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As healthcare continues to experience a seismic shift from inpatient to outpatient care, health systems are investing heavily in acquiring ambulatory surgery centers (ASCs) or building new centers from the ground up, requiring health systems to reevaluate their ASC strategy.
Several forces, including patient preference and the adoption of value-based payment models, are pushing health systems to grow their ambulatory care footprint. As a result, the ambulatory care setting is experiencing significant growth. In fact, U.S. Census Bureau data shows that ambulatory care revenue was up nearly 5 percent year over year in the third quarter of 2018, totaling $264.6 billion.1
With this growth comes increased competition, and health systems are re-engineering their non-acute strategy to ensure success in this market. Leading health systems are working with companies like McKesson Medical-Surgical to design an operational model that supports long-term growth.
Supply costs are typically the second largest line on the budget, after personnel. Health systems looking to cut supply chain costs for their surgery centers should consider reducing the amount spent on direct shipments, according to Katy Cohen, vice president of surgery center sales for McKesson Medical-Surgical.
Surgery centers pay freight fees for direct shipments from many different medical device companies and other suppliers. These suppliers get a shipping rate, which can be list price, from FedEx or UPS and extend it to the customer. Since some surgery centers receive direct shipments from more than 100 suppliers, reducing shipping costs is one avenue to significant savings.
McKesson is working with TRIOSE, a freight management company, to help surgery centers cut shipping costs without compromising patient care. Through the program, TRIOSE streamlines inbound logistics and uses its scale to secure lower shipping costs for surgery centers at no cost to the customer.
“With that comes a savings of roughly 40 to 50 percent on their freight spend,” Mrs. Cohen said. “It’s a way to stretch that dollar that you used last year. You’re not going to spend it on freight, so maybe now you can go ahead and invest in another piece of capital equipment in a surgery center.”
Whether acquiring new surgery centers or building them from the ground up, health systems should make case costing a top priority.
Knowing the true cost to operate on a patient at a surgery center offers many benefits to health systems. For example, case costing enables health systems to compare different surgery centers by performance and is essential for accurate budget forecasting and contract negotiations with payers and manufacturers.
“It’s critical to make sure you’re using the scale of the health system to bring down the cost per case,” Mrs. Cohen said. “The best way to do that is making sure you’re able to compute all the way down to the staff that’s in the room or even the overhead of the electricity that’s required to do the case to come up with the true cost to operate on that patient.”
Computing case cost is especially important for health systems with multiple surgery centers because it enables the system to identify outliers, according to Mrs. Cohen.
“You can go and peek in very quickly and say, ‘Okay, what is the case cost to do the total knee replacement at this surgery center versus this one? Why is this one such an outlier?'”
McKesson’s team of technology consultants uses a “procurement-to-payment” framework to help streamline key aspects of the supply chain, such as digitizing physician preference cards and leveraging McKesson Inventory Manager, to capture case costs.
As health systems expand into the ambulatory space, it can be difficult to manage the supply chain due to a lack of integrated technology, fragmented procurement practices, and a mix of direct and distributed vendor relationships that causes standardization issues. Many health systems are leveraging technology to help them maximize savings and improve efficiency in this area.
McKesson offers several applications that help surgery centers build a more efficient supply chain, including an application that helps them reduce the amount of time spent ordering controlled substances.
“For most cases that occur in a surgery center, you may have to use controlled substances for pain management,” said Mrs. Cohen. “Typically, to order a class II controlled substance, you have to fill out handwritten paperwork in triplicate.”
McKesson’s controlled substance ordering system application, McKesson CSOSManager℠, automates the process, saving ASCs time and eliminating paperwork.
“A surgery center can order a pharmaceutical today by as a late as 4:00, and it actually arrives on the truck the next morning,” Mrs. Cohen said. “That’s unheard of in the industry.”
Automating manual tasks, such as controlled substance ordering, helps ensure surgery centers have necessary supplies needed for a procedure and gives nurses more time to spend with patients.
As the industry shifts toward value-based payment models and inpatient volumes in many markets remain flat or decline, health systems are shifting their resources to outpatient care. Executing a strong non-acute care strategy is vital for success in today’s healthcare environment. Associates like McKesson can help health systems develop an operational model that benefits both providers and patients.
1: U.S. Census Bureau, Quarterly Services Survey, Dec. 6, 2018.