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Case Costing and Benchmarking for Orthopedic, Spine and Pain

Driven ASCs

Susan Kizirian, RN, MBA

Chief Operating Officer

Ann Geier, RN, MS, CNOR, CASC

Sr. VP of Operations

Ambulatory Surgical Centers of America (ASCOA)

Objectives

• Discuss the benefits of case costing

• Describe the information needed to complete case costing

• Identify and present tools to enable completion of case casting

• Discuss actual ortho/spine case costing examples

“The safest way to double your money is to fold it over and put it in your

pocket.”Kin Hubbard (1868 - 1930)

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Why do case costing?

Why Do Case Costing?

• Snapshot of cost of doing business

• Allows comparison of costs by CPT codes

• Allows cost comparison by physicians

• Benchmarking against other centers

• Drives cost of supplies down– Staffing and supplies are biggest expenses in ASCs

• Helps determine if reimbursement covers cost of doing business

• Demonstrates profit margin by CPT code/surgeon

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7

Use the Data to Increasethe Bottom Line

Human

Resources

Cost Drivers

Surgeon

RecruitmentEliminate

Losses

Implants &

Prosthetics

Payer

Contracting

Carve Outs

Charge

Master

Schedule

Efficiency

Case Costing

All Road Lead to Case Costing

Some of Best Paying ASC Procedures

• Best specialties: Neurosurgery, General Surgery, (hernias, lap choles, lap banding), Urology (slings and ESWLs), Orthopedics (shoulder arthroscopies)

• Neuro, ortho, and neurostimulators lead the way

Matt Lau, Director of Financial Analysis, Regent Surgical Health, Becker’s ASC Review Feb. 24, 2010

Procedure Average range of reimbursement

Diskectomies $17,000-$34,000

Laminotomies $9,000-$11,000

Vertebral corpectomies $17,000-$20,000

Insertion/repair of neurostimulators $11,000-$18,000

Matt Lau, Director of Financial Analysis, Regent Surgical Health,

Becker’s ASC Review Feb. 24, 2010

Some of Best Paying NeurosurgeryASC Procedures

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Payors

• Costs are known when negotiating contracts

• When negotiating retrospective payments, you know exactly what it costs you to do the case, the time it took, etc. & provides data to improve payments

It’s all about chasing the $$$$$$

First Steps

• Appoint ONE person to gather/enter data

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First Steps

• Allow several days/weeks to enter all data

• Enter up-to-date preference cards

• Begin with most often-performed procedures

• Goal: All procedures are entered for every physician

• Train staff to enter complete case history reports (clinical logs)

What You Need to Start

• Good computer system

What You Need to Start

• Computer literate employee

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What You Need to Start

• Accurate pricing on supplies

What You Need to Start

• Knowledge of overhead costs: total cost of running the center

What You Need to Start

• Benchmarks allowing the ASC to compare itself to others

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COST DRIVERS

Cost Drivers Rent

Service Contracts

Labor

Supply Costs

OR Utilization

Physician Variables

OR Time & Utilization

Supplies

Surgeon Preferences

Anesthesia Preferences

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Supplies

• Disposable Medical– Case Specific

• Preop, OR, PACU– Routine supplies

– Standard Packs & Custom Packs

– Pharmaceuticals

– Gases

• Surgeon Preference– Procedure specific supplies

– Pharmaceuticals

– Implants & Prosthetics

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Supplies - 2

– Anesthesia• Routine Supplies• Pharmaceuticals• Gases

– Supplies – Other• Necessary to provide services either non-medical or not

directly tracked to a specific patient

– Implants & Prosthetics• Demand vs. Preference• Device Benefits Managers

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Case Costing Methodology

Intermediate Method:

(OH / OR Minutes) + Supplies = Case Cost

Simple:

Everything revolves around the OR Minute

Calculating the OR Minute

Step 1: By accounting period (month)

*Overhead (minus supplies) / OR minutes = OH per OR minute

Step 2: By 1° CPT/Surgeon:

(OR mins x OH per OR minute) + Supplies = Case Cost

*Overhead is the total expense for the month from the P & L statement (cash accounting) minus medical supplies

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Analyzing Case Cost Sample Form

Where Does the Information Come From?

• Vendors

• Software reports – OR times, operating costs, etc.

• Preference cards

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-$ ABC AMBULATORY SURGERY CENTER

COST COMPARISON

DATE: 2/20/06

Procedure: Knee Arthroscopy 29881

SUPPLIES IN COMMON

Doc Name 1 Doc Name 2 Doc Name 3 Doc Name 4

ITEM PRICE ITEM PRICE ITEM PRICE ITEM PRICE

2 Adaptor, Spike 3.50$ 2 Adaptor, Spike 3.50$

Bandage, Coban 4" 8.57$ Bandage, Coban 4" 8.57$ Bandage, Coban 4" 8.57$ Bandage, Coban 4" 8.57$

Blade, Surgical #11 0.22$ Blade, Surgical #11 0.22$ Blade, Surgical #11 0.22$

Bandage, Esmark 6x12 4.61$ Bandage, Esmark 6x12 4.61$

Light handles -$ Light handles -$

Needle, Spinal 18x3 1/2 1.08$ Needle, Spinal 18x 3 1/2 1.08$ Needle, Spinal 18x 3 1/2 1.08$

2 Suction Tubing 1.06$ 2 Suction Tubing 1.06$ 2 Suction Tubing 1.06$ 2 Suction Tubing 1.06$

Arthroscopy Tubing 87.20$ Arthroscopy Tubing 87.20$ Arthroscopy Tubing 87.20$ Arthroscopy tubing 87.20$

Canister, Sctn 2000cc 3.26$ 4 Canister, Sctn 2000cc 13.04$

4 Sod Chl, 2000 ml 8.20$ 4 Sod Chl, 2000 ml 8.20$

Drape, Arthroscopy Pak 58.50$ Drape, Arthroscopy Pak 58.50$ Drape, Arthroscopy Pak 58.50$ Drape, Arthroscopy Pak 58.50$

Dressing, Kerlix 4" 1.08$ Dressing, Kerlix 4" 1.08$

Sponge, Gze 12 ply 4x4 0.79$ Sponge, 12 ply 4x4 0.79$

Suture, Ethlon 4-0 1667H 3.07$ Suture, Ethlon 4-0 1667H 3.07$ Suture, Ethlon 4-0 1667H 3.07$

IV Catheter 20g 1.61$ IV Catheter, 20g 1.61$ IV Catheter, 20g 1.61$ IV Catheter, 20g 1.61$

IV Adm set primary 4.35$ IV Adm set primary 4.35$ IV Adm set primary 4.35$ IV Adm set primary 4.35$

IV Adm set secondary 1.01$ IV Adm set secondary 1.01$ IV Adm set secondary 1.01$ IV Adm set secondary 1.01$

Cefazolin Duplex 5.05$ Cefazolin Duplex 5.05$ Cefazolin Duplex 5.05$ Cefazolin Duplex 5.05$

Tegaderm w /w indow 0.30$ Tegaderm w /w indow 0.30$ Tegaderm w /w indow 0.30$ Tegaderm w /w indow 0.30$

Lactated Ringer 1000ml 1.03$ Lactated Ringer 1000ml 1.03$ Lactated Ringer 1000ml 1.03$ Lactated Ringer 1000 ml 1.03$

LMA -$ LMA -$ LMA -$ LMA -$

Adult Circuit 60" 7.92$ Adult Circuit 60" 7.92$ Adult Circuit 60" 7.92$ Adult Circuit 60" 7.92$

Propofol 7.72$ Propofol 7.72$ Propofol 7.72$ Propofol 7.72$

Fentanyl 0.65$ Fentanyl 0.65$ Fentanyl 0.65$ Fentanyl 0.65$

Torodol 1.00$ Torodol 1.00$ Torodol 1.00$ Torodol 1.00$

Adult mask anesthesia 3.20$ Adult mask anesthesia 3.20$ Adult mask anesthesia 3.20$ Adult mask anesthesia 3.20$

Dressing, 2 x 2 0.03$ Dressing, 2 x 2 0.03$ Dressing, 2 x 2 0.03$ Dressing, 2 x 2 0.03$

Large Ice Bag w /ties 0.83$ Large Ice Bag, w /ties 0.83$ Large Ice Bag, w /ties 0.83$ Large Ice Bag, w /ties 0.83$

Knee Arthroscopy

SUPPLIES THAT DIFFER

ITEM PRICE ITEM PRICE ITEM PRICE ITEM PRICE

Arthrowand Covac 201.00$ Agg Plus Shaver 95.80$ Needle Counter, Foam 1.17$ Glove, Surg Est Sz 6 1/2 1.97$

Blade, Surgical #15 0.22$ Betadine scrub brush 0.60$ Needle, Hypo 18gx1 1/2 0.03$ Glove, Surg Est Sz 7 1/2 1.97$

4 Gloves, Surg Est Sz8 7.88$ Needle, Hypo 22gx1 1/2 0.03$ Raytec 0.65$ Needle, Hypo 22gx 1 1/2 0.03$

4 Lac Ringers 3000ml 23.91$ Sponge, Raytex 4 x 4 0.65$ Bandage, Kling 6" 0.57$ Scrubbrush, W/Iodophor 0.66$

Marker, Skin 0.61$ Tape, Adhsv Foam 2.80$ Marcaine .25% W/Epi 1.81$ Sponge, Gze 4x4 12 ply 0.79$

Sponge, Gze 4"x4" 0.03$ Ace Bandage 6" 1.82$ Closure, Steri-strip 1/4x3 0.69$

Gown, XL 3.00$ Pad, Abdominal Tender 0.36$ Bupivicaine .25% - 10 ml 1.57$

Towel, Str Blue 4-pack 2.78$ Suture, Prolen 4-0 8682G 3.77$

ABD 0.12$ Bupivicaine .5% w/Epi 1.34$

Bacitracin Ointment 0.06$

Dressing, Adaptic 3x3 0.28$

Bupi w/Epi .25% 30ml 20 2.52$

Epinephrin multi-dose vial 4.85$

TOTAL COST 451.18$ 314.52$ 198.63$ 218.12$

AVERAGE OR TIME 48 min 73 min 68 min 42 min

(Based on 13 cases thus far) (Based on 10 cases thus far) (Based on 5 cases thus far) (Based on 4 cases thus far)

OPPORTUNITIES:

ANNUAL REALIZATION IN REVENUE

Proposed change times

number of cases annually

equals =potential annual

savings to facility

Knee Arthroscopy (continued)

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ACDF (continued)

ACDF (continued)

Next Steps

• Carefully review data

• Look for outliers

• Ensure accuracy

• Present at monthly Board meetings

– Blind the doctors’ names

– Allow the doctors to see their own case costs in private

• Lead discussion on lowering costs

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Sample of Board Report for Spine Surgeon

Results

• Physicians are competitive

• Don’t like being the high cost doc

• May challenge findings

“To err is human – and to blame it on a computer is even

more so.”Robert Orben

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Bottom Line

• Discussion usually includes:

– What they don’t use on preference cards

– What they could change

– Implants that could be substituted

– Why is Doctor A so much higher than the rest?

– Why is Doctor D so much lower?

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Physician Variables - Surgeons

• Surgeons

– OR Time – on time, speed and efficiency

– Preferences

• start time

• staff

• supplies

• implants

• instruments & equipment

• medications

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Physician Variables - Anesthesia

• Speed & Efficiency: degree integrated into patient & schedule flow

• Preop review– Preop protocols

• Preop testing

• Preop meds

• PACU protocols– PACU meds

– Pt recovery time

• OR Medication protocols

• Discharge protocols– N/V management

– Pain management

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Stakeholder Planning

• What financial or emotional interest do they have in the outcome of your work? It is positive or negative?

• What motivates them most of all?

• What information do they want from you?

• How do they want to receive information from you? What is the best way of communicating your message to them?

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Stakeholder Planning - 2

• What is their current opinion of your work? Is it based on good information?

• Who influences their opinions generally, and who influences their opinion of you?

• How will you win them around or manage their opposition?

• Who might be influencing their opinions?

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Manage Closely

Non-Engaged Staff & Board & Surgeons

Keep Satisfied

Committed Staff & Surgeons & Board

Monitor Keep Informed

Payers, Patients

High

POWER

Low

Low HighINTEREST

Power-Interest Grid

with Stakeholders Marked

Controlling OR Costs

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Benchmarking

• Comparisons to others and to yourself

• National benchmarking is available: ASCA, MGMA, VMG Intellimarker from VMG Health, Becker’s ASC Review (online & free)

• Accreditation organizations require it

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ASCA Salary & Benefits Survey

• The leading and only comprehensive ASC salary survey

– National, Regional and Select State Data

– Salaries for 17 ASC Positions

– Bonus Information

– Employee Benefits Data

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ASCA Financial Benchmarks

• Key ASC Indicators

• Performance Ratios

• Accounts Receivable

• Costs Per Case

• Salaries and Benefits

• Medical Supplies and Drug

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Cost Per Case - All ASCs

Salaries &

Benefits

36%

Medical Supplies

& Drugs

25%

Building Lease &

Depreciation

8%

Miscellaneous

31%

ASCA Financial Benchmarks

Key ASC Indicator, Costs Per Case, page 12, ASC Financial Benchmarking Survey, 2006, Foundation for Ambulatory Surgery in

America.

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ASCA Financial Benchmarks - 2

• Operational Information– Accounting Method

– Anesthesia Professional Type

– Anesthesia Service Arrangements

– ASC Location

– Facility Accreditation & Organization

– Facility Size (Total Square Feet)

– Facility Size (Square Feet per OR/Procedure Room)

– Patient Encounter Distribution

– Payer Mix

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ASCA Financial Benchmarks - 3

• Procedure Specific Data

– Gross Charges Per Case

– Net Revenue Per Case

– Costs Per Case – Medical Supplies & Drugs

– Minutes Per Case

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ASCA Financial Benchmarks - 4

• Procedure Specific Data

– CPT 29826 – Shoulder Arthroscopy

– CPT 29877 – Knee Arthroscopy

– CPT 42820 – Remove Tonsils & Adenoids

– CPT 45380 – Colonoscopy with Biopsy

– CPT 66984 – Cataract Surgery w/IOL

– CPT 69436 – Create Eardrum Opening

– Others

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ASCA Financial Benchmarks - 5

• Financial Statements– Per Case

– Per Case by Specialty

– Per OR/Procedure Room Hour

– Per Patient Hour

– Per OR/Procedure Room

– Per OR: 1-2, 3, 4-5, > 5

– By Ownership

– Multi-specialty, Single Specialty

– Per Square Foot

– Years in Operation: 1-3, 4-6, 7-10, > 10

High Impact Metrics

• Actual cases as % of projected cases

• Case per day

• Collections as % of charges

• Supplies as % of collections

• Payroll as % of collections

• AR – days outstanding

• AR & AP % current

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Supplies % of CollectionsMedical Supplies as a Percent of Collections

5%

10%

15%

20%

25%

30%

Oct-04 Nov-04 Dec-04 Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05

Poor > 24%

Average 19%

Good < 13%

*Industry median is a sample median reprinted with permission from the Medical Group Management Association, 104 Inverness Terrace

East, Englewood, Colorado 80112-5306; 303.799.1111. www.mgma.com. Copyright 2005.

Industry Median 20%*

Supplies % of Collections

• Always one of top two ASC costs

• Largely physician driven - but you can guide them

• Reduce cost by sourcing through group purchasing organizations (GPO)

• Case costing critical to reduce

• Provide recommended preference cards

Payroll % of Collections

10%

15%

20%

25%

30%

35%

40%

Oct-04 Nov-04 Dec-04 Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05

Poor > 27%

Average 22%

Good < 17%

Industry Median 29%*

*Industry median is a sample median reprinted with permission from the Medical Group Management Association, 104 Inverness

Terrace East, Englewood, CO 60112-5306; 303-799-1111. www.mgma.com. Copyright 2005

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Payroll % of Collections

• Typically the largest single cost of an ASC.

• Compress your schedule to reduce.

• When the work is done, turn off the lights and send people home.

• Use PRN staff when possible.

• Pay more per hour for the right people

Supplies and Payroll

• Can be controlled

• Change thought processes

• Track savings

• Calculate annualized savings

• Share information with staff

• Present to the Board

“Computers can figure out all kinds of problems, except the things in the

world that just don’t add up.”James Magary

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Summary

• Case costing takes time

• Information is priceless

• Diligence & Commitment are required

• Train your Board and Medical Staff regarding the reports

….and….

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Managing the Bottom Line

Human Resources

Cost Drivers

SurgeonRecruitment

Eliminate LossProcedure(s)

Implants & Prosthetics

Payer Contracting

Carve Outs

Charge Master

Schedule Efficiency

Case

Costing

Questions?

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Contact Information

Ann Geier, RN, MS, CNOR, CASC

Sr. VP of Operations

ASCOA

ageier@ascoa.com

Susan Kizirian, RN, MBA

COO

ASCOA

skizirian@ascoa.com