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Business Advisor: 5 Supply-Saving Solutions
Reducing case costs frees up funds for investing in the future.
Corrie Massey
Publish Date: May 13, 2015   |  Tags:   Business Advisor
money on the table BONUS BENJAMINS Efficient supply management is like finding money on the (back) table.

Next to staffing, supply costs are a surgical facility's biggest expense. Here are 5 strategies to contain your supply costs without sacrificing quality. You can use what you save in supplies to help maintain your facility's profit margin and physician-owner dividends, invest in new service lines, fund equipment upgrades, and keep you and your staff nicely compensated.

Standardize as much as possible. Start by case-costing, particularly for implant-heavy cases like hernias, cataracts, orthopedics, and urology and gynecology (slings and bulking agents). To achieve the biggest financial impact quickly, focus on the financials of the most frequently performed cases. If you find, for example, that rotator cuff repair costs vary widely between your surgeons, do a little more digging. If Dr. Ortho always converts to an open repair from an arthroscopy, it could be saving OR time, but costing more in materials. Be sure to account for those types of variances in your analysis. If you find OR times and implant or materials costs are all over the map, involve your surgical team to determine next steps. It may be an easy conversation with a particular surgeon about his techniques or it may require a physician group discussion led by your medical director.

When cost variance is not due to implant costs, try to pinpoint other opportunities for standardization. One example is the use of procedure packs. Custom packs are convenient for staff, saving them time when they're opening cases. However, custom packs can cost more than standard issue packs.

In addition, if a single component of your custom pack is on backorder, production of the entire collection of supplies can be derailed. Making changes to custom packs can also be tricky and expensive, especially if your volume is low and your contract commits you to using all of the packs on hand before change requests are fulfilled. On the other hand, pre-source packs are more varied in their offerings than they used to be and are usually more readily available, without the lag in production associated with custom packs. Choosing a more basic pack lets you add custom components without affecting production and delivery.

Reach out to surgeons. Variances in implant costs are sometimes inevitable due to the nature of the procedure. However, sometimes just simple awareness of the costs of materials and implants can be the key to limited per-case expenses.

I had a group of gynecologists that performed a lot of "clean" procedures. Some of their preference cards called for a full GYN pack, including a back table cover, leggings and pouch drape. Other cards for the same procedure called for a pack of towels and a pair of gloves. Bringing the 2 costs directly to the physician group let them discuss appropriate protocols for these specific procedures. During the face-to-face review of supply usage, we discovered one physician drove the use of packs because of an unanticipated difficult case many years earlier. He had added requests for those additional and often unneeded supplies based on that case, and hadn't removed them from his preference cards since. The discussion among the physicians, and my reassurance that additional supplies and a prepared team would always be at the ready, resulted in their agreeing on a standardized middle ground, eliminating the use of a full GYN pack for those procedures.

Consign and commit. One way to place products on the shelves without an initial outlay of cash is to pursue consignment agreements. Products are placed at the center and only charged after they are used and replaced on the shelf. This is a great way to have accessibility to products without tying up operating dollars on the front end, especially for de novo centers and new service lines without a usage history. The theory is that by the time the products are used and replaced — resulting in an invoice from the vendor — some money will be coming in from either patient or insurance payments to cover the replacements costs.

Letters of Commitment (LOCs) can facilitate better pricing if your surgeons agree to use a certain percentage of supplies or implants from a dedicated vendor or commit to a certain dollar amount in annual expenditures. This is common with larger suppliers that work with distributors and group purchasing organizations.

If you opt for either of these options, take extra caution to read the fine print in the signed agreements. The days of a gentleman's agreement for consignment or tiered pricing are gone, and contracts hold both the buyer and seller accountable on many levels. I've seen some consignment contracts that are a single page, but very constraining, while others are multiple pages with more flexible terms. All contracts are negotiable, so don't be afraid to approach reps with your concerns about language that makes you uncomfortable. If a proposed contract is tricky to understand or work through, consider bringing in legal counsel as a per diem consultant or approaching a different vendor entirely.

Partner with third-party vendors. Different from distributors, these vendors can be helpful in procuring closeout supplies that original manufacturers no longer support. We had an anesthesia machine that was no longer supported by GE, but only required replacement filters. The price jumped from $100 per filter to $1,000 per filter in just a few weeks as national supplies dwindled. We found a supplier in England that had a significant number of these filters — still in the original packaging — at a much lower price. We stocked up, which kept us from having to replace our anesthesia machine.

Consider single-use device reprocessors. Another cost-saving option is using an FDA-approved SUD reprocessing company. These firms collect your SUDs and return the devices or instruments after restoring and re-sterilizing them back to the specifications of the original manufacturers — all at a significant cost savings. Other reprocessors maintain an inventory of returned devices that were never reclaimed by facilities and let you buy from their stock at the same reduced price. Even open and laparoscopic disposable clip appliers — recently on backorder from a large distributor — were still available from our reprocessing company. Remaining clips are counted and written on the handle before re-sterilization. This lets you pick an applier with more or fewer clips remaining, depending on the needs of the case.