Whitepaper: If It Ain't Broke, Fix It
This whitepaper provides background information on the industry, highlights the increasing margin pressure, and identifies an innovative approach to reducing SG&A costs. Fill out the form to read more!
The cost of running any business, including an ambulatory surgery center (ASC), has surged over the past year. The list of contributing factors is lengthy and includes rising wages, shortages of goods, higher shipping costs and increasing energy costs. Some ASCs — particularly those in competitive markets — are finding that they must spend well beyond their budgets to attract and retain qualified staff. This comes on top of needing to shell out more for necessary equipment and supplies and struggling to secure meaningful reimbursement rate increases and timely payments from payers.
Whether you’re in a small, single-specialty ASC or a large, multispecialty facility, the reality is likely the same: Your margins are tightening, and there’s probably no relief from such unfavorable trends on the immediate horizon.
Despite this apparent doom and gloom, ASCs are not in a hopeless situation. Surgery centers have shown over their 50-plus-year history to be resilient. To find ways to work around challenges. To identify opportunities to make lemonade out of lemons. While this current period in the industry is undoubtedly a difficult one, surgery centers can undertake initiatives big, small and everything in between to help navigate the turbulence of shrinking margins. Below are seven such initiatives to consider.
As margins tighten, there becomes less room for error. Any questionable decisions concerning new initiatives, new investments and big (and sometimes smaller) changes can cause substantial financial distress at a time when ASCs cannot afford further strain on the bottom line. When significant decisions are made, it’s imperative that they be based on facts, not feelings. And by facts, we largely mean data.
Surgery centers should be looking for ways to reduce their risk by attaining deeper insight into their data — insight into everything from costs to productivity to key performance indicators (KPIs) that can help guide decisions and better ensure those decisions will ultimately accomplish their intended objectives.
It may be necessary to add new technology or allocate time and resources to expand your current usage of technology to gain these insights. However, such upfront investments should pay for themselves many times over in the form of greater operational efficiencies, process and workflow optimization, increased cost savings and other benefits brought about by intelligent, data-driven changes.
This is no time to leave anything concerning cost to chance. If the costs of any cases exceed what your ASC receives in payments for those cases, every such case will shrink the bottom line. While securing fair contracts sometimes requires a center to take a loss in some cases, these
cases should be low volume. It is essential that the bulk of a surgery center’s cases generate a meaningful profit.
To better ensure such a return, ASCs must know their exact case costs, with the emphasis on exact. These figures should include the costs of supplies and devices, staff time, and the utilities necessary to support the procedure. By finding ways to improve the accuracy of case costing, ASCs will put themselves in a better position to determine where changes to cases, often concerning equipment and supply use, can effectively reduce expenses without harming quality.
Staffing is one of the top two costs for ASCs, and, as we noted above, it’s an expense that’s rising fast. It’s simply more expensive to attract and retain staff these days. Some staff are essential to an ASC’s operations, including those tasked with clinical responsibilities, facility oversight and patient throughput. But in other areas, surgery centers can turn to technology and outsourcing to help reduce reliance on employees and decrease staffing costs, including those expenses associated with overtime, pro re nata (PRN) staff and adding staff as a center grows.
ASCs are using technology to streamline responsibilities and automate previously manual processes and projects, dramatically reducing the number of tasks that must be physically performed by a staff member. For example, we’re seeing centers adding solutions that empower them to make more efficient — and often more intelligent — decisions in areas that have largely been reliant upon staff, such as those concerning equipment and supply purchases, vendor payments and inventory. Meanwhile, the use of outsourcing is helping ASCs with revenue cycle management, anesthesia, housekeeping and even the sterile processing department.
The other top expense for ASCs is supplies and equipment. Whereas bringing about noteworthy savings through staffing changes is likely to be a lengthy process, surgery centers may be able to boost their bottom lines fairly quickly — and fairly significantly — by improving inventory management. Consider that poor inventory management leads to unnecessary and incorrect purchases, over-purchasing, misplaced or lost supplies, expired supplies and even unnoticed theft. Every one of these outcomes translates to money lost.
These outcomes should be avoidable in an ASC, where there’s typically little unpredictability in day-to-day operations (unlike a hospital, for example). Physicians, procedures and patients are identified in advance, which means the necessary supplies and equipment are known as well. This supports an ASC’s ability to achieve and reap the benefits of a “just-in-time” inventory management system.
Technology is making it much easier for surgery centers to monitor supplies and equipment and keep these at the optimal levels needed to support operations. Solutions are also providing greater insight into inventory that supports better-timed purchases, reductions in waste and identification of cost savings opportunities.
If you don’t already know which of your cases generate the highest return on your investment, case costing should help provide this insight. With such information in hand, you can better explore whether opportunities exist to grow your most valuable volume. Do your performing physicians have more of such cases to bring to your ASC? If so, can you rearrange your block times to safely fit in additional cases? Do you have the option to open your center for part of the weekend? If your physicians are already maximizing this volume, are there other physicians in your market who may want to bring these cases to your center?
While not as straightforward as building on existing cases, adding new types of cases and specialties — assuming you have available time on the schedule, adequate staffing and access to the necessary equipment — can be an effective mechanism to enhance revenue and further endear yourself to payers that may be looking to move more volume to ASCs. Speak with your existing physicians about whether they are performing cases elsewhere that could safely be performed in your center. You can also reach out to physicians in your market who may be interested in bringing new procedures and specialties.
Before adding a new procedure or specialty, especially those that will require significant upfront investments (e.g., equipment, staffing, staff training), try to calculate as accurate of a case(s) cost as possible. Learn supply and equipment expectations from the performing physician. Clinical staff who have supported this physician on these cases can also be useful sources of information on surgeon preferences and procedure time. Supplement this information with industry research, which can include speaking with representatives from other ASCs already performing these procedures.
Have you ever heard of Amazon’s “hands off the wheel” project? It was a program designed to help the company further automate office work. As the Harvard Business Review reported, the program’s purpose was not to eliminate jobs but rather automate more tasks so the company could then reassign people who were performing those tasks to build new products. In other words, Amazon wanted to do more with the people it already had on staff rather than doing the same with fewer people.
ASCs are in a position to emulate this quite successful program. How? Identify the manual tasks performed in your center and ask yourself, “Does an opportunity exist to automate — or achieve some automation — of these tasks?” Don’t quickly dismiss the potential for a manual process to be replaced or further supported by automation. We’re seeing automation solutions now helping surgery centers with patient communications, reordering supplies, coding procedures and, as we recently wrote about, payment process. It wasn’t all that long ago that these tasks required manual, time-consuming processes.
During this tumultuous period for ASCs, the financial performance of a center should not just be a concern and area of focus for management. Everyone who works at the facility should understand the importance of cost savings and revenue growth for the short- and long-term viability of the ASC — and thus the viability of their positions. After all, when a facility struggles, it can force difficult decisions concerning staffing levels, scaling back operations and delaying or abandoning growth opportunities. On the other hand, when a facility is thriving, there is more job security, the increased potential for raises and bonuses, a greater ability to pursue growth avenues and generally higher levels of satisfaction.
Tap into the knowledge and expertise of your staff, including physicians, to help identify and pursue initiatives that can strengthen the bottom line. Your staff sees everything that happens in your ASC — day in, day out. Ask them for suggestions, with no idea too small. During downtime, task staff with brainstorming ideas and researching solutions that may be able to help you cut your expenses and achieve greater efficiencies.
This is no time to be passive. ASCs that pursue initiatives and make investments that enhance their performance will likely find it much easier to navigate these choppy economic waters and position themselves for even greater growth and success when conditions eventually improve.
Subscribe today to stay informed and receive regular updates from triValence.