I've costed our cataract procedures down to the tape (3¢) that we use to cover the patient's non-procedural eye, to the warm blanket (41¢), to the retrobulbar injection (29¢), to the surgeon's cap (4¢) and gloves ($2.75). I know this might seem a tad obsessive, but in a business where income is largely pre-determined by private or government reimbursements, the greatest opportunity to increase profitability is through effective cost management. And when you host thousands of patients, a few cents here and a few cents there can really add up.

But managing your case costs in cataract surgery is like herding cats: so many doctors, an enormous quantity and variety of supplies, every minute of time spent by a variety of staff and all the unexpected occurrences that can occur when performing thousands of procedures in a single year. Here's practical advice for conquering this daunting task.

3 keys to case costing cataracts:

1. Learn every aspect of the surgical procedure. This includes the types of personnel and the times involved — pre-op, surgery time and post-op. It includes ordering supplies, material inventory and maintenance. It includes all medications and all materials: disposables, reusables, lenses, viscoelastics and other materials such as CTRs and sutures (if needed). And it includes equipment/instrument acquisition and repair. Learn it, live it, love it.

2. Develop a user-friendly, analytical spreadsheet. You'll use this to enter data in categories, as well as for each potential cost, allowing for computations of mean values for every potential cost and category of cost. This spreadsheet should provide a foundation from which cost savings will rise. A sample is on page 37 and a version you can customize for your use is available at www.outpatientsurgery.net/forms.

3. Collect data. This is the roll-up-your-sleeves part. You collect data by directly observing lots of lots of surgery. This includes detailed notes of all materials used during cases. Use a stopwatch to determine exact times that staff members need to perform their duties in every aspect of the patient encounter.

You must become intimately familiar with the cataract procedure before you begin collecting data. My advice: Wear comfortable shoes, because you'll spend lots of time on your feet. Put on scrubs and observe lots of cataract surgeries. I observed about 100 cases. Given the number of doctors and materials used, as well as the variability of the standard procedure, 100 seems like a reasonable number. You'll also want to follow lots of patients from the moment they enter pre-op until their release. Follow each staff member associated with cataract surgery to acquaint yourself with the moment-by-moment activities and job functions during every aspect of the patient encounter.

After gaining this familiarity, you'll be able to document every type of material and unit of time normally used during cataract surgeries. Continue to don scrubs and observe surgeries — but now with notebook and stopwatch in hand. As you collect the data, simply enter it into the spreadsheet until all 100 cases provide sufficient information for a realistic mean cost for each item and minute of staff time per case.

How to use your spreadsheet
Turn to page 37. The first column describes the product used. The second column shows the frequency with which the product is used (if a product is used 1 out of 10 times, the frequency is 10% or 0.1. If a product is used twice, the frequency is 20% or 0.2). The third column gives the total cost of an entire unit/vial of the product. The fourth column equals the total cost of each product used per procedure.

The cost sheet not only lists every single product, but also enters these products into categories. Categorization is important because it's valuable to understand the total cost of each phase of the procedure, independent of how many times a particular product is used. This allows for an analysis of the total cost of each aspect of the procedure, as opposed to only the frequency with which a single product is used. Looking at the cost by categories — housekeeping, anesthesia, staffing and so on — breaks the procedure into smaller units that are easier to wrap your head around.

Let the savings begin
After completing the spreadsheet, you can focus on items that might be modified to lower costs. The first items to address are those with the highest mean cost per surgery. In our cataract cases, these items were IOLs, viscoelastics and staff costs. From looking at the raw data, I realized that the costs of all 3 of these items were highly variable. It was obvious that we could lower the costs through negotiation and improved efficiency. You can also examine the spreadsheet in greater detail to search for other potentially variable costs where savings might be accomplished.

Whenever a quantity of use or cost unit is modified through negotiating a lower cost or streamlining staff time, the spreadsheet will automatically compute new subtotal and total costs. This not only demonstrates the effects of particular cost-saving measures, but also keeps a running picture of up-to-date data.

To lower costs, you need to determine how staff members can effectively and efficiently accomplish their tasks, and negotiate with the doctors using the facility as well as vendor representatives in order to achieve the lowest possible price for products. The hard data and the analytical capabilities of the cost sheet enable scenario-building as a basis for these negotiations. For example, after negotiating with an IOL vendor to achieve a price-per-lens and showing the effectiveness of that reduced cost on the total cost of the cataract procedure, that information was valuable in negotiating with the doctors to use a standard lens, as opposed to a variety of lenses. The same would be true of other materials, such as viscoelastics.

The table also showed where we could trim staff time without compromising the quality of service. I developed a step-by-step analysis of staff time for every aspect of their duties during the procedure. This included every detail, such as checking charts pre-operatively, taking the patient to pre-op, preparing the patient, preparing instruments, post-op time with the patient and room turnover until the staff was ready to begin another procedure. Examining this data, given my familiarity with the process and discussions with staff members, I was able to streamline staff time wherever possible. Dollars per unit of staff time not only include wages, but also administrative costs such as insurance.

As a side benefit, more efficient staff time would decrease the time per procedure and allow for more procedures in a day. As such, not only was there a cost savings per procedure, but also greater income on a per-diem basis. These changed values, entered into the cost sheet, gave a clear picture of the total effect on the surgery center's profits.

The cost sheet shows the costs per procedure of an optimal cataract surgery after implementing many changes to materials and staff costs. As the sample table indicates, our total average cost per procedure is now $202.88, compared to an approximate cost per procedure of more than $300. That's an average savings of $97.12. This savings, when multiplied by thousands of procedures per year, results in a substantial increase in annual profits from cataract surgeries.