Few hospital leaders escaped the budget devastation brought on by COVID-19. Now, as we emerge into a new era, many leaders feel pressure to cut costs in a well-intentioned attempt to mitigate financial losses. But, what if reducing expenses is not the most effective way to improve financial margins? What if a different course of action would allow hospitals to achieve a more healthy – and profitable – financial state?
Why do hospitals–which specialize in diagnosing the sick and charting a course to recovery for patients often struggle to diagnose the cause of financial pain and achieve organizational health?
Very frequently, when faced with complex financial problems, hospitals tend to focus on reducing expenses rather than growing profitability. Perhaps this is because the former seems easier than the latter. But, the real solution often is more nuanced.
In the same way that the cost-avoidance of spending $200 on a fuel pump might save on the overall expense of a car, the vehicle simply will not run without it. Similarly, failure to optimize anesthesia in a hospital or ASC throttles back the performance of the entire surgical “engine” – and thereby chokes the critical lifeblood of revenue which drives the entire organization.
Consider the following scenarios. The leaders at Hospital A, who are focused on reducing expenses, pursue the actions on the left side of the table. On the right side are the actions taken by the leaders at Hospital B, who are focused on improving efficiency and improving revenue, and profitability.
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Hospital A: COST REDUCTION FOCUS |
Hospital B: REVENUE IMPROVEMENT FOCUS |
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Lays off staff and cuts anesthesia salaries |
Uses variable anesthesia staffing models that flex up or down based on hospital and patient needs |
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Closes half of ORs at 3 and all trauma ORs by 5 to minimize costs |
Implement sound OR optimization model |
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Schedules procedures in accordance with current established recovery times |
Researches post-operative strategies to reduce recovery time and increase surgical throughput while maintaining clinical and patient excellence |
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Generalist handling anesthesia insurance reimbursement |
Partners with an anesthesia billing expert to maximize insurance reimbursement |
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Hospital A Results: NET $2MM “SAVED” |
Hospital B Results: NET $20MM MARGIN IMPROVEMENT |
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CEO sees an increase in employee attrition, reduced patient services, and a decrease in clinical quality and experience – but “saves” $2MM in cost. |
Successful CEO offsets budget shortfalls by optimizing the ORs. As a result, they recruit new surgeons, expand services to the community, improve culture, increase quality, and improve hospital profitability. |
Is it better to reduce surgical services and cut $2mm, or to expand profitable surgical services and add $20mm in profitability? The answer is clear; however, it’s admittedly not as simple as these lists make it seem. However, the concept, when implemented, is nevertheless true!
“Providing inadequate anesthesia resources will hamper the ability for a hospital organization to grow appropriately or create tense competition for the use of those services within departments. Restricting services restricts growth. It is a self-fulfilling prophecy.” Cervantes says.
Since anesthesia service is integral to a well-run and efficiently utilized OR, a proactive, well-aligned partnership in this area is critical. Dr. Cervantes believes Premier Anesthesia brings this and more to the partnership with Kadlec.
“For me, Premier Anesthesia is not only an anesthesia staffing company but also provides consultation services, quality anesthesia billing, recruitment information, financial breakdowns, leadership, and information on the anesthesia market as a whole,” he explains. “The services that Premier Anesthesia provides allow our anesthesia team and our hospital to make sound business decisions now and more importantly, with the future in mind.”
At Premier Anesthesia, we partner with your hospital and ASC to manage the OR as a profit center, maximizing the revenue lift brought by expanding services and growing surgical throughput. We align with your goals — while providing high-quality clinical care, exceptional customer service, and sound practice management — to help you achieve your mission.
Learn how to turn pain points into profits. Contact us today.