Flying first class isn’t always an option
By Stephen W. Earnhart, MS
President and CEO
Earnhart & Associates
Austin, TX
During a routine process and operational audit of a hospital facility last month, we discovered an interesting situation. The supply cost and personnel cost for most ambulatory surgery cases exceeded the reimbursement by 30%. That did not take into account the fixed or variable expenses and profit margin. The more surgery the hospital did, the more money they lost. This revelation was particularly disturbing to the chief financial officer of the well-known facility who thought there was a significant profit on these cases.
What were the symptoms? A nagging sense of doom by the nurse manager. Her concerns were the increased use of expensive supplies on cases and the increasing use of endoscopies for hernia and carpal tunnel cases. As it turns out, she was right to be concerned. As managers and administrators of health care facilities, we need to realize that no one is going to pay us for the high-tech toys and cool procedures we do anymore. It’s sad, but it’s just not going to happen. So . . . who is going to tell the surgeon?
The facts are that big business (who pays for all of health care) just isn’t willing to pay for all the new technology, regardless of how much better it is for the patient. We can argue the point to death or deal with it. From a practical standpoint, we need to deal with it.
First, it is definitely time to separate inpatient from outpatient services. We cannot afford to have the same staffing levels and mindset that we have for inpatient cases. There are two classes of service now. If you want to fly first class on an airplane, you pay more. Inpatient is now the first-class flyer, and ambulatory is for those flying coach. Consider these specific differences:
- Technology. It has to change. We really do not need two or three monitors in each operating room to do an incisional hernia repair.
- Supply cost. It’s time to sit down with the surgeons and explain that we need to reduce as much as we can on their preference cards. We cannot afford everything listed there. You may be afraid you’re going to push them out the door to a freestanding center. However, if they do leave, they are going to find out that everything you are trying to accomplish is what the for-profit centers have been doing for years. Surgeons are going to have to come around and understand that we as facilities can do only so much.
- Staffing. We are treating ASA 1 and 2 patients for the most part. You do not need the same staffing levels for this class of patients. You can be proactive, or let a company like mine come in and tell you to cut back, but someone is going to do it eventually.
- Contracting. It’s time to "beat up" the people who negotiate your contracts. There’s not much you can do about federal programs, but your commercial payers need to come around.
- Mentality. I can tell you from experience that the most difficult roadblock ahead will be your own staff. As health care providers, especially not-for-profit hospitals, it is difficult for staff to understand the economics of doing without, especially when it comes to denying the patient. As much as we would all like to fly first class, the fact is, we cannot always afford it.
(Editor’s note: Earnhart & Associates is an ambulatory surgery consulting firm specializing in all aspects of surgery center development and management. Contact Earnhart at 8303 MoPac, Suite C146. Austin, TX 78759. E-mail: [email protected]. Web: www.earnhart.com.)
[Editor’s note: This column addresses specific questions related to Health Insurance Portability and Accountability Act (HIPAA) implementation. If you have questions, please send them to Sheryl Jackson, Same-Day Surgery, Thomson American Health Consultants, P.O. Box 740056, Atlanta, GA 30374. Fax: (404) 262-5447. E-mail: [email protected].]
During a routine process and operational audit of a hospital facility last month, we discovered an interesting situation. The supply cost and personnel cost for most ambulatory surgery cases exceeded the reimbursement by 30%.You have reached your article limit for the month. Subscribe now to access this article plus other member-only content.
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