How to Operate a More Profitable OR
Are you giving away your profits due to issues that cause time delays in the most valuable real estate in your hospital? Your OR? Is your OR operating as efficiently as possible?1
These are important questions in a day and age when approximately 65% of all hospital admissions are due to surgical interventions and account for more than 40% of the total expenses of a hospital.2 Nowhere in the hospital is this drive for cost containment and increased patient volume more evident than in the operating theatre. Here, costs are measured in minutes and revenue gained on a per case basis.3
OR time delays are critical to the profitability of each patient case. Taken together, seemingly small delays can result in profit erosion for your entire hospital.
Impact on Margins
The impact on margin varies greatly depending on a facility’s specific costs, charges, and reimbursement. But when you consider that over 61% of all surgical procedures experience a delay2, you may be giving away your profit margin without realizing it.
For example, let’s break down payments and profits for an inpatient total knee replacement without major complications. If your hospital participates in Medicare’s Comprehensive Care for Joint Replacement (CCJR) bundled payment model, your Medicare payment for the complete bundle of care could range from $18,000 to $33,000.5
Using an average Medicare payment of $25,5006 and applying an historical average hospital operating margin of 6%7 would yield approximately $1,530 of profit per episode.
|Sample Medicare Payment||$25,500|
|Aggregate profit margin possible based on national sample of hospitals (6% of $25,500)6||$1530|
|Aggregate cost per OR minute3||$62|
|Aggregate cost of an OR delay (8 minutes @ $62)||$496|
|Number of minor delays (8 min each) to erase the margin of one procedure ($1530÷$496=3.08)||3|
With an average cost per OR minute4 of $62, inefficiencies that cause delays can eat away at profits rapidly. In fact, for every three procedures with a delay, you’re giving one away at cost!
8 Steps to Prevent OR Delays from Affecting Your Bottom Line
Although running a busy OR is always challenging, there are steps you can take to improve efficiencies and protect margins in each surgical procedure.
- Document & Analyze
Document your delays to understand root causes and analyze trends.
Calculate your costs per procedure.
Identify your facility’s current margins by procedure.
Understand the top delays for each procedure and the time lost per delay.
Review product selection and workflow, including asset tracking and staff tracking.
- Identify & Implement
Identify areas for improvement and implement an action plan for each.
- Set Goals
Set a measurable goal to improve margins for each procedure and monitor progress.
- Involve & Communicate
Involve everyone and communicate successes!
Small Changes, Larger Profits.
Even at a modest $62 per minute, small delays can add up quickly. Likewise, small changes can reverse the scenario. Here are four examples1 of ways to run a more efficient OR and positively impact your bottom line:
- Choose Proper Gowns & Masks
Strikethrough on gowns or face masks can occur as a result of wearing the wrong protection-level for the procedure.
This can cause a 10-15-minute delay to stop, re-scrub, replace mask, re-gown and re-glove.
Cost of Delay: $620-$930
- Use the Right Wrap & Containers
Tears in sterilization wrap or damaged instrument containers require replacement sets or re-sterilization.
This can result in an 8-60-minute delay for flash sterilization or up to an hour to obtain a terminally-sterilized replacement set.
Cost of Delay: $496 - $3,720
- Track your Assets
Valuable time is lost when critical equipment or implants are not ready or not available to start the procedure.
The time impact can be a delay of 10 minutes to hours to locate and prep the required equipment.
Cost of Delay: $620 - $$$$
- Track your Patients & Staff
When surgical team members or patients are not ready, not available or need to leave during the procedure --- work will stop (or not start) until the team is complete and ready.
This can lead to a delay of 10 minutes to hours.
Cost of Delay: $620 - $$$$
Time is Money.
Addressing OR inefficiencies is one of the more productive opportunities to decrease costs and increase profits in your facility. Take the time to protect your margins.
- Van Winkle, Rachelle A., et al. Operating Room Delays: Meaningful Use in Electronic Health Record, CIN: Computers, Informatics, Nursing. 2016:1.
- Girotto, J A., et al. Optimizing your operating room: Or, why large, traditional hospitals don’t work. International Journal of Surgery. 2010; 8(5): 359-67. http://www.sciencedirect.com/science/article/pii/S1743919110000804
- Macario, Alex, What does one minute of operating room time cost? J Clin Anes. 2010; 22: 233-36. Available from: http://ether.stanford.edu/asc1/documents/management2.pdf
- Average of Medicare expenditures for surgery, hospitalization, and recovery from 2014 ranging from $16,500 to $33,000 per episode. Centers for Medicare & Medicaid Services, Comprehensive Care for Joint Replacement Model. Available from: https://innovation.cms.gov/initiatives/cjr
- Richter DL and Diduch DR. Cost Comparison of Outpatient Versus Inpatient Unicompartmental Knee Arthroplasty. Ortho J Sports Med. 2017 Mar;5(3), 2.
- Hayford T, Nelson L, Diorio A.. Projecting Hospitals’ Profit Margins Under Several Illustrative Scenarios, Working Paper Series 2016-04, Congressional Budget Office, pp. 16-17. Available from http://www.cbo.gov/sites/default/files/114th-congress-2015-2016/workingpaper/51919-Hospital-Margins_WP.pdf