheaper to have it all there," he says. Additionally, custom packs save on waste, Lamb says.

• Standardize. The center formerly had five orthopedic surgeons who each wanted different implants, Hazen says. Now, the five have a single source vendor, he says. "Doctors will go along with that, because you can show them how much cheaper it is" and maintain the same standard of care, Hazen says. "If you tell the vendor you'll only use their equipment, they'll drop the price."

For example, the average cost of a cast now is $210, compared with a national average of about $285, Hazen says. "It's a matter of going to single vendors and negotiating contracts," he says.

• Use perpetual inventory. The center orders inventory just three times a week, Lamb says. "It cuts down on just-in-time ordering," she says.

Different nurses order for each specialty, based on what cases are scheduled, Hazen says.

• Track turnover times and length of stay. Cost savings can be realized through reductions in turnover times, Hazen says. His center averages seven to 10 minutes.

Look at the entire time your patients are at your facility, Hazen suggests. "Track them from the time they come in front door: How many minutes are spent in waiting time, pre-op, OR, Stage 1 and 2 recovery?" he says. For colonoscopy, the length of stay has been reduced to one hour and 37 minutes, compared with a national time of four hours in a hospital, Hazen adds.

Using certified registered nurse anesthetists (CRNAs) has helped, he says. The anesthesia staff handles all anesthetics and uses diprivan to encourage faster recovery. "With this type of sedation, many patients are fast-tracked [directly] to Stage 2," Hazen says.

Less time at the facility reduces staff costs and improves patient satisfaction, he says. "It used to be that no one minded two-hour waits for doctors," Hazen says. Now, "the shorter time they're at the center, the happier they are."

• Run program with fewer employees. The staff chart live during the case, instead of at the end of the day, so when they're finished with their cases, they go home, Hazen says. "It helps keep employee costs down," he says.

The center runs with fewer employees (total of 38 FTEs) than many facilities of comparable size. Hazen tells applicants they'll never work that hard anywhere else; however, the center has a good team atmosphere that employees enjoy, he adds.

"The key is staff knowing they have ownership," Hazen says. "They know that the patient has to be satisfied, they have to give quality care, and they have to do it quickly and effectively."