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Can GI Pass Its Toughest Test?
Find out what endo centers must do to survive Medicare payment cuts.
David Bernard
Publish Date: October 27, 2008   |  Tags:   Financial Management

The days of endoscopy being an enormously profitable venture for both single-specialty gastroenterology centers and multi-specialty centers hosting GI services may soon end thanks to a revised ASC payment system that will take a big bite out of the specialty that made up one-third of Medicare ASC volume in 2006. Already, some are predicting staff layoffs and even shuttered centers.

Currently, GI procedures are paid at 89 percent of hospital outpatient department rates. Under the new ASC payment system, which will reimburse ambulatory surgery centers 65 percent of the HOPD rate, payment for most GI procedures would drop by 17 percent at the end of a four-year phase-in period. Let's take diagnostic colonoscopy as an example. The current rate for this procedure when performed in an ASC is $446. Payment will drop to $427.76 next year and, barring any changes, will level out at $373.04 in 2011 when the new payment system is fully implemented.

"CMS has dealt a disastrous death blow to GI ASCs through draconian cuts to payment," says David Johnson, MD, president of the American College of Gastroenterology. "This ill-conceived and unfair scheme threatens public health by severely limiting access to colorectal cancer screening in what is widely accepted as a safe, cost-effective setting for delivery of these healthcare services."

We asked the administrators of three high-volume endo centers how they plan to stay in the game.

Basic strategy
If you're aiming to maintain your endo service line's profits, you'll first need a clear view of the target.

First, determine what the actual impact of the proposed cuts is going to be for your center, says Andrew S. Weiss, CASC, administrator of the Endo Center at Voorhees in Voorhees, N.J. "You can do this on an Excel spreadsheet, listing your revenue per procedure and totaling your net revenue" for 2007 as well as 2008 through 2011, the four-year span over which Medicare's payment changes will be phased in. Comparing your numbers with those of other centers may also help to orient your facility to its place on the bottom line. In addition to firms that specialize in benchmarking data, state and national industry organizations and corporate partners can also supply you with those numbers.

GI observers have noted that the specialty's reimbursement rates, even before the Medicare revisions, have not been particularly high, but that the specialty's practitioners have made it profitable through volume. Keeping this tenet in mind, seek savings and boosts from all angles. "Look for opportunities to replace missing revenues," says Mr. Weiss. "It's time to re-examine every opportunity."

Revisiting and possibly renegotiating your private payor contracts is an ideal starting point for revamping your revenues, especially if they're long-term contracts. "Explain to payors what your case costs are and what's changed in the payment system for your most common procedures," says Mr. Weiss. "Maybe you can get a cost-of-living adjustment. Whatever you can get is worth asking for."

If you're renewing a contract with a payor, however, "don't look into long-term contracts, but only one-year, three-year, five-year renewals," he says, so as to avoid lengthy stretches without the chance to change up your contract's conditions.

Any examination of your case costs should also lead you to renegotiations with your suppliers. Mr. Weiss estimates that supply costs make up 20 percent of a GI center's expenses, so reopening purchasing contracts may hold opportunities for savings through price reduction deals or less expensive but safe alternatives to products you're using. At his center, materials managers made a move toward the greater use of single-use items after pricing calculations showed they'd cost less in the long run than reprocessing reusable items would.

"Shop everything, and revisit it from time to time," he says. "Just because we examined something two or three years ago doesn't mean we can't examine it again now." He also advises administrators to join a buying group, if you haven't already, and benchmark your case and supply costs against similarly sized facilities.

Purchases aren't the only aspect of supplies that need watching. You've also got to keep an eye on how much inventory you keep on hand. "If you overstock, with inventory piled up, that's money," says Mr. Weiss. "But if you understock, that means emergency deliveries and extra costs. Those will really drive up case costs."

Determining your facility's par levels takes time and attention, he says, as it involves an accurate reading of such individual variables as case volume, scheduling and staff accountability - that is to say, do members of your surgical team hoard supplies?

Make a list of every item you use, and how many of each item are used, during a case. For some supplies, you'll have to average the number out, since you might not use them in every case. Then take your case volume for each case during a set period of time: daily, weekly, biweekly or other. Multiply the number of cases during that time period by the number of items needed for each of those cases. Then you'll have the usage for your specified time period. If, for example, you do 100 cases a week, and you use one nasal cannula per case, then your weekly usage of nasal cannulas is 100.

Next, determine the amount of supplies you want to keep on hand at any given time. If you decide to keep two weeks' worth on hand, in the above example that would be 200 nasal cannulas.

Keep in mind that the less inventory you have in storage, the better. That way, your available cash isn't all tied up in currently unused supplies, which will please your accountants. But finding a length of supply time, and a par level, is a function of how comfortable you are in working with your suppliers, and how reliable they've been in delivering your supplies on time, every time.

"It's a tricky job, but the payoff is there," says Mr. Weiss, especially when coupled with "just-in-time" delivery systems. "By paying attention to these areas, it's amazing how much money you can save."

Savvy staffing
As your facility's single largest expense, staffing demands a close financial review. But since your staff members are the assets that keep your facility working, you'd be well advised to handle the situation with sensitivity. "Turmoil and staff turnover will cost you a lot more," says Mr. Weiss.

Mr. Weiss says that staff salaries and benefits occupy 30 percent of his center's budget. "You obviously have to pay market rates to get and keep good staff," he says. But given the spiraling cost of insuring your employees, you might consider making changes to what your employees contribute to health and dental packages.

The positions with which you choose to staff your facility also play a part in your staffing costs. If an RN leaves or retires, says Mr. Weiss, remain flexible in considering what her role was and whether an LPN or nursing assistant might be able to fill the position just as well. Likewise, calculate the cost of outsourced services in comparison to hiring staff to come on board.

Streamlining patient flow
At the Berks Center for Digestive Health in Wyomissing, Pa., three procedure rooms host 17 half-hour blocks each and the center's 10 physician-owners keep the blocks full. "We're scheduled from 7 a.m. to 5 p.m. every day," says John Gleason, MMHS, CASC, the center's administrator, who counted 10,000 patient visits in 2006. "We're about as efficient as our physicians are capable of operating."

The center employs two patient handling techniques that shortcut through potentially wasted time for the center's physicians and procedure rooms. The first, "open endoscopy," is not a contradiction in surgical terms. It's a process by which patients undergo the endo procedure without first having to sit for a pre-procedure office visit. "If you're not doing this, you should be," says Mr. Gleason, who notes that it's standard operating procedure in some parts of the country, but hasn't yet made it to others.

The purpose of the pre-procedure office visit is to determine if the patient is in good enough shape to undergo the procedure, says Mr. Gleason. "If they're healthy or sick, they get the same visit," he says. The consultation is important if their health proves frail enough to warrant postponing the procedure or moving the procedure to a hospital, he says, "but if they're healthy, what's the use? You have to eat that cost of the physician's time and the patient who came in just because the doctor said to." Instead, the healthy patients get a five- to 10-minute telephone triage interview.

The second is managing a standby list and a pool of patients who are available to fill last-minute cancellations. "We have extremely active schedulers who are very much on top of the situation," says Mr. Gleason. Each patient who schedules an endoscopic procedure - particularly the patients who qualify for the open endoscopy mentioned above - is asked if he's willing to come in for his procedure in the event that another patient cancels and a block becomes available. For colonoscopies, two days' notice is necessary for patients, says Mr. Gleason, but esophagogastroduodenoscopy, or upper endoscopy, is a prime procedure for short notice scheduling and "filling in the open blanks."

Expand for demand
If endoscopic profitability is all about volume, if your schedule's full and if your numbers are accurate, perhaps it's time to expand, whether that means in time, services or structure.

The four rooms at the Endo Center at Voorhees used to open at 7 a.m. They now open at 6:30 a.m. "I got a commitment from four doctors to fill that slot on each of four days," says Mr. Weiss, "and we increased our utilization." With that commitment filled, the four extra cases a week total up to 200 more cases a year. He might add pain management services to fill the procedure rooms during the afternoon blocks less popular with the center's GI docs.

If you're sitting on extra space, now may be the time to build it up for increased endoscopy volume. The Michigan Endoscopy Center in Farmington Hills, Mich., has turned its storage room into its sixth procedure room. "When it became clear they'd be cutting reimbursements to ASCs, we decided to bring it into operation to offset the cuts and potentially build revenue," says center administrator Brien Fausone, MA, MBA. The new room - slated to open this month - will come in handy. There weren't enough blocks on the schedule to accommodate the center's 17 physicians, who often ended up taking their work elsewhere, says Mr. Fausone.

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