presents . . . Case Costing and Advanced

presents . . . Case Costing and Advanced

presents . . . Case Costing and Advanced Benchmarking for Ambulatory Surgery Centers 90-minute audio conference August 6, 2008 2:00 p.m.3:15 p.m. (Eastern) 1:00 p.m.2:15 p.m. (Central) 12:00 p.m.1:15 p.m. (Mountain) 11:00 a.m.12:15 p.m. (Pacific) The Case Costing and Advanced Benchmarking for Ambulatory Surgery Centers audio conference materials package is provided by ASC Communications, 315 Vernon Ave, Glencoe, IL 60022. Copyright 2008, ASC Communications. Attendance at the audio conference is restricted to employees, consultants and members of the medical staff of the attendee. The audio conference materials are intended solely for use in conjunction with the associated ASC Communications audio conference. You may make copies of these materials for your internal use by attendees of the audio conference only. All such copies must bear this message. Dissemination of any information in these materials or the audio conference to any party other than the attendee or its employees is strictly prohibited. Advice given is general, and attendees and readers of the materials should consult professional counsel for specific legal, ethical or clinical questions. For more information, contact ASC Communications 315 Vernon Ave, Glencoe, IL 60022 Phone: (800) 417-2035

E-mail: [email protected] Web site: www.beckersasc.com 2 Welcome! 315 Vernon Ave Glencoe, IL 60022 Web site: www.beckersasc.com We are pleased that you have chosen to set aside a part of your day and join us for our Case Costing and Advanced Benchmarking for Ambulatory Surgery Centers audio conference with Ann Geier and Susan Kizirian. We are sure you will find the conference educational and worth your time, and we encourage you to take advantage of the opportunity to ask our experts your questions during the audio conference. If you would like to submit a question before the audio conference, please send it to [email protected] Although we cannot guarantee your question will be answered during the program due to time constrictions, we will include it if time permits. If you have comments, suggestions or ideas about how we might improve our audio conferences, or if you have any questions about the audio conference itself, please do not hesitate to contact me. Thanks again for taking part in this program. Sincerely, Robert Kurtz

Director of Communications Phone: (410) 874-7681 [email protected] 3 Contents Speaker bios ........................................ 5 Presentation ........................................ 6 Speaker contact information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 4 Speaker bios Ann Geier, RN, MS, CNOR, CASC, is the vice president of operations for Ambulatory Surgical Centers of America (ASCOA). She has worked in ASCs since the mid-80s. In her various roles, she has worked with controlling costs while maintaining the quality of care provided to patients. Ms. Geier is currently involved on a national level with the Ambulatory Surgery Foundation (ASF), AORN and the ASC Quality Collaboration Expert Group in setting standards for quality of care strategies. She teaches in the AORN Ambulatory Surgery Managers Certificate Program twice a year and

teaches the annual financial management for Ambulatory Surgery Managers course. Ms. Geier is also on the AORN PNDS Data User Base task force, is a surveyor for AAAHC and speaks at national and regional meetings several times a year. Susan Kizirian, RN, MBA, is the chief operating officer for ASCOA. Ms. Kizirian has more than 17 years experience in all aspects of ASC operations, serving as executive director and as a consultant for ASC management and development. Most recently, Ms. Kizirian worked with the University of Virginia Health System ASC program. Additionally, she has 15 years of practice management experience and eight years of expertise with clinical site research. She currently serves as lifetime past president emeritus on the board of directors of the Florida Society of Ambulatory Surgery Centers, and is past treasurer of the American Association of Ambulatory Surgery Centers and past president of the Ambulatory Surgery Management Society of the Medical Group Management Association. 5 Presentation by Ann Geier and Susan Kizirian 6 All Roads Lead to Case Costing Human Human Resources Resources Cost CostDrivers Drivers

Surgeon Surgeon Recruitment Recruitment Schedule Schedule Efficiency Efficiency Charge Charge Master Master Case Case Costing Costing Eliminate Eliminate Losses Losses Implants Implants&& Prosthetics

Prosthetics Carve CarveOuts Outs Payer Payer Contracting Contracting 77 Why Do Case Costing? Hone strategic plans Highlight possible opportunities & problem areas Address cost and revenue sources to maximize your bottom line

Benchmark your costs against other ASCs 88 Historical: Cost Setting Initiatives Medicare ASC vs. OPPS Charges Cost Surveys APCs Milliman 1991 selected cases 99 Medicare

Fee Schedule Origination 1980 - Based on Cost extrapolations from hospital data CMS (then HCFA) required to perform cost survey every 5 years (Current Rates rebased in 1990 based on 1986 cost survey plus periodic adjustment for inflation) 35% of fee is Labor with adjustor 65% of fee is Overhead Last cost survey 1994 Data not useable Attempted cost survey in 1998tabled 10 10 How CMS Determined ASC Costs The Report of the Conference Committee accompanying section 934 of the Omnibus Budget Reconciliation Act of 1980 (Public Law 96499),

which enacted the ASC benefit in December 1980 This overhead factor is expected to be calculated on a prospective basis utilizing sample survey and similar techniques to establish reasonable estimated overhead allowances for each of the listed procedures which take account of volume (within reasonable limits). (See H.R. Rep. No 1479, 96th Cong., 2nd Sess. 134 (1980).) 11 11 Medicare 1998 APCs proposed (based on OPPS methodology) majority of fees extrapolated from charge data and hospital cost data - tabled 2008 APC System enacted Payments 65 % of Hospital OPPS (HOPD Rates) Relative value

Conversion Factor HOPD Cost Survey Data 12 12 2008 Rate Setting Methodology HOPD System CPT APC Relative Weight Relative Weight * Conversion Factor = Payment ASC System -- 2008 CPT APC Relative Weight Relative Weight * (Conversion Factor * 65%) = $Rate 9 13 2008 HOPD vs. ASC Rates HOPD System CPT 66984 $1520.05 23.8649 * $63.694 = CPT 43239

8.5030 * $63.694 = $541.58 CPT 66984 23.8649 * $41.401 = $988.03 CPT 43239 8.5030 * $41.401 = $352.03 ASC System 10 14 Milliman 1991 ASC Cost Survey (no longer available) On Selected High Volume Procedures IOL, Arthroscopy, GI Detailed costs Disposable Medical Supply & Implant

costs Calculated an industry average Cost of anesthetic gas, O2 per minute Staff costs per minute Unable to replicate most industry average costs 15 15 Charges 16 16 Charge Master Setting Charges

Best Cost with mark up Most Common Multiple of Medicare ASC or HOPD rates with some carve outs Billing Charges Most Common - Global Modified Line Item Line Item 17 17 Reimbursement 18 18 Reimbursement Reimbursement Schedules

Medicare Medicare Like Fee for Service Out of Network 19 19 Reimbursement - 2 1. Federal Payers 2. Medicare Tricare State Payers

Workers Compensation Medicaid Paid according to the Surgery Case Rates Obtain from State Medicaid Manual All inclusive rates but some allow specific human tissue, implants and/or prosthetics 20 20 Reimbursement - 3 3. Commercial - Have own rate setting methodologies Most follow closely to Medicares lead In some cases, Commercial plans pay less than Medicare 21 21 Reimbursement - 4

What do we get paid? Depends on: Payer mix Payer Contracting Expertise Example: CPT : 43239 Medicare $427 Aetna Blue Cross Deluxe Plan EGD w/bx (60%) $400 (20%) $550 (10%) $650 (10%) 22 22 Methodologies 23 23

Case Costing Methodologies Case Costing Methodologies Basic Expenses/Cases Intermediate - (OH OR Minutes) + Supplies Complex Cost Accounting Multiple Components Labor intense data collection system Software Applications Adjunct - Costs vs. Benefits 24 24

Case Costing Methodologies - 2 3rd Dimension Leadership & Implementation 25 25 Basic - Averages Expenses Cases = Cost/Case (Reimbursement Expenses) Cases = Profit/Case 26 26 Basic - 2 Disadvantages Advantages Simple Accounting Not labor intense

Dont know: Which procedures are winners what to focus on 27 27 Intermediate Step 1: By Accounting Period (Month) Overhead (minus Supplies) OR Minutes = O/H Per OR Min Step 2: By 1 CPT/Surgeon: (OR Mins x O/H per OR Min) + Supplies = Case Cost 28

28 Intermediate - 2 Step 3: By 1 CPT/Surgeon/Payer: Reimbursement - Cost By Surgeon Per CPT = Profit Per Case 29 29 Intermediate - 3 Advantages Lumps expenses into small number of categories Gives you Surgeon, CPT and Payer Specific Data Allocates all costs to OR utilization (which

is THE revenue generation activity) Disadvantages Requires higher order of knowledge & skills Lumps expenses into categories 30 30 Intermediate - 4 Requirements Accounting Software COAs Labor Administrative & Clinical Services Rent Medical Supplies

Disposable Medical Pharmaceuticals Implants & Prosthetics 31 31 Intermediate - 5 ASC Software Inventory OR Log Scheduling AR Reports Preference Cards 32 32 Intermediate - 6

Preference Cards By Surgeon by CPT Items Used in Preop, Anesthesia, OR, PACU OR: Prep, Drapes, Gloves, Irrigation, Sponges, Suture, Meds, Needles & Syringes, Dressings, & Misc Standardize Keep Up to Date 33 33 Intermediate - 7

Human Resources Accounting & Bookkeeping proficiency; CPA oversight ASC Software knowledge & skills Materials Management & Purchasing capability Excel expertise Communications adept Change agent know-how 34 34 Complex True Cost Accounting Multiple Labor Components intense data collection system Multiple

Software Applications 35 35 Complex - 2 Disadvantages Advantages Detail knowledge Slight tweaks can have major impact Complex Labor Intensive Costs outweigh benefits

36 36 Cost vs. Benefit Cost of Procedure or Service vs. Reimbursement Need to have at a minimum the Intermediate Case Costing Methodology in place to be useful 37 37 Cost vs. Benefit - 2 Weighted Averages 38 38

Cost vs. Benefit - 3 39 39 COST DRIVERS Cost Drivers Rent Service Contracts Labor Supply Costs OR Utilization Physician Variables OR Time & Utilization Supplies

Surgeon Preferences Anesthesia Preferences 40 40 Rent Cost per Sq Foot CAM (Common-Area Maintenance) Charges Varies by Site New Projects Existing Projects 41 41 Service Contracts - Equipment

Required for Equipment & Building: Electrical Safety Anesthesia Machines & Monitors HVAC Emergency Generator Vacuum Pump C-Arm (tube) Gas Manifold 42 42 Service Contracts Equipment 2 Required: high volume endoscopy services should carry contracts on the scopes Not Recommended:

microscopes, monitors (anesthesia gas monitors should be part of the anesthesia machine contract, cautery video equipment 43 43 Service Contracts Equipment 3 Required: Other Hi Tech Equipment PM Service Contract Options:

$ - PM check only, technician labor and travel time. For some hi-tech equipment this will include software releases/upgrades $$ - The above plus parts are included $$$ - The above plus labor and travel time for non-PM service (not recommended) *hi-tech equipment where software releases/upgrades are part of the service contract 44 44 Service Contracts - 4 Linen & Laundry Cleaning Fire Systems Other 45 45 Labor

Allocate globally Types: Direct: Specific activities tracked to specific patient Indirect: Activities necessary to provide services that are not directly tracked to specific patient 46 46 Supplies Disposable Medical Case

Specific Preop, OR, PACU Routine supplies Pharmaceuticals Gases Surgeon Preference Procedure specific supplies Pharmaceuticals Implants & Prosthetics 47 47 Supplies - 2 Anesthesia Routine Supplies Pharmaceuticals

Gases Supplies Other Necessary to provide services either nonmedical or not directly tracked to a specific patient Implants & Prosthetics Demand vs. Preference Device Benefits Managers 48 48 OR Utilization Cost per minute to operate OR OR Time: Patient Out Time Patient In Time Total

Expenses for accounting period minus supply costs divided by Total OR time in minutes for same time period Schedule Utilization Compress Unused Time 49 49 Intermediate More 50 50 Preference Card 51 51 Analyzing Case Cost 52

52 53 53 NAME OF FACILITY COST COMPARISON DATE: 8-2005 Procedure: BMTs SUPPLIES IN COMMON Dr. A ITEM PRICE Circuit $ 10.02 Mask $ 3.56 Blade $ 5.68 Mask $ 0.64 Slipper $ 0.64 Tow el $ 4.87 Med cup $ 0.62

Glove $ 1.18 SUPPLIES THAT DIFFER ITEM PRICE Tubes $ 9.92 Collar Button Floxin $ 39.25 Cannister $ 5.70 Tubing $ 1.07 TOTAL COST $ 83.15 Dr. B ITEM Circuit Mask Blade Mask Slipper Tow el

Med cup Glove ITEM Tubes Collar Button Floxin Cannister Tubing PRICE $ 10.02 $ 3.56 $ 5.68 $ 0.64 $ 0.64 $ 4.87 $ 0.62 $ 1.18 PRICE $ 9.92 $ 39.25 $ 2.85 $ 1.07 $ 80.30 Dr. C

ITEM Circuit Mask Blade Mask Slipper Tow el Med cup Glove ITEM Tubes Reuter Bobbin Floxin Cannister Tubing PRICE $ 10.02 $ 3.56 $ 5.68 $ 0.64 $ 0.64 $ 4.87 $ 0.62 $ 1.18 PRICE $ 17.28

$ 39.25 $ 5.70 $ 1.07 Dr. D ITEM Circuit Mask Blade Mask Slipper Tow el Med cup Glove ITEM Tubes Paparella Cannister Tubing $ 90.51 PRICE $ 10.02 $ 3.56 $ 5.68 $ 0.64

$ 0.64 $ 4.87 $ 0.62 $ 1.18 Dr. E ITEM Circuit Mask Blade Mask Slipper Tow el Med cup Glove PRICE $ 4.10 $ 2.65 $ 7.20 $ 0.64 n/c $ 2.05 n/c $ 0.31 PRICE

$ 38.00 ITEM Tubes PRICE $ 19.20 $ $ 5.70 1.07 $ 71.98 Floxin Cannister Tubing $ $ 2.95 2.85 1.07

$ 43.02 AVERAGE OR TIME 13 17 14 45 16 OPPORTUNITIES: Use only one suction per case Change to single use Floxin ANNUAL REALIZATION IN REVENUE Proposed change times number of cases annually equals = potential annual savings to facility Results Floxin - savings of $11,456.64 annually based on 312/year Suction - savings of $1,057.68 annually based on 312/year 54 54 Analyzing Case Costs CPT

Procedure Payer Standard Charge OR Mins O/H Costs $28.66/ min Supply Costs O/H Costs Plus Supply Costs Reimb

% Collected Income (Loss) Collection Status 28296 CORRECTIO N, HALLUX VALGUS MCD 6,662 78 2,235 244 2,480

507 7.61% -1,973 PAID 28296,2828 5 L8699X2 CORRECTIO N, HALLUX VALGUS BC 11,412 74 2,121 256 2,377

3,018 26.44% 641 PAID CORRECTIO N, HALLUX VALGUS BC 25,786 100 2,866 347 3,213 23,328 90.47%

20,115 PAID 28296, 28126 28288 L8699 CORRECTIO N, HALLUX VALGUS BC 15,952 95 2,723 250 2,973 6,592

41.33% 3,620 PAID 28296, L8699 CORRECTIO N, HALLUX VALGUS Carrier IssueClaim is in process 28296, 28285X2 28270X2 L8699X2 CIGNA 6,662

77 2,207 242 2,449 0 0.00% -2,449 TOTALS 66,474 424 12,152 1,339 13,491

33,445 50.31% 19,954 55 55 High Impact Metrics 56 56 High Impact Metrics Actual cases as % of projected cases Case per day Collections as % of charges Supplies as % of collections

Payroll as % of collections AR days outstanding AR & AP % current 57 57 Cases % of Projected Before development, we estimate the expected case volume. If youre not reaching anticipated case volume, you need to know why. If case volume falls significantly short of plan, losses can result. Quality care and efficiency will attract additional cases. 58

Cases / Projected 200% Excellent > 172% 180% 160% 140% Average = 115% 120% 100% 80% Poor < 58% 60% 40% Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08

Feb-08 Mar-08 59 Cases per Day Measure of throughput. More cases performed per day means lower per case overhead costs. Wage costs for a day of surgery is relatively fixed. 60 Average Cases per Day Cases per Day 35 Excellent > 33 30

25 Average = 24 20 15 Poor < 15 10 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07

Jan-08 Feb-08 Mar-08 61 Collections as % of Charges If % too low then perhaps billing or collections are troubled. If % is too high, you are likely either not charging enough or cleaning up an AR problem. Can only assess this metric well over several months. 62 Collections as % of Charges

35% Collections % of Charges Excellent > 32% 30% 25% Average = 25% 20% Poor < 19% 15% Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07

Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 63 Supplies % of Collections Always one of top two ASC costs Largely physician driven - but you can guide them Reduce cost by sourcing through group purchasing organizations (GPO) Case costing critical to reduce

Provide recommended preference cards 64 64 Medical Supplies % of Collections 30% Supplies % of Collections Poor > 27% 25% Industry Median = 22%* Average = 20% 20% 15% Excellent < 14% 10% Apr-07 May-07 Jun-07 Jul-07

Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 *Industry median is a sample median reprinted with permission from the Medical Group Management Association, 104 Inverness Terrace East, Englewood, Colorado 80112-5306; 303.799.1111. www.mgma.com. Copyright 2007. 65 Payroll % of Collections

Typically the largest single cost of an ASC. Compress your schedule to reduce. When the work is done, turn off the lights and send people home. Use PRN staff when possible. Pay more per hour for the right people. 66 66 Payroll as % of Collections Payroll % of Collections Industry Median = 27%* 26% Poor > 27% Average = 22% 21% Excellent < 18% 16%

Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 *Industry median is a sample median reprinted with permission from the Medical Group Management Association, 104 Inverness Terrace East, Englewood, Colorado 80112-5306; 303.799.1111. www.mgma.com. Copyright 2007.

67 Supplies and Payroll Can be controlled Change thought processes Track savings Calculate annualized savings Share information with staff Present to the Board 68 68 AR Days Outstanding

((Total Outstanding Charges) / (Total Monthly Charges)) x 30 days. The higher your AR days the more likely youll never collect. $ collected is $ you can pay owners. Clean-up pays for itself 10 - 20x. Success by a sound process. 69 AR Days Outstanding 45 AR Days Industry Outstanding Median = 47 Days* Poor > 38 40 Average = 34 35 30

Excellent < 29 25 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 *Industry median is a sample median reprinted with permission from the Medical Group Management Association, 104 Inverness Terrace East, Englewood, Colorado 80112-5306; 303.799.1111. www.mgma.com. Copyright 2007.

70 AR Percentage Current Higher is better because you dont want any of your AR getting old. An imperfect measure because you often get paid in less than 30 days which leads to a lower figure. You want your over 30 AR to be low due to fast collection. 71 AR % Current 80% AR Percentage Current Excellent > 77%

75% 70% Average = 68% 65% 60% Poor < 60% 55% Industry Median = 50%* 50% Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07

Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 *Industry median is a sample median reprinted with permission from the Medical Group Management Association, 104 Inverness Terrace East, Englewood, Colorado 80112-5306; 303.799.1111. www.mgma.com. Copyright 2007. 72 3rd Dimension Leadership & Implementation 73 73 Typical Reaction to the Initial Preference Card Discussion Will

Scope for Food 74 74 Physician Variables - Surgeons Surgeons OR Time on time, speed and efficiency Preferences start time staff supplies implants instruments & equipment medications 75 75 Physician Variables - Anesthesia

Speed & Efficiency: degree integrated into patient & schedule flow Preop review Preop protocols Preop testing Preop meds OR Medication protocols Discharge protocols

N/V management Pain management PACU protocols PACU meds Pt recovery time 76 76 Stakeholder Planning What financial or emotional interest do they have in the outcome of your work? It is positive or negative? What motivates them most of all? What information do they want from you?

How do they want to receive information from you? What is the best way of communicating your message to them? 77 77 Stakeholder Planning - 2 What is their current opinion of your work? Is it based on good information? Who influences their opinions generally, and who influences their opinion of you? How will you win them around or manage their opposition?

Who might be influencing their opinions? 78 78 Power-Interest Grid with Stakeholders Marked Controlling OR Costs High Manage Closely Non-Engaged Staff & Board & Surgeons Keep Satisfied Committed Staff & Surgeons & Board POWER Monitor Keep Informed Payers, Patients Low Low

INTEREST High 79 79 Standardizing Equipment Choosing Between Options Grid Analysis: Most effective where there are a number of good alternatives and many factors to take into account Lay out your options as rows on a table. Set up columns to show your factors Allocate weights to show the importance of these factors Score each choice for each factor using numbers from 0 (poor) to 3 (very good). Multiply each

score by the weight of the factor, to show its contribution to the overall selection Add up the total scores for each option. Select the highest scoring option 80 80 Grid Analysis C-Arm Purchase Factors: Weights: Cost 3 Quality 5 Service 4 GE-OEC 1x3=3 3x5=15 3x4=12

30 Siemens 2x3=6 2x5=10 2x4=8 24 Phillips 2x3=6 2x5=10 1x4=4 20 Ziehm 3x3=9

2x5=10 1x4=4 23 Score 81 81 Ladder of Inference* Our beliefs are the truth The truth is obvious Our beliefs are based on real data The data we select is the real data ________________ *Senge, Peter, The Fifth Discipline Fieldbook, pgs 242-246. 82 82

Ladder of Inference How It Works 7 I take Actions based on my beliefs I draw Conclusions I add Meanings (cultural & personal) Observable data and expectations (as a videotape recorder might capture it) The Reflexive Loop: Our Beliefs affect what data we select next time 6

I adopt Beliefs about the world 5 4 3 1 2 I make Assumptions based on the meanings I added I select Data from what I observe 83 83 Ladder of Inference An Example Set belief every time this behavior is observed 7

I dont ever need to discuss supply costs with Dr. X Dr. X is not going to comply with cost efficiencies Dr. X obviously thinks he doesnt have to follow the rules like the other surgeons Dr. X uses the most expensive supplies (as a videotape recorder might capture it) 6 Dr. X will never change; talking to him is useless

5 4 3 1 2 Dr. X doesnt embrace the cost effective culture of ABC Surgery Ctr Dr. X only chooses the most expensive supplies 84 84 Using the Ladder of Inference

What is the observable data? Does everyone agree on what the data is? Can you run through the reasoning? How did we get from the data to the abstract assumptions? When you said (what was inferred), did you mean (what was interpreted)? 85 85 Balancing Inquiry and Advocacy* Advocacy: Present and argue strongly for ones position or belief Inquiry: Lay out reasoning and thinking to learn about others views and have them learn about yours Goal: Create dialogue for movement towards and acceptance of change;

road to continuous improvement __________________________ *Senge, Peter. The Fifth Discipline Fieldbook, pgs. 253-263 86 86 Conversational Recipes for Improved Advocacy What to Do State your assumptions and describe the data that led to them Explain your assumptions Make your reasoning explicit.

What to Say Here is what I think, and here is how I got there? I assumed that . . . I came to this conclusion because . . . 87 87 Conversational Recipes for Improved Inquiry What to Do Gently walk down the ladder of inference and find out what data they are operating from

Use unaggressive language, particularly with people you are not familiar with these skills. Ask in a way which does not provoke defensiveness. Check your understanding of what they have said. What to Say What leads you to conclude that? What data do you have for that? What causes you to say that? Instead of What do you mean? Or Whats your

proof? Say Can you help me understand your thinking here? Am I correct that youre saying . . . 88 88 Conversational Recipes for Balancing Advocacy with Inquiry . . . You might say When . . . Strong views are expressed without any reasoning or illustrations

You may be right, but Id like to understand more. What leads you to believe . . .? Im unclear how that connects to what weve been saying. Can you say how you see it as relevant? When you said (give example)I had the impression you were feeling (fill in emotion). If so, Id like to understand what upset you. The discussion goes off on an apparent tangent . . . You perceive a negative reaction in others . . . 89

89 Benchmarking MGMA ASC Performance Survey ASCA Salary & Benefits Survey Financial Benchmarks Benchmarking for Dummies Peer Facilities Network 90 90 Benchmarking: Overview

Process of establishing a standard of excellence and comparing activities to that standard Provides goals for process improvement Provides understanding of the changes to facilitate improvement An ongoing process - not a one-time event 91 91 Benchmarking: Benefits 1. 2. 3. Understand your strengths and weaknesses Objectively evaluate your own performance Compare measurements externally against peers and better performers 4. Analyze what others do, so you can learn from their experience (and not make the same mistakes)

5. Convince internal audiences of the need for change 92 92 Benchmarking: 10 Step Process 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Establish practice objectives and strategy Identify performance indices Identify benchmark sources available Data collection Perform data comparison Communicate findings

Develop action and assessment plans Implement plans and monitor progress Assess practice objectives; evaluate benchmark standards; recalibrate measurements REPEAT! 93 93 MGMA ASC Performance Survey Medical Group Management Association: ASC Performance Survey www.mgma.com Compares Specific Overhead Costs Per OR Per 1000 cases Per Annual caseload Per Selected Specialties (Ophthalmology & GI) 94

94 MGMA Survey Report Tables Accounts Receivable Payer Mix Staffing and Cost Operating Cost Categories Clinical Outcome Measures (demographic only) Standards

Aggregate As a Percent of Medical Revenue Per Square Foot Per Case Per Procedure Per Operating Room 95 95 Key Performance Indicators Cases 1,999 or fewer Total Case Volume 1303 Total Cases per month 109 Total Procedures 1949 Total Gross Charges $ 3,065,495 Total Medical Revenue $ 1,422,021 Total Medical Revenue per Case $ 962.92

Total Employed Support Staff 9.30 Tot empl support staff cost as a % of medical revenue 25.00% Medical and surgical supply as a % of medical revenue 20.37% Medical and surgical supply cost $ 304,773 Medical and surgical supply cost per case $ 232.91 Total Operating Cost per Case $ 895.28 Net Inc from Operations as a % of medical revenue 23.29% Net Income from Operations $ 335,127 Net Income per Case $ 289.20 Cases 2,000 to 2,999 2547

212 2985 $ 4,126,365 $ 2,228,451 $ 882.90 13.12 23.91% 18.14% $ 460,627 $ 180.85 $ 670.06 26.80% $ 469,258 $ 210.28 Cases 3,000 to 4,999 4100 342 5088 $ 6,718,497

$ 3,879,094 $ 1,068.52 24.06 24.86% 16.40% $ 730,919 $ 179.42 $ 765.23 32.09% $ 1,185,579 $ 292.90 Cases 5,000 or more 6208 517 8547 $ 13,742,500 $ 6,449,700 $ 912.11 33.75

24.63% 20.01% $ 1,313,403 $ 194.29 $ 657.85 33.39% $ 1,836,585 $ 262.03 Source: MGMA ASC Performance Survey: 2003 Report Based on 2002 Data 96 96 ASCA Salary & Benefits Survey The leading and only comprehensive ASC salary survey National, Regional and Select State Data

Salaries for 17 ASC Positions Bonus Information Employee Benefits Data 98 98 ASCA Financial Benchmarks Key ASC Indicators Performance Ratios Accounts Receivable Costs Per Case Salaries and Benefits Medical Supplies and Drug 99 99 ASCA Financial Benchmarks Cost Per Case - All ASCs

Salaries & Benefits 36% Miscellaneous 31% Building Lease & Depreciation 8% Medical Supplies & Drugs 25% Key ASC Indicator, Costs Per Case, page 12, ASC Financial Benchmarking Survey, 2006, Foundation for Ambulatory Surgery in America. 100 100 ASCA Financial Benchmarks - 2 Operational Information

Accounting Method Anesthesia Professional Type Anesthesia Service Arrangements ASC Location Facility Accreditation & Organization Facility Size (Total Square Feet) Facility Size (Square Feet per OR/Procedure Room) Patient Encounter Distribution Payer Mix 101 101 ASCA Financial Benchmarks - 3

Procedure Specific Data Gross Charges Per Case Net Revenue Per Case Costs Per Case Medical Supplies & Drugs Minutes Per Case 102 102 ASCA Financial Benchmarks - 4 Procedure Specific Data CPT 29826 CPT 29877 CPT 42820 Adenoids CPT 45380 CPT 66984 CPT 69436 Others

Shoulder Arthroscopy Knee Arthroscopy Remove Tonsils & Colonoscopy with Biopsy Cataract Surgery w/IOL Create Eardrum Opening 103 103 ASCA Financial Benchmarks - 5 Financial Statements Per Case Per Case by Specialty

Per OR/Procedure Room Hour Per Patient Hour Per OR/Procedure Room Per OR: 1-2, 3, 4-5, > 5 By Ownership Multi-specialty, Single Specialty Per Square Foot Years in Operation: 1-3, 4-6, 7-10, > 10 104 104 Benchmarking: Analysis 1. 2. What differences exist between your facilitys data and the survey report values? Do the differences indicate that a performance outcome is significantly or negligibly out of line with the survey? Are the differences reasonably explained? (i.e., data collection, definitional) How great have special circumstances such as

the market competitiveness or regulatory changes affected the outcome? 105 105 Benchmarking: Analysis - 2 3. 4. By what methods can the financial or operational indicator be internally and/or externally changed or controlled? How should your ASC measure performance for the financial or operational indicators that represent the organizations most challenging shortcomings? Do your systems and processes allow for the appropriate assessment of the indicator? 106 106 Managing the Bottom Line

Human Human Resources Resources Cost CostDrivers Drivers Surgeon Surgeon Recruitment Recruitment Schedule Schedule Efficiency Efficiency Charge Charge Master Master Case Case Costing Costing

Eliminate EliminateLoss Loss Procedure(s )) Procedure(s Implants Implants&& Prosthetics Prosthetics Carve CarveOuts Outs Payer Payer Contracting Contracting 107 107 Speaker contact information Ann Geier Ambulatory Surgical Centers of America

Phone: (843) 216-2432 E-mail: [email protected] Web site: www.ascoa.com Susan Kizirian Ambulatory Surgical Centers of America Phone: (850) 510-8203 E-mail: [email protected] Web site: www.ascoa.com 108

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