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5 Ways ASCs Can Cut Costs: From Larry Taylor, CEO of Practice Partners in Healthcare

Group of happy doctors communicating on a meeting in the hospital.

November 15, 2016

Larry Taylor, president and CEO of Practice Partners in Healthcare in Birmingham, Ala., points to five ways ambulatory surgery centers can cut costs.

1. Revisit implant discounts. Reevaluate surgical implant discounts on a regular basis. Ask for price breaks, reminding the implant company that lower prices can translate into higher case volume and thus increase its business. “One key strategy in reducing implant costs is to develop a capitated plate and screw plan with a key vendor,” Mr. Taylor adds. Work with the vendor to establish one price for plates, screws and drill bits, allowing for a greater number of profitable cases going through the ASC.

2. Review pharmacy expenses. Pharmacy expenses are a significant line item in most surgery centers. To assure the best pricing, review the potential for changes in drug purchasing. “Surgery centers often get into purchasing routines that are difficult to break,” Mr. Taylor says. Invite competing vendors to propose lower prices for drugs. In addition to reviewing their base price, be sure to include other charges such as shipping rates and important services for the center, such as just-in-time inventory, regular shipping days per week and breadth of supply. Centers can even realize savings by contracting with some vendors outside their GPO, Mr. Taylor says.

3. Ask for utilization reports. Ask vendors to compile a utilization report for the surgery center. Using the report, review trends and purchasing volume to determine whether there are any opportunities for price reductions. “Take the time to review trends on your own and determine cost-effective alternatives to high-volume purchases, especially services at the back of the house,” Mr. Taylor says. For example, focus cost-cutting efforts on items and services that are not driven by physician preference, such as traditional or T1 phone service. “We see centers with large expenses in IT that are paying above-market rates,” Mr. Taylor says. “Often you can bring down your rates by switching to a new carrier.”

4. Don’t forget to review office supplies. Cost-reduction strategies used to ignore office supplies, but even this area is fair game in the current economy, Mr. Taylor says. Review prices and utilization of the current office supply vendor and estimate potential savings by moving to a smaller chain. Also, consider recycling opportunities for office supplies. Examine the materials the ASC is throwing away and determine whether the center might be able to reuse them. For example, when medical documentation has been scanned into its final digital format and the paper chart is no longer needed, the center might be throwing out charts, files, tabs and other items.

5. Evaluate equipment service programs. “Equipment service programs can be very lucrative to vendors but may not be useful to the center,” Mr. Taylor says. Look at preventative maintenance and response times. For some programs, it might be better to “go bare” and simply not have a service contract, he says. “To understand your ultimate need for these contracts, review the service level you are paying for and figure out the service level you actually need,” Mr. Taylor says. Evaluate the cost of such each program and the center’s long-term utilization of the program. If servicing was due to misuse of equipment or incorrect processes, handling or storage, an in-service program might correct the problem.

Determine renewal and expiration dates for each maintenance program and mark them on the calendar as a reminder to make a timely review, with an eye to modifying the relationship at the appropriate time, if needed. Finally, when service contracts are up for renewal, remove auto-renewal clauses so that the ASC has an opportunity to review changes before each renewal. “This helps you to better control the relationship,” Mr. Taylor says.

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