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Winter 2011

How to Increase Practice Revenue by Improving or Efficiency

Jeffry A . Peters, MBA
President, Surgical Directions, LLC, Chicago, IL

Most anesthesiologists can tick off a list of problems with the hospital OR: long gaps between cases, frequent cancellations, chronic delays, pervasive waste. The majority of these issues can be ascribed to disorganization on the hospital side.

But while these dysfunctions are not your fault, they are your problem. Inefficiency in surgical services leads to low OR utilization, which translates directly into low anesthesia revenue, high anesthesia costs and long coverage hours.

1. When you raise the bar, surgeons rise to the occasion.

Most hospital ORs assign block time to surgeons based on seniority, not actual utilization. Blocks are usually 4-hour units, which do not facilitate multiple cases. The result is that in many hospitals, OR utilization hovers around 60 percent. That means a critical resource is not generating revenue 40 percent of the time.

The solution is to increase expectations for surgeon case volume. First, establish the 8-hour block as the basic schedule unit. Longer blocks are more efficient for maximizing cases, and they reduce OR expenses per case. Second, assign block time based on actual volume. Third, require that surgeons maintain a minimum 75 to 85 percent utilization rate to retain ownership of their block.

Planned and managed properly, “raising the bar” will not alienate surgeons. In fact, utilization standards strengthen the OR’s service to active surgeons by ensuring them schedule access.

2. Flexibility needs to be built into the system.

Most OR schedules are made up entirely of block time. Private surgeons and surgeons with add-on cases have a hard time getting onto the schedule. While a strong block system is important, inflexible systems cause surgeon dissatisfaction and create long-term problems.

To avoid this pitfall, hospitals should establish open rooms to accommodate add-on cases. Better performing hospitals have found that maintaining 20 percent open space provides adequate schedule access to non-blocked surgeons and physicians with add-on volume. Properly managed, open rooms can achieve high utilization rates.

Hospitals also need to take a careful look at the OR draw-down. Many ORs all but close up shop after 3:00 p.m. The problem is that most surgeons now have to spend more time in the office to generate patients for surgery and need more “after hours” access to the OR for procedures. Better performing ORs now hold open up to one-third of rooms into the late afternoon to accommodate add- on cases.

3. Efficiency begins on the front end.

Case delays and cancellations are huge challenges to day-to-day efficiency. In most hospital ORs, the majority of cases begin more than five minutes late and cancellations run above three percent. The main cause is inadequate pre- operative preparation—patients arrive on the day of surgery with incomplete tests and unmanaged medical conditions.

Effective ORs have created processes for ensuring all elective surgical patients are evaluated a minimum of three to five business days prior to surgery. Surgeons, anesthesiologists and nursing staff should work together to develop standards for pre-operative testing based on surgical invasiveness and comorbid conditions. Leading pre-anesthesia testing units have developed a phone-based patient interview process driven by a patient risk assessment questionnaire.

Effective pre-op assessment processes not only reduce same-day cancellation and surgical delays, they can also dramatically improve patient outcomes. This will soon become even more important as payers stop reimbursing hospitals for preventable infections, readmissions and other quality-related problems.

4. If Toyota can do it, the OR can do it.

A hospital OR is a busy place, but busyness does not equal efficiency. Most ORs have ample opportunity to streamline and rationalize processes. Anything an OR can do to enable surgeons to get in one or two more cases a day will significantly increase profitability.

Leading ORs have made great strides in efficiency by using Lean manufacturing tools developed by Toyota and other organizations. Value stream mapping can be used to map OR processes, identify bottlenecks, spotlight waste and shrink timelines. It is especially valuable for redesigning turnover team responsibilities. One high-efficiency move for many ORs is to create dedicated nursing teams for cardiovascular services, neurology and other key specialties.

Recently, I worked with a hospital OR that used Lean techniques to redesign vascular surgery workflows. The initiative reduced average turnover time from 52 minutes to 16 minutes and increased cases per block from 2.14 to 3.17.

5. Business discipline is critical to success.

Lack of business focus is a major problem for most hospital ORs. Poor expense management eats away at profitability. Poor strategic planning undermines the long-term viability of the department.

Hospitals need to make sure the OR management team includes business expertise. Effective management teams pay careful attention to nursing paid hours versus worked hours and develop a flexible staffing matrix that maximizes worked hours per OR minute.

Supply chain management represents another opportunity. Most ORs focus on supply costs, but it is even more important to look at utilization and waste. The management team should examine surgeon preference cards and surgical packs to identify and eliminate high-waste items. Up to 90 percent of all supplies can be held on consignment, significantly reducing inventory expenses.

Mutual Benefit

Anesthesia can play a leading role in helping hospital administration understand these issues and make appropriate changes. In high-performing ORs, an anesthesiologist is appointed medical director of perioperative services and co-manages the OR with the nursing director. Together they implement key improvements that benefit both the OR and anesthesia:

  • Block schedule reforms that boost OR volume also increase anesthesia practice revenue.
  • Increasing utilization rates, decreasing case delays and cutting turnover times will help anesthesia control costs and work hours.
  • Helping the OR reduce expenses will take the pressure off anesthesia stipends.

But how will hospital administration receive these recommendations from anesthesia? In my experience, anesthesiol- ogists have every reason to expect keen interest.

High performance in the OR is critical to hospital success. In fact, perioperative services accounts for more than 65 percent of revenue in better performing hospitals. Yet most hospital administrators are daunted by the complexity of the department and are reluctant to wade too deep into OR processes and physician politics.

In this environment, administrators will welcome any outreach from anesthe- siologists who understand surgical ser- vices and are willing to help the hospital increase OR revenue and cut OR costs.

Jeffry A. Peters, MBA, is a nationally recognized leader in developing “best in class” perioperative services. He has helped academic medical centers, health systems, community hospitals and surgeon-owned ASCs raise surgeon satisfaction, grow OR volume, improve market share and increase perioperative profitability. His work focuses on aligning governance, operating systems, personnel and financial incentives to drive organizational performance. Mr. Peters writes and speaks regularly on hospital/physician integration, perioperative improvement and anesthesia contracting. He received his MBA from Northwestern Kellogg School of Management. Mr. Peters is president of Surgical Directions, LLC. He can be contacted at (312) 396-5403 or