Same-Day Surgery Manager: Generate new income by cutting your costs
By Stephen W. Earnhart, MS
CEO
Earnhart & Associates
Austin, TX
Want to make more money next month? Look at your "variable costs" this month! Many professionals tend to overlook the amount of revenue that is generated by simply not spending money. The treasure chest lies within your own grasp.
What is variable cost within a surgical facility? Actually, there's much more than most realize. I'll share some tricks I use when I evaluate a facility or to see how efficient the management staff performs.
Most expenses in any surgical environment are generated by actual patients having surgery. Makes sense, but it is not all that obvious to some. Some expenses, such as rent, bank notes or loans, and utilities to some degree will be the same if you are doing 100 cases per month or 800 per month. Not much can easily or quickly be done about those costs, but your two biggest items, supplies and staffing cost, are directly related to how much surgery you are performing. I know that you know that, but I do want to point out how much found revenue those costs represent because we typically do not see it as such.
The average surgical department or surgery center will spend about $1 million to $5 million dollars each year in staffing. If your surgical volume is down 30% as some centers are reporting, then if you have your staff set up as "flex" or "per diem," you should furlough about that percentage of staff to represent your surgical volume. The savings can be as significant: $25,000 to $125,000 each month! Supply costs, for many cost centers, tends to equal staffing cost. So using the same example, you can save the same amount each month. Total so far = $50,000 to $250,000 each down month. Add in other variable patient-related costs such as linen, transcription, postage, paper forms, bad debt, medical gases, medical waste, and other expenses, and it starts to add up.
So, let's see how much "revenue" we were able to generate by reducing costs:
Personnel cost: $25,000-$125,000
Supply cost: $25,000-$125,000
Miscellaneous: $6,000–$36,000
Total potential "new revenue" equals between $56,000 and $286,000 each month!
So, now let's pretend that those savings were actually new cases. With average net reimbursement per case at around $2,000 per case, we have actually generated the equivalent of between 28 and 143 cases each month! None a bad month, all things considered.
I know what some of you are thinking: Imagine how much we could save if we did no cases each month! Doesn't quite work out to the same.
Now ... reality. Clearly this is not the case with all hospital and surgery centers around that country. This example will not work for you if your staff is all full time and you have not built in a flexible staffing schedule. Maybe it's time to consider that schedule. Staffing is far and away the greatest expense we have in any facility, but our staff is also what helps to make us successful! Without great people within the walls, we have nothing. So how do you reduce or at least give yourself the option of flexing your staff during down time? It could be far, far easier than you think: Ask them! With the holidays and nasty weather ahead of us, what better time to work a four-day workweek or to take some time off?
I was with the administrator of a center a couple of weeks ago and let her know she was overstaffed during slow periods and that it was hurting her numbers significantly. I suggested the model explained above. She said her staff needed the hours and the money and that it would not work. I asked her if she would at least bring it up at the staff meeting the next day. She did, and more than 60% of her staff said they would cut back to four days per week and take time off to get things done outside of work. So, unless you ask, you just don't know. [Earnhart & Associates is a consulting firm specializing in all aspects of outpatient surgery development and management. Contact Earnhart at 13492 Research Blvd., Suite 120-258, Austin, TX 78750-2254. E-mail: [email protected]. Web: www.earnhart.com. Tweet address: Earnhart_EAI.]
Want to make more money next month? Look at your "variable costs" this month! Many professionals tend to overlook the amount of revenue that is generated by simply not spending money. The treasure chest lies within your own grasp.Subscribe Now for Access
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