Innovative Financial Strategies for Surgery Centers: Key Strategies and Solutions

Innovative Financial Strategies for Surgery Centers: Key Strategies and Solutions

by: Traci Albers, CEO and Allison Stock, COO

Surgery Centers are integral to the healthcare industry, offering efficient and cost-effective outpatient surgical care. To thrive financially, Surgery centers must adopt strategic approaches that optimize revenue, control costs, and enhance operational efficiency. Here, we explore actionable solutions to maximize financial success in surgery centers, focusing on revenue optimization and cost management.

Optimizing Revenue Streams

1. Diversify Service Offerings

Expanding into high-demand specialties such as orthopedics, cardiology, and total joint replacements can significantly boost revenue. Incorporating diagnostic services like imaging and lab tests enhances patient care and adds to the revenue stream. Surgery Centers should regularly assess market demands and explore adding new specialties that promise higher reimbursements.

Conducting a market analysis to identify gaps in specialty services within your region can help strategically expand service offerings. Partnering with specialists to introduce these high-demand services ensures that all regulatory and operational aspects are addressed.

2. Strengthen Payer Contracting and Reimbursement

Negotiating favorable contracts with a broad network of insurance providers is crucial. Surgery centers must comply with Medicare and Medicaid regulations to maximize reimbursements and minimize revenue loss due to claim denials. Understanding the intricacies of these contracts and continuously engaging with payers can lead to better financial outcomes.

Regularly reviewing and renegotiating payer contracts to reflect current costs and service values is essential. Employing a dedicated team or consultant to handle payer relations ensures all billing practices comply with the latest regulations.

3. Optimize Specialty Mix

High-revenue specialties such as orthopedic surgeries often yield greater net revenue per case. However, balancing these with lower-revenue procedures like pain management can ensure full resource utilization and maintain a steady revenue flow.

Utilizing data analytics to determine the most profitable specialties and allocating OR time accordingly can help maintain operational flow without compromising profitability. Ensuring lower-revenue cases fill scheduling gaps can be an effective strategy.

4. Case Volume Growth

Increasing the volume of cases a surgery center handles is a direct way to boost revenue. Expanding service offerings, optimizing scheduling, and improving referral networks can achieve this.

5. Revenue Cycle Impact

Maintaining a low average revenue days in accounts receivable (A/R) and minimizing the percentage of A/R over 90 days can improve cash flow. Accurate coding, timely billing, and aggressive denials and appeals management are essential to an effective revenue cycle management strategy.

Key areas to focus on for improving revenue cycle impact include:

• Coding Accuracy: Ensuring accurate coding to prevent denials and reduce bad debt.
• Registration Denials: Reducing registration denials to minimize bad debt.
• Prior Authorization & Medical Policies: Ensuring compliance with prior authorization and medical policies.

Managed Care Impact:

• Contract Negotiations: Engaging in effective contract negotiations to secure favorable terms.
• Charge Master Optimization: Regularly reviewing and optimizing the charge master to ensure appropriate billing and maximize reimbursements.

Cost Management Strategies

1. Efficient Staffing and Salary Management

Labor costs constitute a significant portion of surgery center expenses. Efficient staffing models and regular reviews of productivity and staffing levels can reduce costs. Implementing best practices for staffing ensures that salary expenses are aligned with revenue.

Conducting quarterly staffing audits to align staffing levels with case volumes and implementing flexible staffing schedules can enhance efficiency. Cross-training staff to cover multiple roles reduces overtime costs and enhances operational flexibility.

2. Supply Chain Optimization

Effective supply chain management is crucial for controlling costs. Regular reviews of case costing and preference cards can identify cost-saving opportunities. Negotiating with local vendors and leveraging group purchasing organizations (GPOs) can further reduce supply costs.

Establishing a supply chain committee to review spending on a quarterly basis and engaging in bulk purchasing agreements can reduce per-unit costs. Negotiating better terms with suppliers also contributes to cost savings.

3. Monitor Fixed and Variable Expenses

Regularly tracking and optimizing both fixed and variable expenses is essential. Ensuring optimal room utilization and minimizing turnaround times can enhance efficiency and reduce overhead costs.

Implementing software solutions to monitor room utilization and turnaround times helps streamline operations. Scheduling maintenance during non-peak hours avoids disruptions and enhances efficiency.

Managing Key Expense Categories

Key expense categories that surgery centers need to manage effectively:

1. Staffing & Salaries: Ensuring efficient staffing models and regular productivity reviews.
2. Drugs, Implants & Supplies: Optimizing supply chain management and negotiating with vendors.
3. Rent Expense: Monitoring and negotiating rental agreements to control costs.
4. Anesthesia Costs: Managing contracts and usage to ensure cost-effectiveness.
5. Equipment Repair Service Agreements: Regular maintenance and negotiations to reduce service costs.
6. Linen: Efficient management and potential outsourcing to control expenses.
7. IT: Investing in cost-effective technology solutions and maintaining efficient IT operations.
8. All Other: Regular audits and reviews to manage miscellaneous expenses effectively.

Enhancing Operational Efficiency

1. Maximize OR Utilization

Efficient operating room (OR) management is critical for financial success. Metrics such as Total Voluntary Block Time Releases and Case Backfill Rate help ensure that OR time is utilized effectively, enhancing capacity and throughput.

Using advanced scheduling software to optimize OR block time allocation and regularly reviewing block time utilization allows for necessary adjustments based on demand and surgeon availability.

2. Effective Revenue Cycle Management

Maintaining a low average revenue days in accounts receivable (A/R) and minimizing the percentage of A/R over 90 days can improve cash flow. Accurate coding, timely billing, and aggressive denials and appeals management are essential to an effective revenue cycle management strategy.

Investing in training for coding and billing staff to ensure accuracy and implementing a robust revenue cycle management system that includes automated reminders for follow-ups on outstanding claims is crucial.

Key areas to focus on for improving revenue cycle impact include:

• Coding Accuracy: Ensuring accurate coding to prevent denials and reduce bad debt.
• Registration Denials: Reducing registration denials to minimize bad debt.
• Prior Authorization & Medical Policies: Ensuring compliance with prior authorization and medical policies.

Managed Care Impact:

• Contract Negotiations: Engaging in effective contract negotiations to secure favorable terms.
• Charge Master Optimization: Regularly reviewing and optimizing the charge master to ensure appropriate billing and maximize reimbursements.

3. Data-Driven Decision Making

Utilizing data analytics to track key performance indicators (KPIs) such as contribution margin, net profit margin, and asset utilization provides actionable insights. This data helps in making informed decisions about service offerings, pricing, and operational adjustments.

Establishing a dashboard to track KPIs in real-time and using predictive analytics to forecast trends allows for proactive adjustments to operations and financial strategies.

Enhancing Patient Experience

1. Focus on Patient Satisfaction

High patient satisfaction leads to repeat business and positive word-of-mouth referrals. Engaging with patients, collecting feedback, and continuously improving the patient experience are vital for long-term success.

Implementing patient satisfaction surveys and feedback mechanisms helps in making tangible improvements in service delivery and patient care protocols.

2. Technology Integration

Investing in advanced medical technologies, such as electronic health records (EHR) and telemedicine, can improve service quality and operational efficiency. These technologies also enhance patient care and streamline administrative processes.

Transitioning to a comprehensive EHR system and exploring telemedicine options extends the reach and convenience for patients. Ensuring staff are trained on new technologies maximizes their benefits.

The Path Forward

Maximizing financial success in surgery centers involves a multi-faceted approach that includes optimizing revenue streams, managing costs efficiently, and enhancing operational performance. Surgery centers can achieve sustainable growth and profitability by focusing on high-demand specialties, negotiating favorable payer contracts, and leveraging data-driven strategies. Continuous improvement in patient satisfaction and technology integration further strengthens their competitive edge in the healthcare market.

Implementing these strategic solutions enables surgery centers to navigate the complexities of the healthcare industry and position themselves for long-term financial success. By staying adaptable and proactive, surgery centers can continue to provide high-quality care while maintaining robust financial health.

Contact us today for more information on how SMP can assist your Surgery Center.