Tuesday, March 14, 2017

Your'e OR is bleeding ....No, not your patients, your OR!

I have completed a lot of projects in the surgical area in the last 18 months and I am continually amazed regarding how much potential profit is being wasted in this area – I’m talking real money, well into six or seven figures. Given that fact, you would think that there would be much more of a profitability focus in the OR.  Maybe the focus is lacking because most of this margin loss is hidden because in spite of considerable inefficiencies most OR’s still show a profit but they could be so much more profitable! There is a reason why surgeons often become partners/owners in independent, for-profit ambulatory centers, they are incredibly efficient and make lots of money. Yes, I know,  a Hospital OR is not the same as an ambulatory center, they don’ have the super sick patients, the complex cases, the trauma cases, etc……but does that mean there is no room for more efficiency in a Hospital OR?
Why doesn’t the OR get the same attention regarding efficiency projects that other Hospital departments have received? Now don’t get me wrong, every department is “beat up” when they have excess OT or appear non-profitable but on the whole, surgery departments get a lot of efficiency lip service regarding the need to improve performance but little pressure to execute. Maybe it’s because the Hospital executives see that area as profitable so why rock the boat. Maybe it’s because surgical services is complex with lots of moving parts and let’s face it, most Hospitals have poor analytical abilities - If you can’t measure it you can’t fix it. I’m not sure of the reason but I suspect the issue will soon get a lot more attention.
My experience is that the average utilization (when properly computed) of most OR’s is around 55%-65%. When you are dealing with such a high fixed cost area you have to ask why such a low utilization is acceptable. Let’s use a restaurant analogy:
I have a 100 seat restaurant, in order to cover my fixed cost and keep my core staff from leaving I have a weekly expense of $10,000 and I usually make gross revenue of $300 per table each week that those tables are occupied. If they were occupied 100% of the time I would have gross revenue of $30,000 and thus a margin of $20,000. Of course 100% is not possible but 80% is possible so at 80% I would make margin of $14,000 a week versus $9,500 a week at 65%, over the course of a year that means I lost $234,000 in margin!  If I was running that restaurant I would do one of two things: Make sure I filled as many tables as possible or move to a 60-70 seat facility and cut my costs. Most community Hospitals are generating at least $1M (many make much more) in margin so using my restaurant example they would make an extra $420K or 42% more margin each year !!!

I tend to see the following inefficiencies:
>Underutilized OR suites. On the surface they don’t look underutilized because there is so much surgical shuffling and staff re-allocation that the under-utilization is pretty well hidden – the place looks busy.   
>High staffing and operational costs to accommodate the whims of surgeons who cannot or will not treat their elective cases like electives (pre-planned well in advance) and instead treat them like emergencies. Too many add-on cases, not efficient or necessary. On average I see about 40% of elective cases being scheduled 1-3 days ahead, it should be 20% or less.
>Poor case sequencing: Cases are scheduled helter-skelter with little thought to setup and breakdown efficiencies or creating consistent staffing patterns.
>Poor Timeouts: This creates greater liability and chance of Medical error or delays caused by poor staff awareness.  The 2 minutes utilized for an average TIMEOUT actually ends up savings time although many surgeons and staff perceive it as a waste of time.
>Late starts: My number one pet peeve. Mostly due to surgeons, anesthesia, or staff being late, there is no excuse and it is very correctable. 
>Inefficient setups and turnovers: Besides the obvious time for setup, breakdown, and cleaning, there are incomplete case carts, incorrect preference cards, and poor equipment readiness. All correctable yet most OR’s do not do a good job in this area, causing six to seven figure waste. 
Do OR’s ignore the above inefficiencies? Of course not, almost every OR has many improvement initiatives going on but few are successful and even when gains are made they quickly fall apart and are not sustained. OR Directors are in high demand because most get burned out after 3-4 years, they are caught between a rock and a hard place - Surgeons who want everything their way no matter what the cost or efficiency and Administrators who are after them to cut costs (without angering the surgeons). My hypothesis about the problem: Most OR Directors are hard-core nurses who are highly accomplished clinicians, they never asked for help doing their clinical duties and they sure as heck don’t need help to fix the business issues of an OR. The problem is that they are clinical experts and not process experts (even if they have taken some lean courses) and focusing on too many things dilutes the efforts in both areas. The truth is that bringing in process expert help is expensive and “technically” the initiatives can be done internally, but in reality these efficiency initiatives are not done well, often do not sustain, and the process takes too long (the OR staff does have a “day job”). Payback on this kind of project is often 3X or better but beyond the financial payback the change in practice and the building of team-work is worth much more than the hard financial gains. As bundled payments take hold, as in-patient length-of-stays shorten, and as more surgeries move to non-hospital surgery centers profits will be extremely squeezed. We know that all change takes time so Hospitals have to act now if they want to change behaviors and preserve one of the few profitable areas of Hospital operations.  

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