All the predictions are coming true. Outpatient total knee replacements are becoming more prevalent as they prove to be a safe and efficient ambulatory procedure. Some say it's only a matter of time before CMS begins reimbursing for outpatient total knees. With experts predicting the demand for total knee replacements will increase by 700% by 2030, there are great opportunities for those facilities that focus on delivering excellent care and reducing the costs associated with this expensive procedure.

In order to develop a total knee program that delivers great patient care with an eye toward economizing and efficiency, it's important to examine where there's wastefulness or redundancy in your facility, both in the OR and the business office. Consider these 5 methods to increase efficiency and trim costs.

1. Negotiate bundled payments

The most profitable way to actually see the money you save is to use a bundled payments system, says David Uba, MBA, CEO of Excelsior Orthopaedics in Amherst, N.Y. To negotiate a price that will set you up for the best profit margin, investigate payers' current pricing for an episode of care in the fee-for-service model.

"You start with the greatest volume payer [in your market]," says Mr. Uba. "Try to figure out what their hospital DRGs are for those cases you want to include in your program." Next, add up the costs of each component of care, which you can do by collecting explanations of benefits from patients. Once you have an evidence-based guess of what the payer is paying for a knee replacement, you have leverage at the negotiating table. For example, you find out an episode of care for an inpatient total knee costs $35,000, while at your surgery center the price is only $9,000. Add in the cost of an implant — around $5,000 — and your facility only needs $14,000 for an episode of care. That's an immediate $9,000 savings.

Then you can decide to pay your surgeon more for the procedure — maybe $2,500 rather than $1,500. Or maybe give your physical therapist a better rate — $150 as opposed to $50. Distribute the savings however you want. As long as you don't exceed the $35,000 cost of an inpatient episode of care, the payer will easily agree to the bundle, says Mr. Uba.

Payers will be overjoyed to negotiate a bundled payment if they can get at least a 20% savings, says Mr. Uba. In the last 3 years of using bundled payments, Mr. Uba figures Excelsior has saved payers about $4 million.

2. Invest in patient-specific instruments

During total knee replacements, Keith Berend, MD, an orthopedic surgeon at Joint Implant Surgeons in New Albany, Ohio, favors using patient-specific instruments (PSIs) over a computer-navigation system that guides the surgical process.

With this method, an MRI scan is used to create disposable molds that fit to a patient's femur and tibia with a slot to guide the surgeon's cuts on those bones. Because the molds are based on a patient's anatomy, the PSI method approaches the same surgical accuracy in placing implants that the computer navigation method does, while significantly reducing the time it takes to perform the operation.

In a study he co-authored in the Journal of Surgical Orthopaedic Advances, Dr. Berend found that using PSI saved 28 minutes of OR time compared to the conventional method of total knee replacement. Compared to computer navigation, PSI saved a whopping 67 minutes. When that time savings gets multiplied over dozens, hundreds or even thousands of cases, the overall cost reduction is clear.

The PSI method also reduces OR clutter. Because a pre-op MRI allows for predetermined trial sizes and a custom cutting jig, only one operative tray needs to be prepared for the procedure, as opposed to conventional and computer-navigation methods that require 6 or 7 trays. Dr. Berend's study estimates the processing cost of each tray at about $58. That saves nearly $300 on each case.

If custom tools that fit the patient have been shown to reduce costs, why not go one step further and use custom implants? Wouldn't a perfectly molded implant make surgery breeze by even faster? Not quite, according to Dr. Berend. He says the up-front cost of custom implants and the shaky promise of long-term cost savings is enough to steer him away.

But custom implants don't have to be prohibitively expensive, says Raj Sinha, MD, PhD, an orthopedic surgeon at STAR Ortho in Rancho Mirage, Calif. "It's whatever you negotiate," says Dr. Sinha. "There's no hard and fast number there."

3. Cut out the clutter

Dr. Sinha discovered a massive cost hiding in his OR when he was working at the University of Pittsburgh years ago. For every total knee replacement, staff would open the routine basic set of surgical instruments, which could number around 200 implements. But Dr. Sinha only used 20 items for each surgery and wondered why so many unused instruments had to be re-sterilized and turned over if they were only going to go unused again.

"Historically, in surgery, there's been this attitude that you want to have everything that the surgeon might possibly need for every case," says Dr. Sinha, "but the reality is the surgeons only use a very small number of instruments."

His team calculated that each instrument cost a nickel to reprocess and sterilize. Spending a nickel to take care of unused instruments adds up to 2 full-time equivalents over the course of a year. Wouldn't you rather have 2 useful full-time employees on hand in the OR than a pile of useless instruments? Or you could pocket the savings to the tune of $120,000 per year.

Dr. Sinha's nursing manager then asked the logical question. What if you do need an instrument that isn't included in your handful of tools? And what if you drop something? His team came up with a handy solution. They took every instrument in the barebones set, triplicated them, peel-packed them and placed them in a Craftsman tool drawer in the OR (see "Dr. Sinha's Barebones Instrument Set" on page 44).

4. Surgical efficiency

In his quest to achieve greater efficiency in the OR, Dr. Sinha took his "cut out the clutter" theory to the actual total joint procedure itself. He found that in performing total knee replacements, 95% of procedures were identical from patient to patient, yet each scrub tech and nurse was expected to work with different surgeons whose methods didn't always align. This could create confusion and lengthen surgical time, thus making each total knee costlier.

Dr. Sinha wanted to replicate those 95% similar procedures to the point where he and his staff were working like a well-oiled machine. He wrote down every step in the performance of a total knee replacement. That's 274 individual actions between surgeon and assistants, from sawing a patella to suctioning smoke.

"We got to the point where I could do an entire operation without saying a word," says Dr. Sinha. "The techs knew what the next step was going to be."

5. Try e-dictation

Dr. Berend's surgery center invested in a program that transcribes surgical notes instantly. "Instead of dictating, all the information is captured live in the OR for an e-op note," he said. "It also enables us to do implant tracking and it communicates with the patient in follow-up to get our satisfaction scores and outcome scores for the surgery center."

Joint Implant Surgeons calculated that it saved $1,000 per month in record-keeping expenses. And the response rate on follow-up surveys was higher than ever. It's more efficient, more accurate and it saves money. That's the Triple Crown of good business. OSM