Effective Case Costing for your ASC Jason Beam, RN, BSN CASC Sr. Vice President of Operations Ambulatory Surgical Centers of America

Understanding Case Costing Case cost accounting is essential to the survival of your ASC. Understanding the profit margins of a procedure between actual Total Cost vs. Reimbursement is crucial. Since many ASCs have surgeons that are invested, MDs are usually more open to looking at cost saving opportunities. Accurate case costing educates the MD’s to these opportunities Case Costing help with your negotiations with Payers and Vendors

Benefits of Case Costing Budgeting and financial forecasts can have a more accurate basis since most surgery scheduling systems are coupled with surgeon preference cards. Be careful in relying to heavily on preference cards for your case costing, as they typically do not reflect all supplies that are used during a case, specifically expensive prosthetics / implants.

Benefits of Case Costing The capturing of complete supply usage in the operating room is uncommon in most facilities around the US. Detailed supply usage at the case level provides the basis for remarkable levels of detailed costing analysis. If you are not currently capturing supply usage, all is not lost.

Benefits of Case Costing Accurate preference cards coupled with costing data can be an alternative tool for procedure / case costing. Although subject to some deviation from actual resources used, preference card contents can help in quantifying the fiscal differences between the supplies used when comparing services, procedures, and surgeons.

Benefits of Case Costing With success in determining your case / procedure costing, you will be equipped with invaluable information in making decisions regarding capital acquisitions, block allocation, and physician recruitment. If a physician tends to use much more expensive supplies than his peers on the same clinical procedures, case costing will enable you to share such details with the physician and the ASC board.

Benefits of Case Costing Educate physicians and staff about the cost of doing business. Modify practice patterns of physicians. Helps with negotiation of supply cost. Helps with negotiation of Implant Cost. Helps with negotiation of payer payment.

Getting to the Bottom-line Case Specific Supplies plus Overhead cost equals Total Cost Receipts -Total Cost Net Revenue (Bottom-line)

Where to Start the Essentials of Case Costing Inventory entry Correct pricing. Correct usage units of measure. Correct unit cost of items. Preference Cards Developing accurate procedure preference cards Capturing as much of the cost as possible Continual review and updating. TRASH IN EQUALS TRASH OUT!!!

Essentials of Case Costing Accuracy of supplies used and cost Preference cards are printed and follow patient through admission. All personnel caring for patient document supply and medication usage, including anesthesia. A reconciliation is performed after the admission in your patient tracking software. If no software, then tracking must be done manually.

Case Specific Supplies  Disposables  Implants  Equipment Rental fees  Medical Gases  Medications  Linens  All miscellaneous patient supplies  Everything used that has a cost should be included on the preference card

Some Pitfalls A common mistake is translating the usage unit of measure to the quantity per UOM in the Inventory Module. Incorrect costs in the Inventory Module. Not capturing all supplies that are used. You must include supplies opened but not used unless they can be reprocessed for use on another case

Overhead Costs Salaries Utilities Rent Interest Billing Charges/ coding/transcription fees Repair and Maintenance Insurance Bank fees Cleaning Taxes Consultants Legal and Professional fees

Determining Your Overhead Cost Per Case The Formula Step 1 Run a P&L on an Accrual Basis for Time Period in question From Total Expenses, subtract the following items: Medical Supply Expense Interest Expense Depreciation (if applicable) Amortization (if applicable) The Result will be the Overhead Costs for that Time Period

Determining Overhead Cost Per Case The Formula Step 2 Determine your total OR minutes for the same time period as Step 1 Take your overhead Expenses divide by your total OR minutes This will give you a per minute cost Multiply the per minute cost by the case specific OR room time Total Overhead Expenses/ Total OR minutes for the month equals the per minute cost

Total Cost Per Case Total Cost for each case is simply adding the Overhead Cost per case PLUS the Supply Cost for Case The Profitability for that case will be the Net Revenue (collections) minus the Total Cost.

Review Your Work Look for supply and overhead costs that are unusually high. Causes Incorrect data on preference cards. Case History module not reconciled. Incorrect times entered into Case History. Only share data that is 100% accurate with your board

In Review Accurate case costing is essential to your ASC Educate all staff on the importance and what role they play in ensuring we capture all associated cost. While it may appear time consuming, once a system is implemented it should only require about 2-3 hours to prepare your report. Work with your software techs to determine the reports you will need. Present a professional, accurate report to your board each month.