Despite recent bumps in the road, value-based care is here to stay. If anything, the transition to new payment models will only accelerate as more private payers develop value-based contracts.
Managing this transition is especially important for OR leaders. In a financially healthy hospital, surgery generates up to 65% of contribution margin. ORs that fail to adapt to value-based care could see significant declines in revenue, undercutting the financial performance of the entire organization.
Insightful executives are now prioritizing efforts to position the OR for success under value-based payment. They know they need to do even more to increase quality and safety, enhance patient satisfaction, reduce direct and indirect costs, and improve patient outcomes.
Each of these goals is a major undertaking. So how can any OR achieve all of them within a short timeframe?
Based on our experience in hospitals nationwide, the key is to leverage the single most important driver of OR performance under value-based care — what we call 360° engagement in perioperative services.
In a hospital OR, 360° engagement means securing the commitment and personal input of every individual who contributes to the success of a surgical procedure. The concept does not pertain only to surgeons. Full-spectrum engagement encompasses surgeons, anesthesiologists, nurses, the full range of clinical support providers, hospital administrators and, critically, patients themselves.
Recent initiatives at several leading hospitals show that 360° engagement is the key to transforming perioperative services. From a leadership perspective, we expect this strategy will drive the bulk of OR growth over the next 10 years.
Exactly how can hospital leaders leverage full-spectrum engagement to grow perioperative services? We have seen ORs achieve dramatic results using the following four effective approaches.
1. Engage providers in creating clinical pathways
To be successful under value-based payment, an OR must improve patient outcomes while controlling costs. Incremental changes and one-off improvements are not enough. The only way to achieve these goals is to optimize the entire continuum of perioperative care. That requires input and commitment from the full range of OR stakeholders.
Recently, Advocate Lutheran General Hospital, a large tertiary care center in suburban Chicago, launched a comprehensive initiative to increase value in colorectal surgery. The foundation of the initiative was full-spectrum perioperative engagement. Several components were key:
Anesthesia leadership. Hospital leaders put the initiative under anesthesiologists who championed the vision and coordinated activity.
Multidisciplinary input. The hospital also brought together a multidisciplinary steering group to lead the project. The group included physicians, nursing leaders, specialty unit managers, post-op coordinators, therapists, care managers, pharmacists, plus representatives from finance, marketing and other administrative departments.
Trusted project management. A project manager who had the trust of surgeons, anesthesiologists and staff helped keep everyone headed in the same direction. This was critical to facilitating the creation of a new care model
Surgical home model. The steering group developed a new “surgical home” delivery model for colorectal patients. The model optimizes and coordinates every step in the perioperative pathway — from pre-surgical triage and patient education through intraoperative protocols and post-acute care.
Recovery protocols. A key element of the model is an Enhanced Recovery After Surgery (ERAS) bundle aimed at early recovery for patients undergoing major surgery.
Specialized optimization clinic. The heart of the colorectal surgical home is the new Perioperative Optimization Clinic (POC). In this pre-surgical testing clinic, anesthesiologists, nurses and hospitalists (plus specialist resources such as ostomy nurses and nutritionists) work together to manage patient risk factors before surgery.
Multidisciplinary engagement was key to optimizing colorectal outcomes at Advocate Lutheran. The initiative reduced length of stay (LOS) by 30% and cut expensive surgical site infections (SSIs) by 74%.
Improvements like these directly support cost control, so they are critical to growing an OR’s profitability. They also represent better quality and outcomes, which can drive volume growth by building an OR’s reputation among surgeons for clinical excellence.
2. Engage patients in pathway goals
Provider engagement is only part of the equation. True perioperative orchestration depends on patient compliance with clinical protocols.
Let’s return to the colorectal surgery initiative at Advocate Lutheran. The new care pathway includes standardized protocols for pre-surgical testing, insulin management, dietary compliance, recovery milestones, home discharge and more. Patient compliance with these protocols is critical to ensuring the best possible outcome. To secure patient engagement, the colorectal steering group leveraged several innovative tools:
One-stop shopping. The POC functions as the single point of contact for all patient needs, both before and after surgery. This helps avoid the miscommunications that lead to poor compliance. It also creates multiple opportunities to educate patients on the care pathway and the importance of protocols.
The connected patient. Colorectal patients at Advocate Lutheran receive a smartphone app that provides key reminders throughout the perioperative process. For example, day-before-surgery alerts include diet and NPO instructions and reminders to discontinue blood thinners. Timed alerts also provide links to instructional videos for bowel prep, use of SAGE wipes and other protocols.
This level of patient engagement was an important contributing factor to the LOS and SSI improvements noted above. In addition, patient engagement helped the hospital cut readmissions for colorectal surgery patients by 38% and reduce their total costs by 16%.
Patient engagement is also a key component of market strategy. ORs that streamline the patient experience and reliably deliver good outcomes are poised for growth in the emerging environment of consumer-driven healthcare.
3. Engage physicians in managing for efficiency
Cost control is critical under value-based payment. But while most OR leaders understand that inefficiency drives up costs, many do not perceive that the only way to solve efficiency problems is to engage clinical stakeholders. Recently, OR leaders at Greater Baltimore Medical Center demonstrated the power of provider engagement to drive operational efficiency.
Two years ago, the OR at Greater Baltimore was struggling with high cancellation and delay rates, long turnover times, and long case times. Low efficiency led to a utilization rate of just 62%. OR leaders tackled these problems by emphasizing 360° engagement:
Physician leadership. Their first step was to create a physician-led governance body for the OR. The new Surgical Services Executive Committee (SSEC) was made up of active, clinically respected surgeons representing a variety of specialties. The group’s commission was simple — establish and enforce policies that optimize OR efficiency and outcomes.
Surgeon-focused systems. The SSEC’s first priority was to redesign the block schedule system. They began by creating a new set of surgeon-focused rules: longer blocks, utilization thresholds, cancellation policies and other key changes. The effect was to reward surgeons who contribute the most in terms of productivity. The new system also encouraged “splitter” surgeons to consolidate more of their volume to Greater Baltimore.
Empowering anesthesia and nursing. The hospital also negotiated a new anesthesia contract that was designed to increase the engagement of this key group. The new contract tied the group’s stipend to clinical and managerial leadership deliverables. In addition, nursing staff members were tapped to lead the redesign of OR processes for greater day-to-day efficiency.
Full-spectrum engagement at Greater Baltimore transformed the OR into an efficient, surgeon-focused organization. Within 12 months, the OR cut delay and cancellation rates, streamlined case turnover and reduced average case times. These efficiency gains set the stage for higher case volumes. Utilization increased 73% and OR volume increased 26%, driving significant gains in net revenue.
4. Engage surgeons in reducing direct costs
Controlling direct costs is also critical, especially under bundled payment. Since surgeon preference is a major driver of OR spending, efforts to reduce direct costs must involve surgeons at every step. Eisenhower Medical Center in Rancho Mirage, California, is a case study in how to engage surgeons effectively in cost control goals.
With a 70% Medicare payer mix and a growing population of retirees, joint arthroplasty is a major service line at Eisenhower. In fact, the hospital recently saw a 31% year-over-year increase in hip and knee replacement volume. OR leaders realized, however, that high implant costs could erase hospital margins under programs such as the Comprehensive Care for Joint Replacement (CJR) model.
Eisenhower addressed this risk by negotiating a co-management agreement with its main orthopedic surgery group. Under this agreement, surgeons were given the opportunity to receive an annual bonus of $150,000. The bonus was tied to specific targets in perioperative performance. Year 1 goals concentrated on efficiency (first-case on-time starts, block utilization) and quality (compliance with Surgical Care Improvement Project measures). In Year 2, the agreement introduced cost control goals.
To hit cost goals, surgeons cooperated with OR leaders on a price-capping strategy for orthopedic implants. Eisenhower used a market analysis to establish a maximum price for several implant categories. Any vendor could sell implants to the OR as long as it honored the ceiling rate. This strategy controlled implant spending while largely preserving surgeon product choice. Surgeons also adopted practices like demand matching, which controls costs by ensuring implants match patient needs.
Engaging surgeons through a co-management agreement had a measurable impact on direct costs. In the first two years of this arrangement, orthopedic surgeons at Eisenhower Medical Center reduced total implant spending by approximately $700,000 per year, an annual savings of 10%.
Co-management can also be an effective component of an OR’s overall growth strategy. A well-structured agreement will build surgeon loyalty, creating a strong foundation for maintaining current procedure volumes and expanding key service lines.
Best chance for growth
The transition to value-based payment is creating new challenges for perioperative services — and opening new opportunities. In the coming decade, hospital ORs that embrace the philosophy and practice of engagement will have the best chance of leveraging these opportunities to grow volume, revenue and profitability.
Jeff Peters, MBA is chief executive officer and Barry Highsted, MSN, RN, CNOR is director of perioperative nursing at Surgical Directions.