September 18, 1998

Operative Services’ push to reduce labor costs now paying off

Operative Services' push to reduce labor costs now paying off

During the past three years Vanderbilt Operative Services has worked hard to reduce labor costs per hour of surgery by more than 12 percent, leading to a rise in productivity as well as improved financial performance.

Labor costs account for nearly 50 percent of the cost of surgical procedures, so increased efficiency in this area, in conjunction with rising case volumes, has led to a markedly improved OR operating margin, said Nancye R. Feistritzer, assistant hospital administrator and director of Operative Services.

In 1995 there was nowhere to go but up. Among the 65 members of University HealthSystems Consortium (UHC), Vanderbilt was last in overall operating room staffing productivity. For the period 1995 to 1997 Vanderbilt was the most improved, rising into the top one-fourth of the consortium in terms of labor cost per hour of surgery.

Feistritzer said increased case volumes over the past few years have occurred primarily on the inpatient side and are due to improved contracting at VUMC and to the success of the cardiothoracic patient care center and other patient care centers in cultivating referrals from the community. As for the gains in productivity, Feistritzer points to two work-redesign initiatives conducted over the past four years with assistance from national consulting firms.

"These efforts haven¹t been simply about reaching a bench mark but about examining our processes all along the way, asking if each task has to be done, and whether we¹re doing it in the most efficient way," she said. "Physicians and staff have been involved in working out the solutions."

Among the changes was a new role for licensed practical nurses, who joined teams inside the OR for the first time. Other projects affecting efficiency included the introduction of automated systems for case scheduling and instrument tracking.

The past few years have also seen improvement in OR surgeon satisfaction, which Feistritzer credits to improved staff training, greater efficiency in serving patients and strengthened teamwork.

If there¹s a cloud around this silver lining, it¹s that the gains in productivity correlate with a slump in staff morale.

"People are reeling from this," Feistritzer said. "We¹ve made progress but it¹s been at the expense of some portion of our staff morale." To address the slump operative services is reexamining staff compensation and revitalizing staff governance activities.

Labor forms roughly half of total OR costs, the other half being supplies and equipment. The OR will next turn its attention to tighter management of supply costs, said Ron Beamon, director of finance for Perioperative Services. Beamon notes that supply preferences vary, at times greatly, by individual surgeons. To help manage this variability, surgeons are being asked to work with the clinical management team to assist with standardization efforts.

For approximately 20 percent of its surgical cases, Vanderbilt uses so-called procedure-based delivery, whereby a vendor preassembles and delivers on a just-in-time basis the supplies needed for a surgical procedure. This allows Vanderbilt to lower its overall inventory and reduce its carrying costs. By this Fall, Vanderbilt will more than double its use of this supply method, and by the end of October arrive at procedure-based delivery for roughly 50 percent of surgical cases. The target is 80 percent, Beamon said.

"The goal will be to have surgeons agree amongst themselves to a standardized means of delivery care via supplies. The process of further transition to supply standardization will focus on high-cost, high-volume and low-reimbursement procedures for further clinical and economic pathway development," Beamon said.