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Running the OR Like a Business

Elyas Bakhtiari, for HealthLeaders Magazine, December 8, 2009
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Focusing on operational tactics and strategic goals can help improve efficiency, morale, and the bottom line.

Chances are that the surgical suite is the area of the hospital that brings in the most revenue, but it is also the source of a disproportionate share of overall operating costs. Managed well, the OR can be a cornerstone of a hospital's overall financial success. But in today's environment, it's easy for expenses or operational inefficiencies to get out of hand and cause major management headaches.

Surgical services have been hit particularly hard by the economic downturn, as patients have decided to put off elective surgeries or needed, but not pressing, procedures. Inpatient surgery volume dropped 2.2% and ambulatory surgery visits declined 1% in 2008, according to a report on the impact of the economic crisis on healthcare released earlier this year by the AHA. In competitive markets where surgeries have migrated to physician-owned hospitals or ambulatory surgery centers, revenue from the OR has eroded even further.

The cost side of the equation isn't much simpler. Supplies and other operating expenses cut into daily profits. Surgeons are increasingly clamoring for robots, cameras, and a whole host of other high-tech surgical devices, and hospitals are being pushed toward multimillion dollar equipment purchases that don't always have a favorable return on investment on paper.

Despite the challenges, hospitals are finding ways to maintain the OR's status as a profit center by running it like a business, and making the necessary adjustments and decisions that entails.

By the numbers
The best way to gauge the efficiency of an OR is to look at its data—not financial information, necessarily, but operational numbers. What is the average turnover time? How much variation is there in supply costs per case? What is the on-time start rate? Before these can be improved they have to first be quantified and benchmarked.

In 2004, Providence Sacred Heart Medical Center & Children's Hospital was struggling with on-time starts, OR turnaround, and scheduling efficiency, and it was taking a toll on physician relations. At least 25% to 30% of surgeons were dissatisfied with the surgery department, and a variety of turnaround initiatives had been unsuccessful in improving overall efficiency, says Carol Sheridan, RN, MOL, vice president for perioperative services at the 623-licensed-bed tertiary medical center in Spokane, WA.

Customer satisfaction is essential to any business operation, but most hospitals cater to two sets of customers: patients and physicians. Fortunately, in the OR both of the interests converge around a desire for efficient scheduling and a good atmosphere. Without those, both sets of customers may start looking elsewhere.

The situation at Sacred Heart was serious enough that a group of about 10 orthopedic surgeons left the organization to start their own freestanding orthopedic center, where they had better control of OR start times and turnovers. A group of neurosurgeons was threatening to do the same.

The turnaround finally came with the help of hard-wiring processes and IT support that allowed the OR team to monitor the activity going on in the surgical suite in real time and benchmark key indicators to performance levels from other hospitals.

"We established some target performance levels from information we had from other top 100 hospitals and really focused on those, and we tied our performance to accountability and created some real-time IT reporting tools," says Sheridan. "Our biggest problem in the past was that we tried different initiatives, but we never really followed up and measured and didn't have key performance indicators to hold us true to what the expectations would be."

The benchmarking helped create a system of accountability, and the hospital was able to improve on some key indicators: Preoperative screenings increased from 35% to 95% today, on-time starts improved from 37% to nearly 90%, and room turnover times dropped from about 30 minutes to 22 to 23 minutes across the board.

"Essentially those dashboards and the electronic information we have is displayed throughout the hospital and into the surgeon offices," says Sheridan. "If a surgeon is operating, the office staff can look at our status board and know where he is in the process—if he is closing or has not started yet—and that helps with some of their efficiencies in their office."

The changes in transparency alone helped a lot. Some of the orthopedic surgeons who initially left are now returning to the hospital, and the surgeons' satisfaction scores have improved significantly, says Sheridan.

Cutting the fat
Improving OR efficiency won't solve its financial problems alone, but the goodwill it buys from physicians can help reign in supply costs. Cost containment is a challenge for ORs that transcends recession-related dips in revenue.

Again, it goes back to the numbers. Bassett Healthcare approached supply costs by benchmarking some of its high-volume surgeries—laparoscopic cholecystectomies, bariatric procedures, and hip and knee replacements—both internally and against national indicators, says Kathleen Brooks, administrative director for anesthesia and surgical support services for the health system that covers eight counties in New York.

Initially, this data was presented to the surgical staff blindfolded, but then the physicians' competitive instincts kicked in.

"Very quickly, general surgeons said, 'I don't care if others see my data; I want to know who's doing the surgery for that low price and how they're doing it,'" says Brooks. "We had one general surgeon who is very efficient with good outcomes and does the case in less time than most and uses fewer supplies. The rest of our surgeons started monitoring how he did his cases. It ended up resulting in significant savings from their improvements."

Brooks doubled down on improving supply costs by working with the nursing staff to switch to rules-based charging. Some hospitals charge a global fee for all supplies, but Brooks wanted a more granular representation of procedural expenses.

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