Surgery center saves $80,000 in six months
Ensuring contract prices can save 15%-40%
Jersey Shore Ambulatory Surgery Center (ASC) in Summer's Point, NJ, reduced wasteful supplies and inventory by more than $80,000 in six months by taking a few simple steps that could be replicated by most outpatient surgery programs.
First and perhaps most importantly, Larry Lane, owner of instraMED Technology, an Indianapolis-based health care consulting company that focuses on alternate health care, ensured the center was receiving their contracted prices from their group purchasing organization (GPO) for items including bandages, needles, and syringes.
"The difference in being on or off a contract can be as much as 15% to 40% cost savings," Lane says.
The prices had not been loaded correctly into the vendor's electronic billing system, he says. "If it doesn't have them identified as a GPO member, they will be paying whatever cost from the distributor," Lane says.
Members of the surgery center staff weren't aware of the contract price, so they were purchasing another product that was not on contract, he says. "I got them on contract, getting the correct price, and making sure the correct price was loaded to the distributor who was supplying them on weekly basis," Lane says.
Next, Lane targeted pharmaceuticals. "We made sure they were loaded to the right distributor, and the distributor had them loaded to the right GPO, and they were getting the correct drug pricing based on the GPO contract," he says.
Services were next on the list, including gases, laundry services, and biomed checks. Lane made sure they were receiving the contract pricing. Also, in some cases, the surgery center was paying bills three times a week. "You should be doing that one time a week or one time a month," due to the expense associated with a staff person paying each bill, Lane says.
After the contract prices were set in place, Lane set up a system the center could use to ensure the correct pricing remained in place.
"One of the things that happens is that the pricing falls out, no one knows about it, and they think it's a price increase," he says. Because of staff turnover in health care, monitoring of correct prices is always an issue, Lane says.
He put a monitoring system in place for the three distributors and wholesalers. The monitoring is performed every six to 12 months, Lane says. The center now asks for a material utilization report for med/surg supplies for the last 12 months. The center also asks for an 80/20 report, which targets the 20% of items that are 80% of the center's supply costs.
Every wholesalers and distributor can provide those reports, Lane emphasizes. "They don't like to, but it's in the agreement," he says.
"Ambulatory surgery centers are so focused on ordering and daily activities, they don't have time to monitor," Lane says. "A lot of times, this is where people are taken advantage of."
Find partner wholesalers and distributors who will work closely with you and who know you're monitoring them, he advises. "That's what this is all about," Lane says.
Reduce inventory to 2- to 3-week supply Outpatient surgery programs can save a significant amount of money by reducing their inventory to a two- to three-week supply, advises Larry Lane, owner of instraMED Technology, an Indianapolis-based health care consulting company that focuses on alternate health care. Work with your physicians to consolidate supplies, Lane advises. "In those physician preference items, one of those things I preach to [outpatient surgery administrators] is that if you can show a comparison, and they can see differences in cost and the value of consolidation, the dollar figure associated with it, they’ll support it," he says. "Once they’re educated, they’ll buy in, and they’re ready to move on with cost savings." Lane likes to break down items by specialty, in terms of volume. Even without group purchasing organization (GPO) contracts, you can consolidate your vendors and negotiate a better price, he says. "If you have volume consolidated, you can go to those vendors selling the prosthesis or screws, for example, and if you’re buying at least 80% of your orthopedic items from them, they will give you a preferred discount," Lane says. "But you have to negotiate that. You need to have the volume, and consolidate that volume into one [vendor]." Save as much as 50% on shipping You may be paying a shipping charge for every item shipped to you, even if they come from the same vendor in the same box, Lane warns. "They place order one day, and the next day they call in another order, and they get charged shipping for both, even though it’s in the same box," he says. Vendors often will use shipping charges as a way to generate revenue, Lane reports. "Most people don’t even think about it," he says. "They think they have to use the vendor’s shipping service." If the facility is a member of a group purchasing organization (GPO), is has a 10%-35% discount on shipping, Lane says. Tell the vendors that you want to use your shipping number, and say, "I don’t want to see any shipping charge on that invoice," he says. "It can be as much as 50% savings on shipping charges." As a general rule of thumb, you should pay 8%-12% of your cost in freight, although there are some exceptions depending on your location. Be on the lookout for gas fees and incorrect taxes due to a facility’s location being listed incorrectly by the vendor, Lane says. "When you’re given the price you’ll pay, that’s not the true price until you consider the other items," he says. "And watch what’s being tacked on." One surgery center Lane worked with reduced its shipping charges from $69,000 annually to about $54,000. "This is one area of savings that isn’t huge, but can have a real impact over time with you controlling this," he says. |
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