Cost Reduction in The OR

This research report was written by Lisa Miller.

Cost reduction in the OR: Even small adjustments in performance can have significant economic impact in the operating room.

High cost implants and supplies are a constant challenge for hospitals to manage for competitive pricing and for inventory controls. There are 4 lesser known strategies that your OR can implement to identify cost savings opportunities and avoid cost increases – that will have a significant positive impact on your operations.

1. Perform a bi-annual line item cost benchmarking assessment 

Implant costs change, new items are introduced to replace older models and new technology is constantly being developed and it’s hard to keep every item under management. However, if you are committed to a quarterly or bi-annual assessment to competitively benchmark your high cost supply and implants costs—you will absolutely capture cost savings opportunities.

A best practice strategy is to have an independent price benchmarking company, other than your GPO, perform a quarterly or bi-annual supply and implant pricing analysis.

2. Analyze your PO detail report on a monthly basis

Running and reviewing your OR supply and implant utilization on a monthly basis will identify outlier spending from new item and different pricing points. This is an opportunity to see line item detail utilization and pinpoint immediate issues as they are happening.

3. Perform an annual review of service line profitability

Perform this annual review by surgical line, by physician and by payer from actual reimbursement received.

Similar to the first strategy, payer mixes change, payment agreements change and the utilization of the physicians change too. In fact, we have identified surgeon patterns that bring specific more profitable cases to certain hospitals and then charity care and lesser profitable cases to other hospitals they perform cases at.

This annual surgical line review by physician, by case, by payer with a focus on revenue codes 278 (implants) and 272 (supplies) as compared to the reimbursement will show you the supply/implant cost per case as a specific ratio and percentage to the reimbursement by payer. Many times the supplies and implants are taking as much as 70% to 80% of the cost of the case.

Leaving a very small amount for other costs such as pharmacy, lab, personnel and other hospital resources in recovery and the floor.

4. Develop a realtime cost playbook for your surgeons

This will help your surgeons see their supply and implant costs by specific item on a weekly basis.

In JAMA Surgery’s study, an analysis was performed to show the association between surgeon scorecard use and operating rooms costs. Two incredible findings:

1. Surgical supply costs per case decreased by 6.54% in the intervention group. This “intervention” was providing the surgeons with cost feedback and their costs in the procedure.
2. The control group who did not have cost feedback or data to know their costs in the surgery had a cost increase of 7.42%.

This means that the opportunity to provide all of your surgeons with cost feedback and detailed costs per case has a 13.96% cost savings opportunity.

If your OR spends $500,000 a month in supply and implant costs, this would mean a $70,000 monthly cost savings.

An aligned, proactive and data driven strategy that has a 14% cost reduction impact to your bottom line.

VIE Healthcare has a proven process and cost playbook program to support your hospital in the development of a cost feedback program. Email Lisa Miller to learn more at lmiller@viehealthcare.com.

Download the Cost Reduction in the OR Research Report:

If you would like to learn about VIE Healthcare’s OR Cost Reduction Services, reach out to Lisa Miller at lmiller@viehealthcare.com.

VIE’s Healthcare’s services are self-funded and guaranteed to achieve cost savings.