Transforming your OR for the era of falling payments and rising quality expectations
The following content is Sponsored by Surgical Directions.
Hospitals depend on perioperative services to drive bottom line results. In better performing hospitals and health systems, the OR generates more than 68 percent of revenue and 60 percent of margin. Unfortunately, healthcare reform is threatening this key source of revenue and profit.
Value-based purchasing, bundled payments, readmission penalties, accountable care and other new payment models are lowering reimbursement while they raise quality requirements. This is forcing hospitals to re-examine the entire organizational and economic structure of their ORs. Hospitals that want to survive the "big squeeze" must find new ways to control surgery costs while optimizing quality.
Over the past few years, my colleagues and I have worked with hundreds of hospital ORs nationwide. We've seen many departments that are struggling with the new requirements — and several ORs that have developed powerful strategies for meeting the challenge of healthcare reform.
The most exciting thing I've learned is that success in today's perioperative environment is not a fluke. Thriving ORs share a set of common characteristics that distinguish them from their competition. These characteristics drive lower costs, better clinical outcomes and more satisfied patients.
Put simply, today's most successful ORs have developed three critical abilities:
1. How to engage physicians in solving the OR's biggest problems. Leading ORs have pioneered an innovative physician governance model that transforms OR culture and supports unbeatable strategy.
2. How to use modern efficiency principles to create a lean OR. Better performing ORs have mastered the art of wringing waste and inefficiency out of the perioperative flow, reducing costs and generating higher revenue.
3. How to use innovation to boost quality, outcomes and safety. Leading ORs have "cracked the code" on how to implement new care models successfully. They provide surgeons with monthly dashboards tracking quality and efficiency metrics. This allows them to achieve superior clinical outcomes while creating opportunities to thrive under new payment models.
Hospital ORs that combine all three abilities are building a sustainable competitive advantage. How are they doing it? Here are three examples:
Florida hospital improves bottom line by $2.5M
Memorial Regional Hospital is a tertiary care hospital in Hollywood, Fla. It is the flagship facility of the nation's second largest public health system. For several years, the hospital's OR struggled with efficiency problems. Low efficiency created frustration among surgeons, leading to decreasing case volumes. Low OR volumes were dragging down the hospital's financial performance.
In 2012, Memorial Regional established a physician-led Surgical Services Executive Committee to govern the OR. The SSEC serves as an operational "board of directors" for perioperative services. It is led by clinically active surgeons and anesthesiologists, with representation from nursing and other key stakeholders. Administration gave the SSEC full control over the OR, including decisions regarding block time, scheduling and other key issues. The committee spearheaded a cultural and operational transformation of the OR that improved efficiency while helping to lower OR costs.
Efficiency improvements enabled surgeons to perform more cases per room, increasing OR revenue and boosting surgeon satisfaction. This allowed Memorial Regional to implement a targeted service line growth strategy aimed at splitter surgeons. The entire initiative resulted in double-digit growth in OR volume. Bottom line: Hospital profitability increased by more than $2.5 million in 12 months.
New York specialty center thrives under bundled payment
NYU Langone Medical Center's Hospital for Joint Diseases is a nationally recognized leader in orthopedic surgery. The Manhattan hospital competes locally and nationally for both surgeons and patients. Yet efficiency problems in the OR were leading to high costs and low case volumes. Cost problems were especially concerning since the hospital was set to participate in the Medicare bundled payment initiative.
Recently, HJD launched several initiatives to transform the OR. First, the hospital established physician governance through an SSEC. One of its first priorities was reducing case times. Tracking case times by phase helped OR leaders identify multiple opportunities for improving throughput. Anesthesiologists, nurses and surgeons then worked together to streamline processes. The total effort reduced average case time by 46 minutes. The SSEC also sponsored preoperative process reforms that reduced same-day cancellations from 6 percent to less than 1 percent.
Efficiency improvements boosted utilization, which improved the OR's cost structure. Greater efficiency also helped HJD grow incremental case volume, which is the key to OR profitability in a bundled payment environment. Along with other improvements, efficiency gains helped raise the hospital's public profile. In 2013, HJD jumped from no. 10 to no. 5 in the U.S. News & World Report Best Hospitals List for orthopedics.
Illinois hospital wins top-outcomes rank
Advocate Lutheran General Hospital in suburban Chicago is known nationally for quality patient care. In 2007, the hospital joined the Surgical Care Improvement Project. Surgery outcomes were already strong, but OR leaders welcomed the chance to take quality to the next level.
One priority was to improve preoperative processes. OR leaders developed standardized scheduling and documentation management systems to ensure the department had complete information about patients, procedures and risk factors. Anesthesia worked with the surgeon staff to create standard protocols for pre-surgical testing based on patient comorbidities and surgical invasiveness. In addition, the OR strengthened safety by adopting crew resource management techniques, including a surgical safety checklist.
All told, the changes created a fully coordinated approach to managing the surgical patient from scheduling through post-op admission — essentially a "surgical home" model of care. Over the next four years, key measures like DVT and UTI rates for complex vascular cases dropped by about 75 percent. In 2009, Lutheran General was cited by the American College of Surgeons for having the lowest post-op complication rate of all hospitals in the National Surgical Quality Improvement Program.
Importantly, care model innovation helped control total costs. Lutheran General's length of stay for some key procedures was one-third lower than U.S. mean outcomes. And the hospital's readmission rate for surgery patients was 25 percent below the national average.
A viable path
The common characteristic of all these ORs is that they have forged a viable path between rising quality expectations and falling payment. As healthcare reform continues to develop, following this path is the key to maintaining a hospital's bottom-line results.
Jeffry Peters is president and CEO of Surgical Directions.