EXECUTIVE SUMMARY
Minimizing variation is one strategy that can help ASCs improve efficiency and cost.
• Use physicians’ inclination toward competitiveness to show them how their supply costs stack up against peers.
• Challenge vendors to find an equal quality, lower-cost option.
• Grow existing business through price transparency and focus on quality.
Most ASCs have cut costs in all of the easier areas. What’s left is challenging.
“The low-hanging fruit has already been plucked, and you’re moving to the top of the tree, and it’s more difficult,” says Stephen Blake, JD, MBA, CPA, CEO of Central Park ENT & Surgery Center in Arlington, TX.
For further cuts, ASCs must focus on standardization, he says.
“The more you can minimize variation, the better it will be in efficiency and cost,” Blake says.
Any financial strategy also should include increasing cases through negotiations with payers and maintaining cost competitiveness, he says.
“But we have to be smart about it,” Blake stresses. “If we’re staying proficient in these areas, then they can be cost competitive in those areas, as well as price competitive in those areas, and we’ll ultimately be successful.”
Keys to Efficiency
These same competitive pressures have contributed to health systems purchasing ASCs. Health systems make the pitch that ASCs will receive more per case in a collaborative arrangement, but as patients increasingly pay higher deductibles, this can be self-defeating.
“You go to a higher price deliverer of care and not get any increase in value,” Blake warns.
The key to running an efficient operation is to standardize purchases, maintain competitive pricing, and increase cases and services. The following are some strategies for shaving costs and increasing cases:
• Show physicians what their peers are spending on supplies. “Physicians are very competitive,” Blake says. “One of the things we’ve done at strategic planning retreats is set up a table with supply items and their associated costs.”
The cost labels will read “Surgeon A, B, C, D, E” to avoid using real names while clearly showing how much each surgeon spends on an item. A physician will see that a colleague has been using a less expensive product, which causes the doctor to wonder about switching to a less costly product. Standardizing product/supply purchases can help an organization cut costs, but it can’t happen with surgical supplies unless the physician is aware there is a way to cut costs and maintain quality.
“We let the physicians’ competitiveness take over, and we found in most cases physicians don’t like to be outliers, especially when it comes to cost,” Blake says.
Physicians would mill around the product tables at the strategic planning retreat, comparing their $3 supply item with someone else’s $1 item. A surgeon might decide he or she was OK with the $1 item and switch.
The price cards forced everyone to ask questions. “Are we getting better results by using a $150 blade, versus the cheaper one we had used in the past? Are we seeing patients are prepared quicker?” Blake notes. “We have that discussion, knowing the cost difference.”
The key is to show and not tell. When ASC leaders tell physicians to change to less expensive products, they often will not cooperate.
“You never tell doctors what to do,” Blake advises. “But give them good data and let them come to the right decision.”
• Challenge vendors. “We all have to continue to challenge our vendors,” Blake advises. “They’re an important part of the solution, and better competition among vendors makes it stronger.”
Standardizing supplies also can help improve this process. “Look at the top 10 and 25 items that you’re spending the most money on, and those are the targets for volume and money being spent,” Blake says.
Ask vendors what they can do to improve those costs for the surgery center.
“We can push a vendor, and, in some cases, they might say, ‘I have this other product that’s not a brand name, but I’m hearing it’s just as good. So, let me get you a couple of samples,’” Blake says.
The goal is not to push vendors to reduce the costs to the point that they’re not making a profit, but to goad them into finding a win-win situation in which they show the ASC a product that is cheaper and just as useful, he adds.
• Grow existing practices. “An ASC is more efficient at the cases it already is doing,” Blake says. “If we do the same cases over and over again, we get pretty efficient at it, and that’s very important.”
Central Park ENT & Surgery Center is competitive with small bread-and-butter-type cases. Also, the ASC is positioning itself to serve as an inexpensive alternative to costly hospital surgeries and post-op care.
“We’re a small, independent center and can be cost competitive, but we have to be smart about it,” Blake says.
“We’re starting to see more and more patients as deductibles rise,” Blake says. “They recognize that they’re paying for the procedure until they get to the $6,500 deductible, and the average person is not going to hit that number.”
• Recruit new physicians. An ASC should employ physicians who are in different stages of their careers. There should be younger physicians and those with mature practices, Blake advises.
“You’ve got those who are thinking about retirement and starting to slow down, so if you don’t bring in new people, you’ll have people starting to retire at the same time,” he explains.
• Be price competitive and transparent in pricing. “If you go to our website, we list our major prices and the things we do,” Blake says. “Price transparency is more and more a part of our business, and it enables us to draw business to the surgeons in our center.”
For example, one woman called the ASC, saying she needed ear tubes for her son. “She said, ‘I got an ENT and live 45 minutes away. But the doctor wanted me to take my son to the children’s hospital for ear tubes. He’s otherwise healthy, and I have a $6,000 deductible, and I called the hospital and it was $5,900 just for the facility fee,’” Blake recalls. “She said, ‘What am I looking at for your center?’ and I said, ‘It’s a $1,677 cash price for that procedure, including doctor, anesthesia, and facility fee.’”
The woman brought her son to the ASC, found a doctor she liked, and the procedure was performed there.
“I get more phone calls because of the price transparency,” Blake adds. “Some people in the internet age will look around and ask what their options are and look at the cost differences.”
As Americans’ deductibles rise and they become more educated about healthcare, they pay more attention to costs.
• Stay ahead of the reimbursement curve. Blake has been pushing payers to accept bundled rates and believes there will be a breakthrough soon. “We think we’ll go to a bundled rate eventually, but we’re not there yet,” he says. “The insurance companies are not quite ready to move to bundled rates, saying their IT systems are not designed to do it yet.”
Once they are ready, the ASC will be able to make the change quickly.
“One of the nice things about being smaller is we can be quicker at changing than bigger systems,” he says.
Minimizing variation is one strategy that can help ASCs improve efficiency and cost.
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