Strategies for managing nonacute procedure profitability in PPI service lines

And though ambulatory surgery centers were not designed to do complicated surgeries like hip implants or shoulder arthroplasty procedures, they’re being asked to.

With such significant growth in volume and complexity, many in healthcare are asking: How will we manage profitability within the nonacute space?

In a recent panel discussion at the 2024 Vizient Connections Summit, Allen Passerallo, Vizient VP, category management, orthopedics, discussed this very topic with Rick May, Vizient senior principal and former orthopedic trauma surgeon, Keith Knag, director of national ambulatory surgery and accounts for Stryker Orthopedics, and Ozzie Delgado, COO, Healthcare Outcomes Performance Company.

Passerallo: Dr. May, let’s start with you. What strategies do you use to optimize operational efficiencies and reduce costs while maintaining a focus on quality?

May: That's a great question. I think the biggest challenge we've faced in the last several years is variability. We've been in a lot of ASCs, and we've never found two that operate the same. So, we spend a lot of time assessing a hospital. Where are you today? Where are the variation points across the board? Whether operational, quality or supplies, we aggressively address those to drive down variation wherever possible.

Keith, let's turn to you. From a supplier perspective, you may have certain programs that work with ambulatory surgery centers on driving efficiencies and cost reduction, again focused on quality. Can you expand?

Knag: At this point in time, just about every major med tech company has a dedicated ASC resource, and while there's nuance to everyone's program, the basic premise is basically the same: You lease equipment from your vendor of choice and utilize their disposables and implants to offset the capital costs. Most of these programs come with a delayed capital payment schedule that will coincide with the ramp up of cases, which allows a facility to recognize revenue before any potential capital payment is due.

We also look at enterprise contracting, and what it would mean to have as much of a sole-source environment as possible — determining which vendor to align with that can address as much of what you are doing as possible. This provides efficiency, inventory on the shelves, and a learning and understanding of the various systems that different surgeons might want to use. It's a lot easier said than done — but if we're working together to educate our surgeons on the benefits this provides, we can get alignment in a mutually beneficial relationship.

Do you see any challenges with compliance once you have that agreement with an organization?

Knag: So, it all depends on the mix of capital, right? In a new build, especially when you have a heavy physician ownership, the physician ownership team is going to have a construction loan, an operating loan and a capital lease — or a capital loan from somewhere, whether it's through a vendor or a bank. When we design these, we're going through this with the surgeons, with the facilities, with the IDNs to map out what the case pro forma looks like. So, you must have forward-looking surgeons who understand they need to bring the right cases to their surgery centers, as well as ensure they're holding their own feet to the fire to generate revenue. In terms of compliance for that — if we build out the model correctly, we're allowed to see what an enterprise contract would look like, and the case pro forma is performing as expected — then we will fund that capital.

What kind of role do you see variation reduction playing when it comes to a supplier service perspective or an implant standardization program? How does that play into your current day-to-day operations, and are your physicians incentivized from a cost-quality metric standpoint?

Delgado: We all know that variability is a draw against quality. The more you can standardize the delivery of care, the higher your chances of delivering a quality product on the back end.

When we talk about variation reduction, it's a real challenge to get the players involved. For a surgeon, time and money are exactly the same. So, if you can do something that helps them monetarily or gives them more efficiency, that’s going to help with buy in.

We don't necessarily say we're going to go with one vendor or one industry partner. We ask, “What is going to be the best vendor industry partner that we want to ultimately target?” Then we're going to sit down with them and say, 'We're going to aggregate and standardize a high-utilization, and tie in, a high-compliance rate." So, if we could go ahead and tie in a high-utilization, high-compliance rate of vendor X, agnostic to vendor X, I'm going to have the ability to do two things. No. 1, I can ensure quality delivery of care. But then from a procurement contracting side, I could ultimately gain the lowest possible cost-per-case utilization on whatever implant that I end up using. So, I'll tell you that those components of standardization drive continued value.

Let's talk a little bit about technology and the role it plays in profitability. Keith, from a supplier's perspective, you have some unique strategies around robotics in the acute and the ambulatory space. Can you talk a little bit about that?

Knag: Robotics can provide accuracy in implant sizing as well as precision in surgery. If we know ahead of time the size of the implant, it can reduce surgical time and the amount of trays needed. That maximizes ASCs’ and reduces potential surgical time and sterilization of trays needed per case. From a marketing standpoint, we know that patients are more educated than ever about the procedures they're having, and the technology that's being used.

Robotics can be a force multiplier in bringing patients to your ASC, and as you bring in robotics, it's paramount that you evaluate reimbursement resources that exist for CPT coding that is applicable to certain robotics platforms. The other side of the technology equation in my mind is data — the data you collect as a facility is going to be paramount to your future revenue — and AI and robotics can certainly help with some of that.

Do you want to talk to us a little bit about that, and how you utilize that from a profitability standpoint?

Delgado: It's a good question. I think everybody knows that provider practices have their own nuances associated with how they schedule cases. So, how do we incorporate decision support tools in the physician's office that allows the ability to make that decision and determine the appropriate site of care to deliver this case based off clinical scoring methodology?

There should be some sort of methodology that allows us to take that decision, put it into a scheduling component that incorporates a rigorous process where we now use the patient’s clinically validated data to determine the most cost-effective location for their surgery. Ideally, this is going to be an AI tool that sits on top of the EMR and will automatically do that for you.

Dr. May, do you want to talk a little bit about maybe some technology that you utilize with your customers when you’re helping them from a process improvement and quality standpoint?

May: You need to have good data in multiple locations throughout this process, and that can come from the EHR or other types of data abstraction — but you need to have a way to evaluate your patient from a clinical standpoint.

We need to understand the clinical issues that are likely to cause the patient problems during surgery, while they're in the ASC post-surgery and after they go home. The second piece is to track on a case-by-case basis everything that's happening from a supply and equipment standpoint in the operating room.

The challenge is to consistently collect that data and enter it into your system. If you don't collect good data, then it becomes useless — it's the “same garbage in, same garbage out” idea. The last piece is to track all the financial decisions that are being made, preferably on a daily basis, to provide real-time feedback to your investors and physicians to achieve maximum performance for your ASC.

Learn more about PPI strategies and technology advancements in the Vizient Medical Device Tech Watch or read more about orthopedic ambulatory surgery centers.