In 2008, the Centers for Medicare and Medicaid Services (CMS) initiated a new payment structure linking ambulatory surgery center payments to hospital outpatient departments. While it worked well initially, ASC reimbursements over time have not kept pace with rising healthcare costs. Today, ASCs on average are paid 59 percent of the HOPD rate for Medicare patients, down from over 80 percent just a few years prior. Combined with a competitive provider landscape overall, shrinking reimbursements mean there are limited opportunities for ambulatory surgery centers to improve their cost structures, enhance profit margins and create real long-term value for facility owners. For many ASCs, building a more effective supply chain often represents the best opportunity for maximizing profit margins on variable inventory costs. In a recent session at the Becker’s 13th Annual Spine, Orthopedic and Pain Management-Driven ASC Conference + The Future of Spine, I walked through many aspects of Regent’s innovative approach to developing a more efficient ASC supply chain, including:

ASC-GPO partnerships

Because surgery centers often lack the purchasing power of a state-wide hospital system, many ASCs partner with group purchasing organizations. ASC-GPO partnerships offer a surgery center buying power when negotiating with vendors, and help small surgery centers gain access to more competitive pricing. Partnerships are highly successful when implemented and managed properly. In order to maximize partnership benefits, one surgery center typically pairs with a single GPO, resulting in the aggregation of purchases flowing through one GPO. While secondary and tertiary GPOs fill in gaps in coverage, it is important to pair with one primary GPO. GPOs assist ASCs in identifying conversion opportunities, such as implants, medical supply and pharmacy products. Such opportunities are identified with the end user in mind.  Facilitating physician independence and encouraging the use of cost-effective products with clinically equivalent outcomes are core components of any successful partnership.

Communicating supply chain goals

One of the biggest challenges to optimizing an ASC’s supply chain is navigating physician brand loyalty. While many physicians prefer specific medical supply products, there often are suitable replacements available for a significantly lower cost. When identified, substitute supply opportunities should be clearly communicated to physicians and concerns involving substitute products addressed. The financial impact of the replacement device also should be clearly articulated to the ASC’s decision makers. Once a replacement product is introduced, it is important to gather and analyze staff and physician feedback. Evaluating physician feedback leads to greater precision when selecting future vendors. When replacement products cannot be identified, it’s also important to work closely with vendors to create custom contracts that may reduce costs. Initiating and building relationships with new vendors is a key component of securing equipment deals. Part of relationship building involves bringing vendors in for on-site training with physicians. Trial labs in which physicians feel and test products help the staff envision how new equipment would function in a real-life clinical setting.

Case costing

Case costing analysis allows us to learn about the underlying drivers of our operational performance on a case-by-case basis, take actionable steps to improve performance based on our findings and achieve real economic impact. Transparency initiatives in the healthcare industry are resulting in the wide availability of data sets involving clinical, operational and financial operations of ASCs. Gathering data around trends and opportunities allows an individual ASC to measure and compare its costs and utilization against local facilities and ASCs around the country.

Inventory optimization

Implants, devices and medical supplies are second biggest expense ASCs face after labor costs.  Carrying more inventory than necessary ties up a facility’s working capital and may put an ASC in a cash crunch. Tracking key performance indicators such as inventory turnover and days in inventory also helps with maintaining supplies. A good inventory management system not only helps actively monitor prices and target discrepancies, but also leads to bottom-line improvements. ASC supply chain management is no longer just about medical equipment—technology now factors into the equation. Surgery centers should utilize specialized software or supply chain platforms to track all inventory. By using these systems, management can verify savings, identify mistakes and automate as many once-manual processes as possible. For more information about ASC supply chain management, please contact Christine Henry Musa at