Better metrics, governance structure and logistics: the keys to maintaining financial viability in times of disruption

The technological, reimbursement and policy disruptions taking place in multiple parts of the healthcare industry are challenging hospitals' financial viability, especially hospitals' surgical service lines.

During a June Becker's Hospital Review podcast sponsored by Surgical Directions, two of Surgical Directions' company leaders — Jeff Peters, founder and chairman, and Leslie Basham, president and CEO — discussed the role that perioperative services play in helping healthcare providers maintain their financial viability and how leaders can improve performance in those service lines.

Four key insights were:

  1. COVID-19 triggered a migration of profitable services from hospitals to outpatient clinics. The restrictions imposed on hospital operating rooms during the pandemic, coupled with payers' growing unwillingness to reimburse high-priced hospital services, propelled a migration away from hospitals of highly profitable diagnostic and surgical services. These services are not likely to come back to hospitals. At the same time, labor costs are rising as multiple types of clinician specialists — including nurses, OR technicians and anesthesiologists — are finding that they can earn much more as traveling locum providers.

  1. With the right refocus, perioperative services can help hospitals sustain their financial viability. Peters detailed that historically perioperative services have been a profitable service line that has contributed to between 50 and 55 percent of hospitals' operating margins. Looking forward, to offset the costs of losing surgical volume and the higher labor costs that hospitals now bear, these services must realistically contribute to at least 60 percent of future operating margins.

    "What that requires is a fundamental shift in how we measure the operations of perioperative services," Mr. Peters said, noting that the shift must be from a focus on measuring process to a focus on measuring outcomes. He gave as an example OR block utilization, which is generally considered satisfactory if it reaches 75 percent and for which process efficiency is measured in terms of on-time first-case starts and turnover time.

    However, a more relevant metric to support moving the utilization target to 80 percent would be case time. This metric tracks the number of procedures completed in a given OR block, with the goal of incentivizing OR teams to complete one or two more procedures than they would normally do, effectively incentivizing outcomes and performance.

  1. Tracking performance must be accompanied by creating the right governance structure. To drive performance through a new outcome metric such as case time, it is necessary to have a multidisciplinary governance structure where the surgeons who will be measured on this new metric see themselves as represented in the process of establishing the metric.

    In the case of perioperative services, this means a governance body composed of nurses, physicians, anesthesiologists and administrators. "You can change the metrics, but how do you get that to be part of the fabric and culture of the organization?" Ms. Basham rhetorically asked. She offered as an example an inclusive governance structure giving nurses opportunities to co-design their total compensation and benefits package, improve their work-life balance and take part in professional training and development.

  1. Tracking performance must be supported by creating the right conditions. At a practical level, creating the right conditions for improved performance in perioperative services may include extending OR hours and designating some Saturdays as "Super Saturdays" to tackle case backload.

    Creating the right conditions also includes reducing same-day cancellations by improving patient education and engagement with regard to pre-anesthesia testing and preparing for surgery. Ms. Basham shared that several of Surgical Directions' provider partners have reduced same-day cancelations to just one or two percent, whereas the average level for most hospitals is close to five percent. "The opportunity cost is millions of dollars from revenue, but also [from avoiding] a huge amount of patient and surgeon anxiety when they think they're going to get that surgery that day and then they are not," she added.

To compensate for the loss of surgical and diagnostic revenue due to changing market conditions, health system leaders must rethink what metrics are most relevant for optimizing efficiency in perioperative services and provide meaningful support to those teams.

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