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scuss your specific issues within Perioperative Services as well as tell you about es used by other organizations to address similar situations. Contact us to schedule Executive Briefing: Improving OR Efficiency 42 n conference call to review your situation and design a path to operational excellence! tive consultants help you enhance your bottom line through improved quality outcomes, Sponsored by: ative process and overall operational improvement. ive & anesthesia essment · interim management 12.870.5600 www.surgicaldirections.com 6 Cornerstones of Operating Room Efficiency: Best Practices for Each By Molly Gamble O perating rooms are one of the most costly areas of hospital operations, and as hospitals face a range of mounting financial pressures, most are reexamining OR operations for any avoidable costs. Despite ORs being such a pillar for hospitals' profitability, there is little published, formal data on true OR costs. For instance, there are far too many variables to accurately determine how much one minute of OR time costs. As a result, hospital administrators often deploy a ballpark to answer that question, ranging from $15 to $20 per minute for a basic surgical procedure, according to research from Stanford University School of Medicine. That range illustrates the significant price hospitals pay for any inefficiencies or unexpected events in the OR, such as last-minute cancellations or delays due to missing imaging equipment. Furthermore, the cost per minute can easily surpass $20 depending on the complexity of the procedure, if fixed overhead costs and/or physician fees are included, how the OR staff is paid and other variables. Although OR costs and potential profits are prone to an array of variables, one thing is certain: Time is an OR's most valuable resource. Even a slight delay in a case's start time, a lengthy turnover, or a few minutes spent looking for a piece of missing equipment, can severely hinder an OR's efficiency and ability to maintain a positive contribution margin. Non-labor costs are an attractive area for hospital management to reduce, as they are of a "low emotional level," according to Jeff Peters, president and CEO of Surgical Directions. These cost reductions do not involve layoffs or reclassification of staff. Plus, non-labor costs also make up anywhere from 40 to 60 percent of total OR costs, according to Mr. Peters. Here are six cornerstones of OR operations, along with some best practices to make them more efficient. 1. Building support among physicians to reduce supply costs. The first step in OR efficiency is for hospital management and OR managers to analyze costs by procedure and by surgeon. Sharing this cost information with surgeons typically builds their acceptance that they may need to alter their practice or resources. "The second thing you want to do is look at high cost items and benchmark them to national standards. Those are things like implants, supplies and devices," says Mr. Peters. "I recently worked with an 11-room OR in the south. They found that their implant costs were 50 percent higher than the national average." If a device, implant or other product exceeds national benchmarks, the hospital CMO, chairman of surgery, OR manager and other clinical leaders should meet with the surgeon to establish a ceiling price. "You present that information to the surgeons and say, 'I want to get these costs down. I don't want to impact your practice, but I need your support as I talk to your reps about the fact that we're going to establish a ceiling price for implants,'" says Mr. Peters. He says most organizations have reduced their implant costs by 20 percent to 25 percent by establishing ceilings. Another tactic is simple: label OR supplies with price information. "You want to build awareness among staff about the costs of supplies," says Mr. Peters. Often, OR staff will open supplies that go unused. By labeling the price on those materials, staff will become more cost-conscious and may change their habits toward supplies. 2. Blocking time. Generally, the most efficient way to block OR time is by the day as opposed to stints of hourly blocks, with each less than eight hours. For instance, a 12-hour block is ideal for specialties that involve longer cases, such as spinal surgery. Even an eight-hour block can allow surgeons to perform up to three procedures. An extended block allows one specialty or surgeon to utilize the OR all day, as opposed to a four-hour block time that can handle one procedure. Hourly blocks four hours or under may also result in cases running over their allocated time or mid-day gaps in utilization. As more profitable surgical cases move to freestanding surgery centers or surgical hospitals, ORs are also facing growing pressure to factor the profitability of a surgeon's cases into block time grants. Despite hospitals' focus on economic incentives, granting block time based on the profitability of cases is subject to organizational politics. If surgeons learn that cases or block times are denied based on financial metrics, it won't take long for them to take their cases elsewhere. Rather than denying surgeons block time based on case profitability, it is recommended that hospitals deploy a more positive strategy and work to attract local surgeons who may bring a potentially lucrative caseload to the hospital. 3. Adjusting OR block time and releases. Traditionally, block times have been adjusted based on surgeons' utilization rates, but recent research has suggested this may not be the most accurate criteria to make that decision. The hospital can still lose money through a surgeon with a high utilization rates if the reimbursement for his or her case does not cover the costs. Instead, OR managers may be better suited to adjust block times based on the balance between under- and overutilization of the OR. For instance, an underutilized OR equals a financial loss for the hospital, as there is no revenue coming in. But an overutilized OR can result in cases going over schedule, decreased satisfaction among clinicians, and the hospital having to provide overtime compensation. Thus, OR managers should try to match case workloads to staff levels when adjusting block times. Block releases are one way for OR managers to instill more flexibility in the OR schedule. A release refers to a block time that is not scheduled for a procedure. Building release times into block schedules far in advance allows schedulers to add cases to blocks that would be underutilized otherwise. Release times also vary per specialty. Procedures booked far in advance, such as joint replacements, may have release times far in advance of the day of surgery, such as 14 days. Cardiac surgeons may hold their block time until the day before surgery, however, as would burn services.