1. Surviving the Loss of Revenue with an Advanced Approach to Cost Management Debbie Mack, VP of Operations, NSH

2. OBJECTIVES Current and Future Reimbursement Trends Review the Material Management Basics Vendor Control Supply Contract Management Financial Review Implant Specialist

3. CURRENT ENVIRONMENT Planned reduction in Medicare reimbursement - Sequestration Uncertainty in MediCal reimbursement Reduced payments in Workers Compensation No increases from insurance companies The potential of additional cuts mandated by both the state and federal governments Shift in employers to providers and consumers of healthcare with higher co-pays and deductibles Below budgeted volumes Significant shift in overall payor mix

4. TRENDS AND THE FUTURE Surgery Centers must standardize in order to be able to continue serving current populations within the fixed payor arena Fixed payor population is increasing under the Affordable Care Act and the HealthCare Exchanges Many of our hospitals and hospital systems are standardizing Must maintain cost for transparency and future reimbursement methodologies Clinical supply/implants costs increase every year The second highest expense in the surgery centers

5. BACK TO THE BASICS Partner with GPO Local/National vendor contracts Choose a Primary distributor Standardize Supplies Create a Supply formulary/item master Reprocessing

6. GPO CONTRACTS Opportunities: ˗ Medical Supplies ˗ Contracted services ˗ Office supplies ˗ Janitorial supplies Distributor must link you to your GPO contract Monitor contracts with expiration dates Re-evaluate often the Tier levels often

7. ANNUAL REVIEWS Review all purchased service expenses at least annually ˗ Compare pricing with ECRI ˗ Examples − Biohazard Contracts − Linen Contracts − Preventive Maintenance Contracts − Telephone/Internet Generic Medications Post PAR levels Custom Packs

8. WHAT’S HAPPENING IN YOUR OR? Vendors up-selling Reps borrowing supplies/implants Opening implants for physicians Storing the rep’s JUNK After-hours socializing

9. VENDOR CONTROL Vendor Credentialing Services ˗ Vendormate ˗ Reptrax ˗ VCS Regulatory requirements Loaner Policy

10. VENDOR CONTROL Allowed only by the request of the surgeon Wears a badge and checks in daily Required to wear a different colored surgical hat Follows your vendor policies Unapproved Products Product Evaluation Committee

11. SUPPLY AND IMPLANT MANAGEMENT Material Manager should be a detailed-orientated employee Print preference cards with cost and update often Pull PRN items aside in a different bucket or baggie Maintain high cost implants as consignment Centralize supply ordering Track expiration dates on implants Minimize purchase orders to reduce shipping costs Monitor reprocessing efforts Mark all high cost supplies and implants with the cost

12. COLOR CODING PRICE RATING

13. SUPPLY CONTRACT MANAGEMENT Negotiate Vendor contracts locally and nationally ˗ Implant RFP’s ˗ Maximum pricing on implant construct costs ˗ Freight/shipping charges Consolidate vendors Commodity Implants ( no middle man) Rebate/Early pay options Exclusivity /Volume Discounts ECRI comparison for all equipment and most implants Contract Compliance

15. FINANCIAL REVIEWS Review supply and implants costs monthly ˗ Identify trends – month to month and to budget ˗ Compare as a percent to net revenue ˗ Maintain a savings log and reward for improvements ˗ Report savings to your Governing Boards ˗ Validate Charge Capture ˗ Identify Low Margin Cases and de-select if possible ˗ Monitor Inventory Days

16. SAMPLE SUPPLY FINANICAL TRENDS ( BUDGET)

17. SAMPLE SUPPLY FINANICAL TRENDS ( YTD)

18. PRODUCT EVALUATION COMMITTEE Physician involvement and identify physician champions Case costing monthly by common CPT codes and share results with physicians Agenda Items: ˗ New Service lines ˗ New supplies and implants ˗ Capital equipment requests and needs ˗ Associated savings of consolidating vendors

19. IMPLANT SPECIALIST Dedicated Person Implant Inventory Management Invoice Review Case Costing Analysis Peer to Peer Networking Vendor Compliance Physician Education Physician Dashboards

20. IMPLANT SPECIALIST ROLE Monitor the presence of Vendors in operating rooms Ensure Vendors complete invoice with pricing and signature of surgeon Specialist review for savings opportunities Prevent up-selling (Demand levels, drill bits, bone/tissue size) Analyze contribution margin and identify areas for re- negotiation or like alternatives Negotiate Cap Pricing with Material Manager Maintain Consignment Inventory with current contracts Monthly Savings Log and Physician Education

21. SAMPLE MONTHLY SAVINGS LOG Offering less expensive implants Monitoring and charging for all implants Not charging for removed hardware Vendors up-charging for shipping costs Adding drill bits to bill only invoices Opening non-approved supplies Negotiating on site reduced pricing for implants Average savings by implant specialist is $20,000

22. If you are not saving money, you are losing money!