From inefficient OR time use to anesthesia costs, seven leaders joined Becker’s to discuss the most overlooked cost factors affecting ASCs’ financial situations.
Editor’s note: These responses have been edited lightly for clarity and length.
Question: What is the most overlooked cost factor threatening ASC profitability?
Heather Combs, RN. ASC Administrator at Austin (Texas) Regional Clinic: One of the most overlooked cost factors threatening ASCs is the inefficient use of OR time, specifically, underutilization or poor scheduling practices. Administrators focus on monthly case volume, case costing, staffing matrix and supply cost, all very important metrics, but often overlooked when the ORs are not operating at capacity. The OR represents a major investment in equipment, staffing and facility infrastructure. Whether a room is in use or not, the center is paying for it. Inefficient block scheduling, late starts, idle time or long turnovers impact revenue significantly. Longer turnover times result in less cases performed and higher staffing costs.
Kathleen Hickman, BSN, RN. Administrator and Clinical Director of Dutchess Ambulatory Surgical Center (Poughkeepsie, N.Y.): I feel the biggest threat is the reimbursement difference between ASCs and [hospital outpatient departments]. Costs continue to soar for supplies, pharmaceuticals, etc., with only incremental increases (or none) in reimbursements for ASCs. Negotiating payer contracts as an independent ASCs presents significant challenges in terms of substantiating the need for higher reimbursement simply to stay ahead of operational costs.
George Olsen. Administrator of Hinsdale (Ill.) Surgical Center: In looking at this question, it is both complex and fundamental and requires an astute management approach. If an ASC is to be well managed and profitable, no operating element can afford to be overlooked. Every operating and financial aspect of the surgery center is fully integrated. The successful profitability of the center is dependent upon all elements working in sync. Everything represents a cost factor that cannot be overlooked.
Simply put, you have revenue and expenses. Within each of these are a range of key moving parts. While it is true that revenue drives the capability of the center, if expenses are not well managed, they will rapidly minimize that revenue side.
When looking at a P&L statement, and looking at the revenue side, key elements are case volume, case mix and payer mix. While each of these have individual focus and management requirements, all demand equal and direct attention.
In comparison, when looking at the expense side, the largest expenses are first, wages, and secondly, the supply side. Regarding wages, attention must be paid to efficiency and aligning staffing needs with surgical volume. On the supply side, managing inventory, and optimizing supplier and GPO contracts to reduce and manage those costs, is critical.
Having an additional software tool of profit forecasting which takes a forensic look at case cost, and everything that contributes to that cost, is a key approach to reaching and maintaining profitability.
While this summary may sound very fundamental, all of these attributes are key elements that are central to success, and absolutely drive the profitability of a center. None can afford to be, or should be, overlooked.
Benjamin Stein, MD. President and CEO at Capital Orthopaedic Surgery Center (Germantown, Md.): Though disposable/implant costs, anesthesia subsidies and misaligned managed care agreements are substantial contributors and often mentioned, I believe that staff retention and turnover due to burnout are a major factor that silently affects the bottom line through a two-pronged hit of reliance on more costly staffing agencies and the resultant decreased efficiencies of unfamiliar staff that lead to decreased revenues.
Stephanie Tomlin, RN. Administrator of Rincon Surgery Center (Tucson, Ariz.): The rising cost of anesthesia is indeed a significant challenge. Historically, anesthesia providers billed patients separately, but now ASCs often need to guarantee hours and offset collections due to changes in anesthesia availability. This shift requires ASCs to adjust their budget structures, making it essential to incorporate these costs into financial projections from the start.
Melissa Waibel, BSN. CEO of Guam Surgicenter: The most overlooked cost factor threatening ASC profitability is supply back orders and allocations. Time is spent trying to research other similar products, which normally cost more as well. I think we are all versed in increasing supply costs in general; always at a higher rate than any increase we get with Medicare reimbursement. The time and effort to secure products currently is increasing, and I believe it will continue to do so for the next two years. That means more payroll hours and higher prices and potentially higher shipping prices for similar products.
Andrew Weiss. Administrator of Summit Surgical Center (Vorhees, N.J.): I think the most overlooked cost factor is employee turnover. The cost of recruiting, hiring and training a new employee makes a significant impact on productivity and efficiency. Treat your employees fairly and with respect; the payoff is incalculable.
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