Operating rooms are one of the most costly areas of hospital operations, and as hospitals face a range of mounting financial pressures, most are reexamining OR operations for any avoidable costs.
Despite ORs being such a pillar for hospitals' profitability, there is little published, formal data on true OR costs. For instance, there are far too many variables to accurately determine how much one minute of OR time costs.
As a result, hospital administrators often deploy a ballpark to answer that question, ranging from $15 to $20 per minute for a basic surgical procedure, according to research from Stanford University School of Medicine. That range illustrates the significant price hospitals pay for any inefficiencies or unexpected events in the OR, such as last-minute cancellations or delays due to missing imaging equipment. Furthermore, the cost per minute can easily surpass $20 depending on the complexity of the procedure, if fixed overhead costs and/or physician fees are included, how the OR staff is paid and other variables.
Although OR costs and potential profits are prone to an array of variables, one thing is certain: Time is an OR's most valuable resource. Even a slight delay in a case's start time, a lengthy turnover, or a few minutes spent looking for a piece of missing equipment, can severely hinder an OR's efficiency and ability to maintain a positive contribution margin.
Non-labor costs are an attractive area for hospital management to reduce, as they are of a "low emotional level," according to Jeff Peters, president and CEO of Surgical Directions. These cost reductions do not involve layoffs or reclassification of staff. Plus, non-labor costs also make up anywhere from 40 to 60 percent of total OR costs, according to Mr. Peters.
Here are six cornerstones of OR operations, along with some best practices to make them more efficient.
1. Building support among physicians to reduce supply costs. The first step in OR efficiency is for hospital management and OR managers to analyze costs by procedure and by surgeon. Sharing this cost information with surgeons typically builds their acceptance that they may need to alter their practice or resources. "The second thing you want to do is look at high cost items and benchmark them to national standards. Those are things like implants, supplies and devices," says Mr. Peters. "I recently worked with an 11-room OR in the south. They found that their implant costs were 50 percent higher than the national average."
If a device, implant or other product exceeds national benchmarks, the hospital CMO, chairman of surgery, OR manager and other clinical leaders should meet with the surgeon to establish a ceiling price. "You present that information to the surgeons and say, 'I want to get these costs down. I don't want to impact your practice, but I need your support as I talk to your reps about the fact that we're going to establish a ceiling price for implants,'" says Mr. Peters. He says most organizations have reduced their implant costs by 20 percent to 25 percent by establishing ceilings.
Another tactic is simple: label OR supplies with price information. "You want to build awareness among staff about the costs of supplies," says Mr. Peters. Often, OR staff will open supplies that go unused. By labeling the price on those materials, staff will become more cost-conscious and may change their habits toward supplies.
2. Blocking time. Generally, the most efficient way to block OR time is by the day opposed to stints of hourly blocks, with each less than eight hours. For instance, a 12-hour block is ideal for specialties that involve longer cases, such as spinal surgery. Even an eight-hour block can allow surgeons to perform up to three procedures. An extended block allows one specialty or surgeon to utilize the OR all day, opposed to a four-hour block time that can handle one procedure. Hourly blocks four hours or under may also result in cases running over their allocated time or mid-day gaps in utilization.
As more profitable surgical cases move to freestanding surgery centers or surgical hospitals, ORs are also facing growing pressure to factor the profitability of a surgeon's cases into block time grants. Despite hospitals' focus on economic incentives, granting block time based on the profitability of cases is subject to organizational politics. If surgeons learn that cases or block times are denied based on financial metrics, it won't take long for them to take their cases elsewhere. Rather than denying surgeons block time based on case profitability, it is recommended that hospitals deploy a more positive strategy and work to attract local surgeons who may bring a potentially lucrative caseload to the hospital.
3. Adjusting OR block time and releases. Traditionally, block times have been adjusted based on surgeons' utilization rates, but recent research has suggested this may not be the most accurate criteria to make that decision. The hospital can still lose money through a surgeon with a high utilization rates if the reimbursement for his/her case does not cover the costs.
Instead, OR managers may be better suited to adjust block times based on the balance between under- and overutilization of the OR. For instance, an underutilized OR equals a financial loss for the hospital, as there is no revenue coming in. But an overutilized OR can result in cases going over schedule, decreased satisfaction among clinicians, and the hospital having to provide overtime compensation. Thus, OR managers should try to match case workloads to staff levels when adjusting block times.
Block releases are one way for OR managers to instill more flexibility in the OR schedule. A release refers to a block time that is not scheduled for a procedure. Building release times into block schedules far in advance allows schedulers to add cases to blocks that would be underutilized otherwise. Release times also vary per specialty. Procedures booked far in advance, such as joint replacements, may have release times far in advance of the day of surgery, such as 14 days. Cardiac surgeons may hold their block time until the day before surgery, however, as would burn services.
4. Proactively avoiding gaps due to equipment problems. One best practice to avoid potential delays and gaps for missing equipment is to hold routine, daily meetings to forecast potential problems for the next day's caseload. For instance, are there any simultaneous procedures that may require the same piece of imaging equipment? Are any pieces of equipment experiencing technical difficulties or under repair? Identifying these problems ahead of time can help surgeons and their teams avoid a time-consuming setback in the middle of a procedure or block time.
Ensuring surgeons' preference information and cards are up to date can also help avoid potential delays. By regularly updating surgical preference cards, OR managers can help ensure case carts are thoroughly and precisely prepared for each procedure and clinical team. This saves OR time that would otherwise be spent looking for missing instruments, and it also reduces variable costs by reducing unused supplies.
J.D. Waldman, MBA, MD, professor of pediatrics, pathology and decision science with the University of New Mexico in Albuquerque and author of "Uproot U.S. Healthcare," says queuing theory can help OR managers plan for potential changes in volume, equipment utilization and other OR patterns. Queuing theory has to do with the mathematical study of waiting in lines, but it involves a closer analysis of resource allocation that can help OR stay ahead of demands. "You can use queuing theory to know what resources you need at 3 p.m. and what resources you need at 3 a.m., because those may be very different things," Dr. Waldman said.
5. Case start times. Tardiness in the OR is like a snowball rolling downhill. A morning case that begins 30 minutes late has repercussions for the entire day. The total length of tardiness grows larger as the day goes on, since the total duration of preceding cases increases. In his research, Alex Macario, MD, a professor with Stanford School of Medicine, found well-functioning OR suites have a cumulative tardiness of less than 45 minutes per every eight hours.
To curb tardiness to less than 45 minutes per eight-hour block, OR managers should ensure patients' medical records and other necessary documents are available and complete prior to case start time. They should also determine when patients are told to arrive with precision — not too early, which can dent satisfaction rates, and not too late. Anesthesiologists, surgeons and other clinical team members should arrive on time, as tardiness on the providers' part can lead to dissatisfaction among the entire team. Finally, ordering surgeons' cases from most predictable to least predictable, and thereby the longest, can reduce the likelihood of cases running over schedule.
6. Controlling turnover times. Turnovers are different from delays, in that turnovers are less than one hour while delays surpass an hour. Still, lengthy turnovers are a source of significant dissatisfaction among surgeons, who see turnovers as lost OR time that could have otherwise been scheduled for cases. Consequentially, many hospitals focus on turnover time reduction to drive OR efficiency, but several experts and researchers say these improvements may not yield significant additional time at the end of the day.
Furthermore, turnover time reductions can also signal unintended consequences related to quality. "Superhuman effort, for example, to rush around on the day of surgery trying to reduce turnover times may be dangerous, stressful and have little financial justification," Dr. Macario wrote in a 2010 editorial published in the Journal of Clinical Anesthesia. Dr. Macario also said costs associated with turnovers are only reduced if the hospital also reduces its OR allocations and staffing, which could potentially affect clinical quality, sterilization processes and patient safety. Instead, OR managers and clinical staff may be better served by focusing on same-day cancellations, on-time procedure starts, equipment availability and parallel processing to increase efficiency.
7 of the Most Important Metrics for Measuring OR Efficiency
Creating a Culture of Open Communication in a Hospital OR
Despite ORs being such a pillar for hospitals' profitability, there is little published, formal data on true OR costs. For instance, there are far too many variables to accurately determine how much one minute of OR time costs.
As a result, hospital administrators often deploy a ballpark to answer that question, ranging from $15 to $20 per minute for a basic surgical procedure, according to research from Stanford University School of Medicine. That range illustrates the significant price hospitals pay for any inefficiencies or unexpected events in the OR, such as last-minute cancellations or delays due to missing imaging equipment. Furthermore, the cost per minute can easily surpass $20 depending on the complexity of the procedure, if fixed overhead costs and/or physician fees are included, how the OR staff is paid and other variables.
Although OR costs and potential profits are prone to an array of variables, one thing is certain: Time is an OR's most valuable resource. Even a slight delay in a case's start time, a lengthy turnover, or a few minutes spent looking for a piece of missing equipment, can severely hinder an OR's efficiency and ability to maintain a positive contribution margin.
Non-labor costs are an attractive area for hospital management to reduce, as they are of a "low emotional level," according to Jeff Peters, president and CEO of Surgical Directions. These cost reductions do not involve layoffs or reclassification of staff. Plus, non-labor costs also make up anywhere from 40 to 60 percent of total OR costs, according to Mr. Peters.
Here are six cornerstones of OR operations, along with some best practices to make them more efficient.
1. Building support among physicians to reduce supply costs. The first step in OR efficiency is for hospital management and OR managers to analyze costs by procedure and by surgeon. Sharing this cost information with surgeons typically builds their acceptance that they may need to alter their practice or resources. "The second thing you want to do is look at high cost items and benchmark them to national standards. Those are things like implants, supplies and devices," says Mr. Peters. "I recently worked with an 11-room OR in the south. They found that their implant costs were 50 percent higher than the national average."
If a device, implant or other product exceeds national benchmarks, the hospital CMO, chairman of surgery, OR manager and other clinical leaders should meet with the surgeon to establish a ceiling price. "You present that information to the surgeons and say, 'I want to get these costs down. I don't want to impact your practice, but I need your support as I talk to your reps about the fact that we're going to establish a ceiling price for implants,'" says Mr. Peters. He says most organizations have reduced their implant costs by 20 percent to 25 percent by establishing ceilings.
Another tactic is simple: label OR supplies with price information. "You want to build awareness among staff about the costs of supplies," says Mr. Peters. Often, OR staff will open supplies that go unused. By labeling the price on those materials, staff will become more cost-conscious and may change their habits toward supplies.
2. Blocking time. Generally, the most efficient way to block OR time is by the day opposed to stints of hourly blocks, with each less than eight hours. For instance, a 12-hour block is ideal for specialties that involve longer cases, such as spinal surgery. Even an eight-hour block can allow surgeons to perform up to three procedures. An extended block allows one specialty or surgeon to utilize the OR all day, opposed to a four-hour block time that can handle one procedure. Hourly blocks four hours or under may also result in cases running over their allocated time or mid-day gaps in utilization.
As more profitable surgical cases move to freestanding surgery centers or surgical hospitals, ORs are also facing growing pressure to factor the profitability of a surgeon's cases into block time grants. Despite hospitals' focus on economic incentives, granting block time based on the profitability of cases is subject to organizational politics. If surgeons learn that cases or block times are denied based on financial metrics, it won't take long for them to take their cases elsewhere. Rather than denying surgeons block time based on case profitability, it is recommended that hospitals deploy a more positive strategy and work to attract local surgeons who may bring a potentially lucrative caseload to the hospital.
3. Adjusting OR block time and releases. Traditionally, block times have been adjusted based on surgeons' utilization rates, but recent research has suggested this may not be the most accurate criteria to make that decision. The hospital can still lose money through a surgeon with a high utilization rates if the reimbursement for his/her case does not cover the costs.
Instead, OR managers may be better suited to adjust block times based on the balance between under- and overutilization of the OR. For instance, an underutilized OR equals a financial loss for the hospital, as there is no revenue coming in. But an overutilized OR can result in cases going over schedule, decreased satisfaction among clinicians, and the hospital having to provide overtime compensation. Thus, OR managers should try to match case workloads to staff levels when adjusting block times.
Block releases are one way for OR managers to instill more flexibility in the OR schedule. A release refers to a block time that is not scheduled for a procedure. Building release times into block schedules far in advance allows schedulers to add cases to blocks that would be underutilized otherwise. Release times also vary per specialty. Procedures booked far in advance, such as joint replacements, may have release times far in advance of the day of surgery, such as 14 days. Cardiac surgeons may hold their block time until the day before surgery, however, as would burn services.
4. Proactively avoiding gaps due to equipment problems. One best practice to avoid potential delays and gaps for missing equipment is to hold routine, daily meetings to forecast potential problems for the next day's caseload. For instance, are there any simultaneous procedures that may require the same piece of imaging equipment? Are any pieces of equipment experiencing technical difficulties or under repair? Identifying these problems ahead of time can help surgeons and their teams avoid a time-consuming setback in the middle of a procedure or block time.
Ensuring surgeons' preference information and cards are up to date can also help avoid potential delays. By regularly updating surgical preference cards, OR managers can help ensure case carts are thoroughly and precisely prepared for each procedure and clinical team. This saves OR time that would otherwise be spent looking for missing instruments, and it also reduces variable costs by reducing unused supplies.
J.D. Waldman, MBA, MD, professor of pediatrics, pathology and decision science with the University of New Mexico in Albuquerque and author of "Uproot U.S. Healthcare," says queuing theory can help OR managers plan for potential changes in volume, equipment utilization and other OR patterns. Queuing theory has to do with the mathematical study of waiting in lines, but it involves a closer analysis of resource allocation that can help OR stay ahead of demands. "You can use queuing theory to know what resources you need at 3 p.m. and what resources you need at 3 a.m., because those may be very different things," Dr. Waldman said.
5. Case start times. Tardiness in the OR is like a snowball rolling downhill. A morning case that begins 30 minutes late has repercussions for the entire day. The total length of tardiness grows larger as the day goes on, since the total duration of preceding cases increases. In his research, Alex Macario, MD, a professor with Stanford School of Medicine, found well-functioning OR suites have a cumulative tardiness of less than 45 minutes per every eight hours.
To curb tardiness to less than 45 minutes per eight-hour block, OR managers should ensure patients' medical records and other necessary documents are available and complete prior to case start time. They should also determine when patients are told to arrive with precision — not too early, which can dent satisfaction rates, and not too late. Anesthesiologists, surgeons and other clinical team members should arrive on time, as tardiness on the providers' part can lead to dissatisfaction among the entire team. Finally, ordering surgeons' cases from most predictable to least predictable, and thereby the longest, can reduce the likelihood of cases running over schedule.
6. Controlling turnover times. Turnovers are different from delays, in that turnovers are less than one hour while delays surpass an hour. Still, lengthy turnovers are a source of significant dissatisfaction among surgeons, who see turnovers as lost OR time that could have otherwise been scheduled for cases. Consequentially, many hospitals focus on turnover time reduction to drive OR efficiency, but several experts and researchers say these improvements may not yield significant additional time at the end of the day.
Furthermore, turnover time reductions can also signal unintended consequences related to quality. "Superhuman effort, for example, to rush around on the day of surgery trying to reduce turnover times may be dangerous, stressful and have little financial justification," Dr. Macario wrote in a 2010 editorial published in the Journal of Clinical Anesthesia. Dr. Macario also said costs associated with turnovers are only reduced if the hospital also reduces its OR allocations and staffing, which could potentially affect clinical quality, sterilization processes and patient safety. Instead, OR managers and clinical staff may be better served by focusing on same-day cancellations, on-time procedure starts, equipment availability and parallel processing to increase efficiency.
More Articles on OR Efficiency:
Committing to Quality, Efficiency: OR Huddles in Action7 of the Most Important Metrics for Measuring OR Efficiency
Creating a Culture of Open Communication in a Hospital OR