All patients admitted to an ASC work their way through the following surgical encounter sequence: preoperative, intraoperative and postoperative. In other words, they are assessed, intervention is performed and a reassessment is conducted.

This approach is not only effective in improving patient well-being, but also in optimizing ASC performance. I’ll walk you through it now.

PERFORMANCE METRICS

Preoperative assessment

ASCs assess their performance by tracking key performance indicators (KPIs) on an ongoing basis. Consider KPIs as the vital signs of the ASC, because they inform the overall health and fitness of the operation. I’ve listed the KPIs typically tracked in ASCs — and how they are calculated — below.

Productivity KPIs

• Collections per full-time equivalent (FTE) = collections divided by FTEs
• Average collections per case = collections divided by case volume
• Labor costs per case = total wages and related costs divided by case volume
• Cases per surgical day = total case volume divided by the number of operational days
• Cases per FTE = total case volume divided by the number of FTEs
• Man-hours per case = total hours worked divided by case volume

Expense management KPIs

• Supply cost ratio = supply expenses divided by collections
• Payroll ratio = gross payroll divided by net collections
• Operating expense ratio = total operating expenses divided by collections
• Net income ratio = net profit divided by collections
• Supply cost per case = direct supply divided by case volume

KPIs are internal benchmarks, useful in identifying whether performance improves or declines over time. Let’s take the analogy of a patient whose blood pressure is elevated in preop. That may indicate hypertension, but after referencing the patient’s history and physical examination, the cause is more likely situational anxiety. The same approach applies to KPIs; when examining them, it is important to consider trends over time in order to see the bigger picture. A single variance may be easily explained as an outlier, whereas a sustained trend may signal underlying problems and warrant further assessment.

Tracking one’s KPI metrics against industry benchmarks is also important in validating the relative health of the organization and identifying opportunities for improvement. ASCs are fortunate to have good external benchmarking resources; the ASC Association offers a Clinical & Operational Benchmarking Survey. Data is collected online quarterly, and the survey is open to the entire ASC community. In addition, VMG Health publishes the VMG Intellimarker, a multi-specialty benchmarking report. It offers financial and operational benchmarks from almost 300 ASCs with an aggregate case volume of more than 1.3 million cases. Lastly, the Outpatient Ophthalmic Surgery Society (OOSS) offers an ophthalmology-specific benchmarking survey open to all ophthalmic ASCs. Given the wide variability among ASC organizations, it is often helpful to reference more than one benchmarking source.

Intraoperative intervention

If you identify a concerning trend, whether by comparing your KPIs over time or against industry benchmarks (or both), an investigation is warranted to understand what is behind the variance. There are many possible reasons for less than optimal performance — for instance, negatively trending productivity indicators may be the result of high staff turnover and/or the mismanagement of new employee orientation. Whatever the cause, this is the time to address the issue and take action (based on your investigation findings).

Postoperative assessment

As with every quality improvement endeavor, reassessment is necessary to validate the efficacy of your selected intervention. This is accomplished through continued monitoring and trending of your KPIs. If your reassessment reveals you fell short of your performance goal, you may need to reconsider your intervention, or you may need to allow more time for your intervention to translate into meaningful improvement. If your reassessment shows that you achieved your desired outcome, you can move on to other improvement opportunities.

Below are two examples where ASCs used KPIs and benchmarking to reach their performance goal. The benchmarks used in Scenario 1 came from 2018’s OOSSMark ASC Performance Metrics, whereas internal benchmarks were used in Scenario 2.

PRACTICAL APPLICATION

Scenario 1: Improving profitability

A mature single-specialty ASC requested a business operations assessment with a focus on labor costs. Profits and distributions had declined two years in a row, and the partners attributed the decline to overstaffing. Attempts to cut staffing were met with resistance from the clinical director, claiming further reductions in staff would jeopardize patient safety.

First, the assessment — a review of the ASC’s KPIs prior to the on-site assessment revealed the following:

• The payroll ratio was at 36%, which is above the healthy range of 18%-25%.
• The labor cost per case was on the low end of the healthy range of $178-$275 per case.
• The average collections per case was below the 75th percentile.

Usually, a high payroll ratio would be cause for concern. However, staffing is not the only indicator driving that number. As such, we looked at both sides of the equation — gross payroll and net collections. When we compared average collections per case against the current client Medicare fee schedule, we found the average collections per case was less than Medicare rates. This indicated a potential collections issue or a function of low contracted rates.

When we got onsite, we took a deep dive into accounts receivable and payer contracts while observing clinical staffing and patient flow. All the while we asked ourselves the following questions based on our previous off-site assessment:

• Was the ASC overstaffed? No, its payroll cost per case was below benchmark. In fact, the ASC was understaffed. Its payroll ratio was high because the KPI payroll ratio uses collections as the denominator, and the facility’s low collections per case drove up its payroll ratio.
• Did the ASC have low contracted rates? No, most of the ASC’s contracts were above Medicare rates, but the facility did not have a Master Fee Schedule. Master Fee Schedules are critical for an ASC to calculate the co-insurance and deductibles at the date of service. Only co-pays and premium services were being collected on the day of service.

Our intervention/reassessment: A Master Fee Schedule and staff training on best practices and out-of-pocket collections on the day of service was implemented. As a result, average daily collections improved by 10%. Within a few months, the ASC saw its average collections exceed its Medicare reimbursement and fall more in line with its contracted rates. With the improved collections, the ASC was able to hire additional staff to meet safety standards and improve its bottom line.

Scenario 2: Reducing the cost-per-case

A surgery center with 10 active surgeons doing 5,000 cataract surgeries annually was concerned about a slowly rising cost-per-case figure. It had an ASC management system with cost-per-case reporting, which it tracked regularly by physician.

First, the assessment: The center’s latest quarter cost-per-case report revealed two relevant findings:

1. Surgeon 3’s average cost per case was $32 higher than the facility’s average. A deeper analysis attributed the surgeon’s higher average cost to frequent use of an additional viscoelastic.
2. Surgeon 1’s cost per case was $26 less than the facility’s average. Examination of Surgeon 1’s preferences identified that the savings was from blade preference. Surgeon 1 uses diamond blades rather than disposable blades.

• On average, disposable blades cost $13 each, totaling $26 per case.
• Converting all other surgeons (Surgeons 2-10) to diamond blades could result in a potential savings of $117,000 per year (based on 4,500 cases x $26) for the center.

However, diamond blades are expensive to procure and maintain, making it necessary to validate not only the potential cost-per-case savings but also the return on investment.

• The diamond blades in use at the center cost $1,500 each. Based on that expense and the center’s assumption that it would need 15 more diamond blades, the ASC estimated a cost of $22,500.
• The center also budgeted an additional $3,000 for repairs, which brought the total expense for diamond blades to $25,500.
• Based on that figure, the center would need to do 980 cases to recoup its investment, which would take about 3 months based on its cataract surgery volume.

Our intervention/reassessment: The center elected to move all its cataract surgeons to diamond blades. As for Surgeon 3’s viscoelastic use, the center worked with the surgeon and its vendors to find an alternative solution that reduced Surgeon 3’s cost-per-case by $14. Based on that surgeon’s annual volume of 500 cases, the center looked forward to a potential savings of $7,000. These changes were effective, as future reports demonstrated a lower cost per case. (For more on case costing, see “How case costing comes into play”.)

CAPITALIZING ON KPI INTELLIGENCE

As highlighted in the two scenarios above, tracking your center’s KPIs against internal benchmarks (over time) and industry benchmarks is essential to validate its performance and identify opportunities for improvement. By following the same methodology implemented every day in our clinical operation — assessment, intervention and reassessment — you can effectively capitalize on this vital business intelligence for center betterment. OM

About the Author

Regina Boore, MS, BSN, RN, CASC, is senior vice president and leads the Progressive Surgical Solutions division of BSM Consulting. Prior to joining BSM in 2018, Ms. Boore founded Progressive Surgical Solutions, which specializes in the development and management of ASCs.