Perioperative surgery in the twenty-first century—two case studies

AORN Journal, Oct, 2004 by Margaret Meyer, Earl Driscoll

According to the Healthcare Financial Management Association, the OR is both the largest revenue center and the largest cost center in a hospital, generating approximately 42% of an average health care organization's revenue and a proportionate share of its costs. (1) In the current health care environment, which is characterized by stretched finances, increased demands for data, and severe personnel shortages, (1) health care organizations can ill afford to overlook any solution that reduces OR costs, especially a solution that offers the added benefit of increased revenue. Implementing a comprehensive information technology (IT) system can be key to optimizing the OR's potential as a revenue center and minimizing its associated costs.

BACKGROUND

As health care organizations' largest cost center, the OR is an especially important target in a managed health care environment where controlling costs is crucial. Most OR departments contain costs in one of two ways: by decreasing costs or by increasing revenue.

In health care economics, cost (ie, the irreversible use of a resource) is measured by dollars spent. For health care organizations in general and the OR in particular, such fixed direct costs as capital equipment, real estate amortization, insurance, dietary services, medical records services, and administrative overhead constitute a major portion of the cost of providing health care. These costs are independent of the volume of service provided, and they exist regardless of whether the OR is being used. Perioperative departments also incur variable direct costs when they consume supplies and pharmaceuticals. These are variable costs because they increase in direct proportion to the volume of service. Regardless of whether direct costs are fixed or variable, however, the only way to decrease them is to eliminate services or facilities and equipment.

Increasing revenue is the other option for controlling costs. To increase revenue, organizations often try to improve productivity in the perioperative department to increase the number of procedures performed. Some studies have shown that the average OR operates at approximately 68% of capacity. (1) Rather than reducing expenses, underutilization of the OR actually increases them because of high fixed costs associated with labor and excess capacity. (1) According to one study, there is no evidence of an increase in the productivity of the perioperative workforce during the years. (2) The study's author concludes that the only way to substantively increase OR productivity is to eliminate down time, which averages as high as 35%. (2)

In other countries, higher productivity has been achieved by increasing patients' wait times for elective surgery. (2) When perioperative staff members have a large queue of patients, the OR manager can choose the day on which each patient has surgery, thus maximizing OR use. These long waiting times, however, which can be as long as a year in some cases, probably would not be acceptable in the United States, where two weeks is the longest wait many patients consider acceptable. (2)

Few hospitals have the luxury to choose only one of these two paths to cost containment. They must find effective ways to do both. Information technology provides a solution that can both increase revenue and decrease expenses in the OR.

PERIOPERATIVE INFORMATION SYSTEMS

The same fiscal challenges in the OR that make IT a critical tool for survival also make the cost of IT difficult for ORs to justify and difficult for organizations to afford. Information systems are not sold to patients, so they provide no direct income; however, information systems are valuable when used as tools to help organizations deliver quality care for a low price, while also complying with regulatory and payer requirements.

The most common use for information systems is automated documentation of the perioperative experience and the aggregation of procedure-specific data, but this type of usage seldom is sufficient justification for purchasing a system. In most cases, hospital administrators want a perioperative IT system to have a significant positive financial effect. In addition, many OR directors also have priorities such as

* inventory reduction,

* obtaining accurate procedure and surgeon cost data to improve standardization and reduce costs; and

* obtaining detailed clinical and financial data.

An IT system can help perioperative staff members respond to all of these priorities, while also providing such benefits as

* reduced costs for preoperative diagnostic tests and consultations--studies have shown that using an information system with decision support to improve preoperative assessment, diagnosis, and coding can provide $68 in savings per procedure and a 1.5% increase in reimbursement; (3)(p2)

* improved charge capture--improving the accuracy of medication use accounting also can improve the charge capture for medications and volatile anesthetic gases by as much as 13% and 6%, respectively; (3)(p3)