Today’s hospitals operate with slim profit margins -- in most cases lower than five percent -- which leaves little room for mistakes or wasted time and resources.
With annual increases in healthcare costs currently running in the double digits, it is more important than ever for hospitals to operate at peak efficiency. Finding that peak requires understanding the unique challenges and opportunities facing operating rooms (ORs).
Surgical volume and type has changed over time
ORs generate the overwhelming majority of most facilities’ revenue, but the volume, dynamics and economics of surgical procedures have changed enormously over time.
One major driver of these changes is an increase in the number of doctor’s visits. American Hospital Association(AHA) data shows that there were almost 750 million doctor’s visits in 2016, nearly double the 380 million visits that took place in 1994. The Affordable Care Act accelerated this trend over the past few years by expanding healthcare coverage to previously uninsured patients. With more doctor’s visits each year, the number of surgeries performed has correspondingly increased. Overall surgical volume has grown more than 17% in the last two decades.
In addition to the higher volume of visits and procedures, technological advances have changed the nature of surgery. Surgeons can now perform procedures that once required lengthy hospital stays as outpatient procedures with minimally-invasive techniques and improved pain management protocols. For example, a cholecystectomy (removal of the gallbladder) used to include a multi-day hospital course. But with laparoscopic tools, patients often go home the same day. Endoscopy and laparoscopy have in many cases reduced or eliminated the need for fully equipped, hospital-based operating rooms.
Outpatient surgery volume has surged as a result. The number of outpatient procedures increased from 13.4 million to 18.2 million (nearly 40 percent) between 1995 and 2016. Perhaps more tellingly, the number of outpatient procedures reimbursed by Medicare grew from approximately 200 in 1982 to more than 3400 in 2016. This shift to less invasive, outpatient surgeries has allowed doctors to see more patients and helped health systems maximize their throughput.
Increased volume creates staffing shortages
As demand for surgery has increased, the supply of operating room staff has tightened. This is particularly true of trained nurses, who are in short supply across the country. The Bureau of Labor Statistics projects that at least an additional one million registered nurses will be needed by 2022. The shortage comes from a confluence of factors: an aging population with ballooning healthcare needs coupled with limited slots at nursing schools, a shortage of qualified faculty, and unmet demand for nurses with full four-year degrees. In 2010, the Institute of Medicine estimated that 80 percent of nurses should have at least a bachelor’s degree but only 50 percent did.
The challenge of nursing shortages is complicated by a growing epidemic of burnout among hospital staff. According to a 2017 survey of 852 hospital workers across the nation, 58.2 percent left a job for reasons such as long work hours, frustration and burnout.
As access to healthcare and surgical technology improve, higher surgical volume should represent a win-win. It benefits hospitals in need of revenue and it helps patients in need of care. But as hospitals struggle to attract and retain staff, the boost in business can become a difficult management dilemma.
Outsourcing is an opportunity to promote efficiency
Hospital operating rooms face dual challenges of increased demand and tight staffing. Both issues create a pressing need for efficiency. An increasingly popular solution is to outsource surgical functions ranging from clinical responsibilities to logistics services (e.g. procedure prep, clean-up, and equipment sterilization and maintenance). This serves several functions:
1) Establishing a clear division of labor in the OR enables productivity . Healthcare is most efficient when every player knows his or her role. A surgeon’s role is to operate. It is not to monitor equipment management, operating room turnover, and a host of other tasks. Yet in many cases, that is exactly what happens. Outsourcing specific functions allows specialists to handle those responsibilities, freeing up capacity for hospital staff to do what they do best.
2) Freeing clinical staff from non-clinical responsibilities allows them to focus on healthcare delivery and patient outcomes. This improves quality of care while increasing provider satisfaction and reducing burnout.
3) Outsourcing services reduces costs. Hospitals have historically approached OR management with a fixed cost mindset – capital expenses for equipment and payroll expenses for staff. Using an on-demand service turns fixed costs into variable costs that can be matched directly to earned revenue. This provides an immediate effect on hospitals’ financial statements.
Hospitals around the country are experimenting with creative solutions to OR logistics, equipment, and staff. For example, one hospital in the Southwest outsourced its anesthesia and perioperative services to a third-party service provider. Making this change reduced the time required for operating room turnover by 35 percent and allowed the organization to add 250 extra patient cases each month. Taken together, this increased the facility’s surgical volume by 40 percent without having to make any new hires.
More hospitals are following that lead. A 2014 Accenture report noted that “operating rooms of the future will evolve into outsourcing models, characterized by actively managed capacity utilization and maximum operational efficiency.” In other words, hospitals should shift towards on-demand, turn-key solutions that offer fully outfitted workers and state-of-the-art equipment. As they do so, they can both reduce costs and improve care.
Author Bio:
Alyssa Rapp is the CEO of Surgical Solutions, a health care services company owned by Sterling Partners. She is also a lecturer in management at Stanford Graduate School of Business and the managing partner at AJR Ventures.