The majority of the news on the Supreme Court's upholding of the Patient Protection and Affordable Care Act has focused on the law's large-scale impact on patients and healthcare organizations in terms of health insurance and cost. What gets less attention but is equally important for healthcare leaders is health reform's effect on specific hospital service lines, such as surgery. Jeff Peters, president and CEO of Surgical Directions, shares the implications the Supreme Court's historic decision has for perioperative services and what five steps hospital leaders can take to ensure success.
Healthcare reform's impact on revenue and payment models
Mr. Peters says healthcare reform's two biggest effects on perioperative services are a reduction in reimbursement per patient or per procedure and an increase in the importance of clinical outcomes for payment. For states that opt in to PPACA's Medicaid expansion, more patients will be covered, but they will be covered at Medicaid's low reimbursement rates in comparison to commercial rates. For states that choose to opt out, however, they will suffer from both reduced reimbursement and a constant rate of patients without insurance.
Lower reimbursement affects many hospital services, but its impact on surgical services may be particularly important for hospitals because operating room processes account for a large percentage of hospital revenue, according to Mr. Peters. As healthcare moves from a fee-for-service to a pay-for-performance model, perioperative services' reimbursement will also be determined in part by the value of patient care. "To respond, perioperative leadership needs to dramatically reduce the cost structure of perioperative services and put systems in place to ensure quality outcomes," Mr. Peters says. He suggests hospitals' surgical department accomplish these two goals by making the following five changes.
1. Establish a collaborative leadership structure. "The first thing [hospitals] need to do is change the way perioperative services are governed and put in a collaborative leadership structure where administration, OR nursing leadership, anesthesia and surgery are coming together to run the OR and to develop a plan that looks at reducing cost and improving clinical outcomes," Mr. Peters says. An example of a collaborative OR leadership structure is a surgical services executive committee that includes administration, physicians, anesthesiologists and nursing and is typically chaired by an anesthesiologist or surgeon. This committee functions as the board of directors of the OR, regularly looking at benchmarks to monitor performance and guide the strategic direction of the department, according to Mr. Peters.
2. Develop a perioperative services culture focused on quality, cost-efficiency. One of the most important responsibilities of OR leadership will be to create a perioperative services culture that focuses on quality, safety and cost efficiency. To accomplish this cultural change, leaders will need to examine the preoperative testing process and compliance with intraoperative best practices.
Beginning to manage patients' care at the time they schedule a surgery can help the OR improve quality by ensuring all comorbidities are accounted for and managed and reduce costs by preventing delays and cancellations. For example, Mr. Peters says if a patient schedules a joint replacement, the OR team should test the patient for anemia six weeks before surgery. If the patient does have anemia, the OR should arrange to have the problem addressed before the day of surgery to minimize the need for a blood infusion postoperatively. Similarly, if a diabetic patient schedules surgery, the OR team should ensure the patient's blood sugars are controlled early.
In addition to specific comorbidities, the preanesthesia testing team should evaluate the entire patient's profile to determine whether the patient may need to go into rehab or a nursing home after surgery and to start case planning before surgery.
Mr. Peters says anesthesiologists should play a central role in creating the policies and procedures in preoperative testing. "The role of the anesthesiologist has changed from putting the patient asleep and safely waking them up to managing the whole preoperative experience from a clinical level and a patient and surgeon satisfaction level," he says. "They need to own the OR and the whole preoperative process." Anesthesiologists are best equipped for this role because their incentives are aligned with those of the hospital, and they are in the OR the majority of the time, Mr. Peters says.
Best surgical practices
Following best practices during surgery can also help create a safe and efficient perioperative culture by improving outcomes and reducing costs through the prevention of infections and other complications. Mr. Peters suggests hospital ORs implement the World Health Organization surgical checklist, which forces the OR team to consciously note that all consents are signed, sites are marked and antibiotics have been given, among other practices. A time-out before the procedure to review the case and what site is being operated can also help avoid complications. In addition, before any clinician leaves the OR, the team should conduct a sign-out to verify the sponge and instrument count is correct to prevent retained objects, according to Mr. Peters.
3. Gather and share quality and efficiency data. Making significant, sustainable improvements in cost and clinical outcomes requires the collection and monitoring of data. Mr. Peters suggests tracking the following measures:
• Surgical Care Improvement Project measures
• Hospital-acquired infection rates
• Deep vein thrombosis rates
• Pulmonary embolism rates
• Retained object rates
• Postoperative complication rates
This data should not be known only to a few leaders, but to all OR team members who can affect the measures. Mr. Peters suggests the OR provide surgeons with a dashboard that shows metrics such as their overall block utilization, case time by procedure, turnover time, cost per procedure, patient length of stay, patient complication rate and surgical site infection rate compared to the median rates. Monitoring this data can help surgeons and other clinicians identify opportunities for improvement and track trends.
4. Manage utilization. Carefully managing OR capacity and block time will be crucial to reducing costs and increasing revenue in the hospital. "It will be very difficult for hospitals to make money with block utilization below 85 percent," Mr. Peters says. He suggests making blocks at least eight hours to help ORs fill the day's schedule more efficiently. For example, he says if an OR has block times of four hours, the morning blocks would likely be popular but blocks in the afternoon would be more difficult to fill, which would reduce utilization and increase costs.
Another way to optimize OR utilization is to allocate block times to only those surgeons who maintain at least 85 percent utilization of the block, according to Mr. Peters. However, it is important to examine not only a surgeon's overall utilization, but also his or her time spent on each case. For example, if a surgeon maintains 85 percent utilization of a block but has excessive case time, that surgeon is not optimizing use of the block, Mr. Peters says. ORs should continually measure case time and other indicators of utilization to maintain high utilization over time.
Perioperative leaders should provide resources to surgeons to help boost their utilization levels. For example, leaders can assign a physician assistant or an additional nurse to assist the surgeon and speed case time. In addition, surgeons who cannot maximize utilization of a long block can schedule cases in open rooms. Mr. Peters recommends leaving 20 percent of the OR's capacity as open rooms for cases of surgeons without block time as well as for urgent and emergent cases. Open rooms provide flexibility for surgeons and can help optimize utilization.
5. Reduce non-labor costs. In most ORs, approximately 60 percent of costs are non-labor costs, and a significant portion of these are implants, according to Mr. Peters. There are several strategies perioperative leaders can take to reduce these costs. First, perioperative leaders can examine surgeons' preference cards. By discussing differences in implants' price and quality with surgeons, the OR may be able to standardize some of the products, which would reduce costs. Many physicians are not aware of the cost of items or the differences in cost between vendors, according to Mr. Peters. Simply sharing this information can often spur physicians to reevaluate their preference cards and choose implants that are more cost effective but have the same quality outcomes, he says.
Perioperative leaders can provide incentives to physicians to standardize products or choose cost-efficient, quality implants. For example, leaders can establish a gain-sharing program in which a portion of the savings from standardizing implants is shared with the surgeons. The surgeons can then use these funds at their discretion, such as for purchasing additional equipment.
The OR can also cut costs by reducing the number of items in case packs and opting instead for packs that have only the essential instruments, according to Mr. Peters. Surgeons can then supplement the instruments with items outside the room. This practice can reduce waste because the OR would not have to throw out unused tools from a large pack that was opened.
Another option to reduce implant costs is to set price ceilings and accept products from only those vendors who bid prices below the ceiling, according to Mr. Peters.
Positioned for success
PPACA is revolutionizing the healthcare industry, and its effects will be seen at every level of a hospital, from the C-suite to the OR. By establishing a collaborative leadership structure and using data to drive improvements in efficiency and quality, perioperative services will be well-positioned to weather reimbursement cuts and to meet quality expectations.
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Healthcare reform's impact on revenue and payment models
Mr. Peters says healthcare reform's two biggest effects on perioperative services are a reduction in reimbursement per patient or per procedure and an increase in the importance of clinical outcomes for payment. For states that opt in to PPACA's Medicaid expansion, more patients will be covered, but they will be covered at Medicaid's low reimbursement rates in comparison to commercial rates. For states that choose to opt out, however, they will suffer from both reduced reimbursement and a constant rate of patients without insurance.
Lower reimbursement affects many hospital services, but its impact on surgical services may be particularly important for hospitals because operating room processes account for a large percentage of hospital revenue, according to Mr. Peters. As healthcare moves from a fee-for-service to a pay-for-performance model, perioperative services' reimbursement will also be determined in part by the value of patient care. "To respond, perioperative leadership needs to dramatically reduce the cost structure of perioperative services and put systems in place to ensure quality outcomes," Mr. Peters says. He suggests hospitals' surgical department accomplish these two goals by making the following five changes.
1. Establish a collaborative leadership structure. "The first thing [hospitals] need to do is change the way perioperative services are governed and put in a collaborative leadership structure where administration, OR nursing leadership, anesthesia and surgery are coming together to run the OR and to develop a plan that looks at reducing cost and improving clinical outcomes," Mr. Peters says. An example of a collaborative OR leadership structure is a surgical services executive committee that includes administration, physicians, anesthesiologists and nursing and is typically chaired by an anesthesiologist or surgeon. This committee functions as the board of directors of the OR, regularly looking at benchmarks to monitor performance and guide the strategic direction of the department, according to Mr. Peters.
2. Develop a perioperative services culture focused on quality, cost-efficiency. One of the most important responsibilities of OR leadership will be to create a perioperative services culture that focuses on quality, safety and cost efficiency. To accomplish this cultural change, leaders will need to examine the preoperative testing process and compliance with intraoperative best practices.
Beginning to manage patients' care at the time they schedule a surgery can help the OR improve quality by ensuring all comorbidities are accounted for and managed and reduce costs by preventing delays and cancellations. For example, Mr. Peters says if a patient schedules a joint replacement, the OR team should test the patient for anemia six weeks before surgery. If the patient does have anemia, the OR should arrange to have the problem addressed before the day of surgery to minimize the need for a blood infusion postoperatively. Similarly, if a diabetic patient schedules surgery, the OR team should ensure the patient's blood sugars are controlled early.
In addition to specific comorbidities, the preanesthesia testing team should evaluate the entire patient's profile to determine whether the patient may need to go into rehab or a nursing home after surgery and to start case planning before surgery.
Mr. Peters says anesthesiologists should play a central role in creating the policies and procedures in preoperative testing. "The role of the anesthesiologist has changed from putting the patient asleep and safely waking them up to managing the whole preoperative experience from a clinical level and a patient and surgeon satisfaction level," he says. "They need to own the OR and the whole preoperative process." Anesthesiologists are best equipped for this role because their incentives are aligned with those of the hospital, and they are in the OR the majority of the time, Mr. Peters says.
Best surgical practices
Following best practices during surgery can also help create a safe and efficient perioperative culture by improving outcomes and reducing costs through the prevention of infections and other complications. Mr. Peters suggests hospital ORs implement the World Health Organization surgical checklist, which forces the OR team to consciously note that all consents are signed, sites are marked and antibiotics have been given, among other practices. A time-out before the procedure to review the case and what site is being operated can also help avoid complications. In addition, before any clinician leaves the OR, the team should conduct a sign-out to verify the sponge and instrument count is correct to prevent retained objects, according to Mr. Peters.
3. Gather and share quality and efficiency data. Making significant, sustainable improvements in cost and clinical outcomes requires the collection and monitoring of data. Mr. Peters suggests tracking the following measures:
• Surgical Care Improvement Project measures
• Hospital-acquired infection rates
• Deep vein thrombosis rates
• Pulmonary embolism rates
• Retained object rates
• Postoperative complication rates
This data should not be known only to a few leaders, but to all OR team members who can affect the measures. Mr. Peters suggests the OR provide surgeons with a dashboard that shows metrics such as their overall block utilization, case time by procedure, turnover time, cost per procedure, patient length of stay, patient complication rate and surgical site infection rate compared to the median rates. Monitoring this data can help surgeons and other clinicians identify opportunities for improvement and track trends.
4. Manage utilization. Carefully managing OR capacity and block time will be crucial to reducing costs and increasing revenue in the hospital. "It will be very difficult for hospitals to make money with block utilization below 85 percent," Mr. Peters says. He suggests making blocks at least eight hours to help ORs fill the day's schedule more efficiently. For example, he says if an OR has block times of four hours, the morning blocks would likely be popular but blocks in the afternoon would be more difficult to fill, which would reduce utilization and increase costs.
Another way to optimize OR utilization is to allocate block times to only those surgeons who maintain at least 85 percent utilization of the block, according to Mr. Peters. However, it is important to examine not only a surgeon's overall utilization, but also his or her time spent on each case. For example, if a surgeon maintains 85 percent utilization of a block but has excessive case time, that surgeon is not optimizing use of the block, Mr. Peters says. ORs should continually measure case time and other indicators of utilization to maintain high utilization over time.
Perioperative leaders should provide resources to surgeons to help boost their utilization levels. For example, leaders can assign a physician assistant or an additional nurse to assist the surgeon and speed case time. In addition, surgeons who cannot maximize utilization of a long block can schedule cases in open rooms. Mr. Peters recommends leaving 20 percent of the OR's capacity as open rooms for cases of surgeons without block time as well as for urgent and emergent cases. Open rooms provide flexibility for surgeons and can help optimize utilization.
5. Reduce non-labor costs. In most ORs, approximately 60 percent of costs are non-labor costs, and a significant portion of these are implants, according to Mr. Peters. There are several strategies perioperative leaders can take to reduce these costs. First, perioperative leaders can examine surgeons' preference cards. By discussing differences in implants' price and quality with surgeons, the OR may be able to standardize some of the products, which would reduce costs. Many physicians are not aware of the cost of items or the differences in cost between vendors, according to Mr. Peters. Simply sharing this information can often spur physicians to reevaluate their preference cards and choose implants that are more cost effective but have the same quality outcomes, he says.
Perioperative leaders can provide incentives to physicians to standardize products or choose cost-efficient, quality implants. For example, leaders can establish a gain-sharing program in which a portion of the savings from standardizing implants is shared with the surgeons. The surgeons can then use these funds at their discretion, such as for purchasing additional equipment.
The OR can also cut costs by reducing the number of items in case packs and opting instead for packs that have only the essential instruments, according to Mr. Peters. Surgeons can then supplement the instruments with items outside the room. This practice can reduce waste because the OR would not have to throw out unused tools from a large pack that was opened.
Another option to reduce implant costs is to set price ceilings and accept products from only those vendors who bid prices below the ceiling, according to Mr. Peters.
Positioned for success
PPACA is revolutionizing the healthcare industry, and its effects will be seen at every level of a hospital, from the C-suite to the OR. By establishing a collaborative leadership structure and using data to drive improvements in efficiency and quality, perioperative services will be well-positioned to weather reimbursement cuts and to meet quality expectations.
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