Case Costing Essential for Business Surgery Center Coalition

Case Costing – Essential for Business Surgery Center Coalition October 4, 2018 Ann Geier, MS, RN, CNOR, CASC™ Chief Nursing Officer Surgical Information Systems www. sisfirst. com

Objectives • Explain the importance and value of case costing • Describe types of case costing • Delineate how case costing helps run the business of ASCs 2

Value of Case Costing

Case Costing Advantages • Allows for accurate budget forecasting • Contributes to understanding profit margin: what it costs to do business; what is paid by insurers or patients • Data provides accurate information for ASC to use when negotiating payer contracts • Keeps the center focused on costs: should lead to better purchasing costs • Can affect implant costs/competition between vendors • Assists in changing physicians’ behaviors 4

Case costing shouldn’t be optional. It should be mandatory. 5

Types of Case Costing

Level of Detail “If you just focus on the smallest details, you never get the big picture right. ” Leroy Hood • Details can overwhelm the process • Lack of details will only give you an overview • Which do you want to pursue? 7

Levels of Detail Case costing on every case – every time Case costing by CPT code Case costing only top 10 procedures Case costing that includes OR cost/minute Case costing that considers overhead as everything minus supply costs • Can you think of anything else? • • • 8

OR Minutes – Drive the Process • To calculate: » Meter patient time in & time out = time in OR/PR (OR minutes used) » Overhead* = Total costs (from P & L) – Direct supply costs » Overhead per minute = Overhead / OR Minutes » Overhead per case = OR minutes x Overhead per minute » Case cost = Overhead cost per case + Direct supply costs *Calculate monthly. There are various ways to calculate overhead. OR minutes costs will be higher during start-up or with low volume 9

Getting to the Bottom-line Case Specific Supplies plus Overhead cost equals Total Cost Receipts - Total Cost Net Revenue (Bottom-line) 10

Overhead Costs – Another Calculation • Example: » » » Revenue = $300, 000 Supplies = $77, 000 Distribution = $75, 000 Debt Service = $40, 000 200 Cases @ 30 Minutes each 11

Quick and Easy Cost-per-minute Calculation Step 1 From • OH the P & L Report (Profit & Loss) Cost = Revenue - Supplies - Distribution - Debt Service Cost = $300, 000 - $77, 000 - $75, 000 - $40, 000 Cost = $108, 000 From utilization reports: • Total OR Minutes = 200 cases X 30 min. each • Total OR Minutes = 6, 000 Minutes Overhead Cost = $108, 000 = $18 / Minute 6, 000 Multiply the per-minute cost by the case-specific OR room time 12

Where Can You Find This Information? • Preference cards – supply costs • Reports – Profit & Loss, OR times, etc. • Vendors Software system is invaluable 13

What is Included in Overhead Costs? • • • Salaries Utilities Rent Interest Billing Charges/coding/transcription fees Repair and maintenance Insurance Bank fees Cleaning Taxes Consultants Legal and Professional fees 14

Starting Point • Inventory » Load complete information in software system » Correct pricing » Correct unit of measure » Correct unit cost of each item • Preference Cards » Review to ensure accuracy prior to loading » Capture as much information as possible » Review at least quarterly » Limit people who can change the information in the system 15

Supplies Disposables Implants Medical Gases Medications Supplies opened but not used, unless they can be safely reprocessed • All other costs should be captured on the P & L Statement • • • 16

Steps Involved in Case Costing Once information is in the software system: 1. Print preference cards for each patient 2. Create an anesthesia supply and medication checklist 3. When a case is completed, assign staff to check items used, added, not used 4. Anesthesia completes forms for each case 5. Supplies used are loaded in the system 6. Every month, reports on supply usage are generated a. Level of detail desired will determine what is run 7. Analytics are conducted 17

Using Case Costing Data to Run Your Business

Software • Work with software provider to maximize use of inventory module • Add analytics to your system • Train frequently » Have all your newer employees been trained? » Are you maximizing the use of your software modules? • Learn which reports will give you the best information? • Assign a super-user 19

Value of Analytics • Unlike static reports that quickly become outdated, analytics provide up-to-date data that administrators can drill into to draw comparisons • Key performance indicators quickly identify areas for improvement and track results over time • Examples: » High cost physicians – compared to others in specialty » High cost supplies – implants, medications, etc. » OR time used – will affect OR Cost per Minute 20

You’ve Got the Info…Now What? • If you do nothing with the data, why collect it? • Share it with owners; they have a vested interest • Information allows discussions about block allocation (OR minutes used), supply cost comparison, value of implants by cost • Before data is shared: » Carefully review data » Look for outliers » Ensure accuracy 21

Garbage In; Garbage Out • When reviewing data, look carefully for: » » Incorrect data on preference cards Incomplete case history Incorrect times Supplies are not checked off or added in a timely manner • Look for supply and overhead costs that are unusually high ‒ Causes – again… • Incorrect data on preference cards • Case History module not reconciled • Incorrect times entered into Case History › All of the above • If incorrect data is entered and not caught, guess who will find it? Your Physicians 22

“If you want to change physician behavior, then you need to provide data that’s relatable to them. You need to provide more than the cost of devices and supplies. In this way, both the cost of devices and supplies, as well as unwarranted clinical variation can be addressed. ” Debbie Schuhardt, Clinical Advisory Solutions - Vizient ASC Supply Chain Tip of the Day: Use Data to Tell the Story; Rachel Popa; Becker’s ASC Review; Aug. 22, 2018 23

Only share data that is 100% accurate with your Board 24

Sample of Case Costing Board Report – Spine Surgeon 25

Knee Arthroscopy – Cost Comparison 26

Knee Arthroscopy – Cost Comparison Part 2 Cost per minute: using $18. 00 per minute Doc 1 - $864 Total cost with supplies: Doc 1 - $1, 315 Doc 2 - $1314 Doc 3 - $1224 Doc 4 - $756 Doc 2 - $1, 628 Doc 3 - $1, 422 Doc 4 - $974 27

Alternative to Detailed Case Costing • Assume: » Preference cards are accurate* » Costs are readily available and updated » Simple case costing can be used to get a broad picture of physicians, anesthetists, pharmaceutical costs *Often, preference cards do not include all supplies used. Most common omission – implants. What others are often missed? 28

Some Pitfalls • A common mistake is miscalculating the usage unit of measure related to the quantity per UOM in the Inventory Module • Incorrect costs in the Inventory Module • Not capturing all supplies that are used • You must include supplies opened but not used unless they can be reprocessed for use on another case 29

Key Takeaways • Accurate case costing is essential to your ASC • Educate all staff on the importance and what role they play in ensuring all associated costs are captured • While it may appear time consuming, once a system is implemented it should only require about 2 -3 hours to prepare your Board report • Work with your software provider to determine the reports you will need • Present a professional, accurate report to your Board each month 30

Remember • It takes time to load inventory » Most ASCs do not fully use this module » Information is not updated • • Humans enter data; mistakes happen Lacking attention to detail can lead to failure Nothing is done with the data Case costing is a terrific method to support change in behavior – for staff AND physicians Let’s talk about how you are doing it. 31

Questions 32

Contact Ann Geier, MS, RN, CNOR, CASC Chief Nursing Officer Surgical Information Systems (SIS) Ann. Geier@sisfirst. com 843 -303 -0008 www. sisfirst. com For a copy of my free e. Book, “Admin 101: What Every New ASC Administrator Needs to Know”, visit www. sisfirst. com, resources, e. Books 33

Thank You