When the Best Surprise is No Surprise
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1 PROVIDER ENGAGEMENT When the Best Surprise is No Surprise Managing Margins and Efficiency in Outpatient Surgery Sarah Wald Dedicated Advisor
2 Impetus for Outpatient Expansion 2 Continued Outpatient Volume Growth Projected Medicare Volume Growth, All Services Cumulative Percent Change All Payer Growth Projections % 15% 21% 5% 11% 14% 5% 14% (8%) -6% -11% -4% Neurosurgery Orthopedics Vascular Outpatient Services per FFS Part B Beneficiary Inpatient Discharges per FFS Part A Beneficiary Cardiac Surgical Gynecology Inpatient Outpatient Source: Service Line Strategy Advisor s research and analysis.
3 Impetus for Outpatient Expansion 3 A Growing Component of the Business Increasing Contributor to Hospital s Top Line Case Study: Holden Health 1 Prioritized OP Growth to Support Bottom Line Proportion of Total of Volumes, Total Revenue % 49% Projected Market Growth % Outpatient Growth 71% 51% Volumes OP Revenue IP % Inpatient Growth 1) Pseudonym Source: Service Line Strategy Advisor s research and analysis.
4 Impetus for Outpatient Expansion 4 Today s Shift Driven by Competition, Patient Access Major Drivers of Outpatient Shift Increasing Competition Patient Engagement, Access Desire for more easily accessible care Clinical Innovation Reduction in procedure invasiveness, recovery times Cost Pressures Continuing pressure to decrease costs Competition from ASCs, freestanding specialty centers Time Source: Service Line Strategy Advisor s research and analysis.
5 Time Impetus for Outpatient Expansion 5 Hospital Purview of OP Specialty Services Expanding Focus on Supporting Specialty Care Continuum Broadening Hospital Scope for Outpatient Services Hospital OP Department Services located within hospital Standalone Ancillary Site Diagnostic, imaging centers, physician offices Standalone Surgical Site Ambulatory surgery centers Multi- Service, Site Freestanding single-specialty centers, one-stop shops Hospital Purview Source: Service Line Strategy Advisor s research and analysis.
6 Determine Financial Impact 6 Financial Assessment Gauges Potential Risk Varied Finances Create Debate on Site of Service Site of Care Impacts Reimbursement, Costs Procedural Reimbursement Upfront Costs Facility Operating Costs Procedural Costs Hospital OP Department Build New Freestanding Facility ASCs Offer Cost Saving Potential Services in ASCs commonly cost less than half of what the same services cost in a hospital outpatient department If a hospital contracts with a payer for population health management, it's in the hospital's interest to have the cases done in the most costeffective quality location. Luke Lambert CEO of Ambulatory Surgical Centers of America Source: Becker s Hospital Review, Challenges and Opportunities of Forming ASC Joint Ventures, available at: Service Line Strategy Advisor s research and analysis.
7 Impetus for Outpatient Expansion 7 Three Major Goals for OP Expansion Cost Reduction, Quality, and Capture Critical for Outpatient Success Goals of Outpatient Expansion Increase Capture Feed downstream IP business Grow market share Improve Quality Promote physician alignment Improve patient satisfaction, access Cover care continuum Minimize Costs More specialized, lower overhead Capitalize on more efficient site Source: Service Line Strategy Advisor s research and analysis.
8 8 How Do OP Surgeries Measure Up? The analysis is intended to address 3 commonly held assumptions about outpatient surgery programs and provide data to inform the observations Efficiency Outpatient surgeries are more efficient because they are less complex and more predictable. Profitability More efficient programs and procedures result in higher profits for the hospital. Supply Costs Preference cards and supply expenditures for a procedure should be the same whether it was done as an outpatient or inpatient procedure. Examine timestamp data to determine the extent of the differences. Use net profit per encounter data to observe correlations in the dataset. Compare supply cost per case for outpatients and inpatients coded with the same ICD-9s.
9 9 Methodology Cases between June 2014 May 2015 Selection Criteria: Outpatient/Inpatient metrics compared across all ICD-9 codes with outpatient cases (i.e. dataset excludes ICD-9 codes with only inpatient data) Exclude outliers and erroneous data: Patient Types listed as unknown, emergency, or observation ICD-9 Codes listed as unknown Supply cost per case = $0 Net profit per encounter = $0
10 Cohort Trends 10 Case Volume in Final Dataset After removing outliers, 542,426 cases remained in the dataset. Patient Type Case Volume Outpatient 442,268 Inpatient 100,158 Total 542,426 Prevalence of Outpatient Procedures Number of ICD-9s >80% %-70% 99 30%-50% 19 <30% 19 Source: Surgical Profitability Compass 2015
11 11 Top Volume Outpatient Procedures The following procedures had an outpatient volume >10,000. ICD-9 Code & Procedure Name Case Volume % of total volume = outpatient EGD WITH CLOSED BIOPSY 36,450 70% CATARAC PHACOEMULS/ASPIR 33,315 98% ENDO POLPECTOMY LRGE INT 32,244 93% COLONOSCOPY 30,025 89% LAPAROSCOPIC CHOLECYSTEC 28,589 56% 86.3 OTHER LOCAL DESTRUC SKIN 17,556 94% 80.6 EXCIS KNEE SEMILUN CARTL 16,765 98% 56.0 TU REMOV URETER OBSTRUCT 13,195 77% D & C NEC 12,989 96% LOCAL EXCIS BREAST LES 12,531 97% MYRINGOTOMY W INTUBATION 12,250 96% CARPAL TUNNEL RELEASE 11,551 97% CLOS LARGE BOWEL BIOPSY 11,536 75% 28.3 TONSILLECTOMY/ADENOIDEC 11,010 91% Source: Surgical Profitability Compass
12 12 Case Duration Outpatient cases are shorter with only three exceptions. ICD-9 Code & Procedure Name Inpatient PI-PO Outpatient PI-PO Inpatient Cut-Close Outpatient Cut-Close EGD WITH CLOSED BIOPSY CATARAC PHACOEMULS/ASPIR ENDO POLPECTOMY LRGE INT COLONOSCOPY LAPAROSCOPIC CHOLECYSTEC OTHER LOCAL DESTRUC SKIN EXCIS KNEE SEMILUN CARTL TU REMOV URETER OBSTRUCT D & C NEC LOCAL EXCIS BREAST LES MYRINGOTOMY W INTUBATION CARPAL TUNNEL RELEASE CLOS LARGE BOWEL BIOPSY TONSILLECTOMY/ADENOIDEC Source: Surgical Profitability Compass
13 13 Turnover Turnover is significantly shorter for several outpatient procedures with only a few exceptions. ICD-9 Code & Procedure Name Inpatient Outpatient EGD WITH CLOSED BIOPSY CATARAC PHACOEMULS/ASPIR ENDO POLPECTOMY LRGE INT COLONOSCOPY LAPAROSCOPIC CHOLECYSTEC OTHER LOCAL DESTRUC SKIN EXCIS KNEE SEMILUN CARTL TU REMOV URETER OBSTRUCT D & C NEC LOCAL EXCIS BREAST LES MYRINGOTOMY W INTUBATION CARPAL TUNNEL RELEASE CLOS LARGE BOWEL BIOPSY TONSILLECTOMY/ADENOIDEC Source: Surgical Profitability Compass
14 Resource Management & Profitability While the data correlated with our expectations for shorter case durations and turnovers in the outpatient setting, there is more to consider when it comes to managing costs and the resulting profit. 14
15 15 Supply Cost per Case As expected, supply costs were typically higher on inpatient procedures. ICD-9 Code & Procedure Name Inpatient Outpatient EGD WITH CLOSED BIOPSY $146 $ CATARAC PHACOEMULS/ASPIR $476 $ ENDO POLPECTOMY LRGE INT $186 $ COLONOSCOPY $113 $ LAPAROSCOPIC CHOLECYSTEC $780 $ OTHER LOCAL DESTRUC SKIN $243 $ EXCIS KNEE SEMILUN CARTL $559 $ TU REMOV URETER OBSTRUCT $762 $ D & C NEC $391 $ LOCAL EXCIS BREAST LES $378 $ MYRINGOTOMY W INTUBATION $164 $ CARPAL TUNNEL RELEASE $653 $ CLOS LARGE BOWEL BIOPSY $143 $ TONSILLECTOMY/ADENOIDEC $376 $250 Next Steps: Evaluate your preference cards and utilization data in order to replicate lowcost preference cards where they re different. Source: Surgical Profitability Compass
16 16 Net Profit per Case Outpatient procedures were more profitable in all but 3 ICD-9s. ICD-9 Code & Procedure Name Inpatient Outpatient EGD WITH CLOSED BIOPSY -$7,992 $ CATARAC PHACOEMULS/ASPIR -$63 $ ENDO POLPECTOMY LRGE INT $859 $ COLONOSCOPY -$4,925 $ LAPAROSCOPIC CHOLECYSTEC -$2,037 $3, OTHER LOCAL DESTRUC SKIN $465 $ EXCIS KNEE SEMILUN CARTL $1,863 $2, TU REMOV URETER OBSTRUCT -$2,641 $2, D & C NEC $3,339 $2, LOCAL EXCIS BREAST LES -$1,297 $2, MYRINGOTOMY W INTUBATION $69 $1, CARPAL TUNNEL RELEASE $1,155 $1, CLOS LARGE BOWEL BIOPSY -$3,425 $ TONSILLECTOMY/ADENOIDEC $1,031 $921 Findings: Evaluate your payer mix and profitability patterns in order to: Determine if your average profitability is in line with cohort trends Maximize margins where possible. Source: Surgical Profitability Compass
17 Profitability 17 Balancing Cost and Revenue What to do next depends on your starting point. Comparing Outpatient Procedures to Inpatient Higher Profit, Lower Supply Costs Goal: Review your organization s performance. Are you seeing the same results as the cohort? Higher Profit, Higher Supply Costs Goal: Replicate the inpatient preference cards in the outpatient setting to increase the margins further. Lower Profit, Low Supply Costs Goal: Replicate outpatient preference cards in the inpatient setting to increase inpatient margin. Lower Profit, Higher Supply Costs Goal: Review the differences in payer mix, preference cards, floor charges, and/or OR time. Supply Cost per Case
18 18 When Supply Costs are Higher for Outpatients What to do when you re spending more on supplies for an outpatient procedure than you do for the same procedure as an inpatient. If the inpatient is more profitable If the outpatient is more profitable Review the differences in payer mix, preference cards, floor charges, and/or OR time. Only D&C NEC fell into this category. Replicate inpatient preference cards in the outpatient setting to increase the outpatient margin further CATARAC PHACOEMULS/ASPIR 56.0 TU REMOV URETER OBSTRUCT 80.6 EXCIS KNEE SEMILUN CARTL
19 19 When Supply Costs are Lower for Outpatients What to do when you re spending less on supplies for an outpatient procedure than you do for the same procedure as an inpatient. If the inpatient is more profitable If the outpatient is more profitable Replicate outpatient preference cards in the inpatient setting to increase inpatient margin ENDO POLPECTOMY LRGE INT 28.3 TONSILLECTOMY/ADENOIDEC Review your organization s performance. Are you seeing the same results as the cohort? EGD WITH CLOSED BIOPSY LAPAROSCOPIC CHOLECYSTEC 86.3 OTHER LOCAL DESTRUC SKIN CLOS LARGE BOWEL BIOPSY LOCAL EXCIS BREAST LES MYRINGOTOMY WITH INTUBATION 4.43 CARPAL TUNNEL RELEASE COLONSCOPY
20 Using the Compass Tool 20
21 21 Dashboards Customize dashboards to monitor key metrics and surgeon performance.
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