With the rising costs of healthcare and the continued pressure to lower costs in the Operating Room, more and more pressure is being placed on the supply chain to deliver cost savings.
To satisfy the thirst for savings, many organizations have turned to Cost per Case as a method of delivering sustained cost improvement in as little as 8 weeks. In the case presented below, a Midwestern, 183-bed community hospital realized $1 million in bottom-line, hard savings and $7.8 million in identified future savings in just 8 weeks of focused collaboration. This successful team highlights the following lessons learned.
The first lesson learned seems cliché, but is the single biggest source of initiative failure. Ensure the effort has the highest visibility, is attended, and is actively participated in by the core stakeholders.
- Engage both physicians and physician groups in all aspects of the dialogue.
- Select a cross-functional team consisting of Surgeons, Anesthesiologists, Surgical Technicians, Circulating RN, OR Director, Health Informatics Specialist & the Purchasing Director.
- The project chair, accountable for both cost reduction and patient outcomes, should be the clinician at the top of the organization.
The second lesson is crucial. Collect, analyze, agree and report data with precision, balance, and deliberateness.
- Define patient outcome measures, data architecture and semantic rules.
- Build a savings and vendor preference model.
- Focus on high cost products & high contribution margin procedures.
- Develop physician profiles and preference cards by procedure type.
- Recognize the limitations of GPOs and evaluate constraints.
- Develop, rank and publish physician scorecards.
- Determine cost targets and install exception reporting for cases outside of cost targets.
- Annually adjust CPC targets to create variances and drive cost control actions & innovation.
The third lesson is getting the basics right and installed at the execution level.
- Standardize totes and instrument trays.
- Reduce processing cost and cycle time of surgical instruments.
- Reduce spend on current surgical instruments and reallocation of the current stock.
- Tender and renegotiate all purchased items and place under contract.
- Move items to consignment where possible & mandate material management excellence.
The fourth lesson drives the change. Establish a cadence of action through effective Governance and use of Closed-Loop Corrective Action.
- Select a Short duration for the initial program, get results & then integrate with standard operational reporting (don't lose C-Level visibility or momentum).
- Schedule, Facilitate and Hold clinical decision sessions by specialty, by procedure.
- Document and Archive Policy, Procedures, Evidence-Based Medicine Literature, etc.
- Use a Rolling-Action Item List (RAIL) to drive accountability.
- Install a daily/weekly cost-per-case management report.
- Establish weekly reviews of cost-per-case results and actions.
The fifth lesson drives the topline, rather than merely unit cost improvement. Charge capture and coding accuracy.
- Define, implement and document an ICD-9/10 charge capture checklist by procedure type.
- Identify charge data collection points, track accuracy and audit the charge capture value stream.
- Establish weekly metrics that compare ICD-9/10 charges with actual cost by procedure performed
- Utilize exception reporting to investigate variances.
The final lesson is the hardest. Avoid intellectual self-medication.
- Don't underestimate the "value of" accurate data. Data can be a catalyst for change or, if in err, a justification for inaction.
- Don't lose sight of patient outcomes and, conversely, avoid using clinical outcomes as excuses.
- Don't underestimate the change management, governance and leadership required to manage the stakeholders in this process.
- Resist the inclination to focus on savings alone. Patient outcomes are paramount.
- Don't self-medicate and believe that this is a simple, one-off task. Integrate this with the overarching management system of the organization.
By recognizing these lessons learned, Cost-Per-Case produces significant, real, long-term ROI. Furthermore, if the Cost-Per-Case management methods are installed sustainably, a Hospital or Hospital systems can embed a robust, ongoing system for monitoring supply cost, clinical outcomes, and evaluating the total "cost and benefit" of new technologies. The key, however, is a structured approach that leverages the lessons highlighted above and arms the physicians with validated clinical data, operational data, current product options, and pricing alternatives. When this happens, an organization can gain competitive advantages, increase top-line revenue, optimize margin and deliver $8 million to the bottom-line in 8 weeks.
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