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OR Cost Scorecards Help Reduce Healthcare Supply Chain Costs

Surgical departments reduced healthcare supply chain costs by almost 10 percent in a year after implementing an operating room cost scorecard program, a study found.

By Jacqueline LaPointe

- Healthcare supply chain costs dropped by 6.54 percent per case in surgical departments that provided surgeons with monthly cost scorecards and had a financial incentive to reduce surgical supply chain spending, a new study in JAMA Surgery found.

Surgeons reduced healthcare supply chain costs for their department after receiving monthly cost scorecards, study indicates

Median direct surgical supply chain costs decreased from $1,398 per case in 2014, the year before the scorecard intervention, to $1,307 per case in 2015.

But surgical departments in the same healthcare system that did not use a scorecard system increased costs. The median direct surgical supply chain costs grew by 7.42 percent between 2014 and 2015. Healthcare supply chain costs per case increased from $712 to $765.

“Our study showed that providing cost scorecards to surgeons during one year, combined with a small financial departmental incentive and identification of physician cost-saving champions, was associated with a significant reduction in surgical supply costs compared with surgeons who did not receive scorecards but were still eligible for the same financial incentive,” wrote study researchers.

Healthcare supply chain management may have been the second largest expense for most providers after reimbursement management, according to a 2015 Cardinal Health and SERMO Intelligence survey, but researchers in the JAMA Surgery study stated that surgeons can help to control costs.

READ MORE: Managing Healthcare Costs, Data Analytics Top C-Suite Priorities

Individual surgeons directly control some healthcare supply chain costs because of preference supply cards, which list supplies and equipment surgeons need for a specific case, and operation room requests.

The preference card and request system, however, can create surgical supply use variation across individual surgeons in the same hospital, resulting in significant cost differences for the same procedure.

Despite their influence on healthcare supply chain costs, most surgeons were unware of their operation room costs. A cited Health Affairs survey from 2014 found that orthopedic surgeons correctly identified the cost of a commonly used implant only 21 percent of the time, and their estimates ranged from 0.02 to 24.6 times the actual cost.

To help surgeons better understand healthcare supply chain costs, researchers in the JAMA Surgery study developed a scorecard that used EHR data to show the median surgical supply direct cost for each procedure type that the surgeon performed in a given month. The scorecard also provided self and peer comparisons.

With the scorecards, surgeons at the healthcare system could see the top 10 most expensive items used, frequently used items, and “bang for your buck” items, which represented the most significant area for potential cost-cutting.

READ MORE: Prescription Drug Rates Remain Top Healthcare Supply Chain Issue

Researchers also offered all surgical departments, regardless of scorecard implementation, a $500,000 financial incentive to reduce healthcare supply chain costs (adjusted for case mix index) by five percent or more.

Researchers found that the scorecard significantly reduced supply chain costs across different surgical departments. The intervention group had a mean savings of 9.95 percent over a year compared to the control group, representing a total savings of $836,147.

In contrast, surgical departments that did not implement the scorecard increased healthcare supply chain spending by $3,073,647 in the same year.

Even after researchers adjusted surgical supply chain cost per case for case mix index, surgeons with scorecard access still decreased costs by 3.95 percent in the year after implementation, whereas surgeons without scorecards increased spending by 5.07 percent.

Surgical departments that implemented the scorecard intervention were also more likely to earn the financial incentive for reducing supply chain costs by more than five percent. Two scorecard implementation groups qualified, while only one control department earned the reward.

READ MORE: Cloud-Based Healthcare Supply Chain Management Drives Market

Additionally, researchers reported that the cost scorecards increased surgeon knowledge about healthcare supply chain costs. Even though surgeons with and without scorecards agreed that surgeons had the capacity and partial responsibility to control operating room costs, surgeons who received scorecards had significantly higher scores on cost reduction awareness.

On a scale of one to five, with five being “strongly agree,” surgeons who received scorecards rated the statement “I know how much my procedures cost in comparison to my peers” an average of 3.33, whereas surgeons with the cost card rated it 2.31.

More surgeons in the scorecard group also reported that they understood which items contributed the most to higher costs with an average rating of 3.83 versus 2.63 for surgeons without the scorecard.

Surgeons also attributed their increased healthcare supply chain knowledge to the scorecard system. Almost 77 percent of those who received the cost data and completed the survey reported that the scoring system helped them to understand operating room cost and efficiency.

Eighty percent also strongly agreed or agreed that the program should continue.

Researchers concluded that providing surgeons with supply chain cost data and comparisons as well as offering a financial incentive to reduce costs may be an effective way to decrease cost variation and overall spending.

The scorecard system also encourages individual providers to modify their behaviors to be more cost-effective.

“Our approach empowers individual health care professionals to make their own decisions regarding resource use rather than relying on mandates from administrators or payers,” wrote study researchers.

Dig Deeper:

Why Healthcare Needs Value-Based Supply Chain Management

How a Small Hospital Developed Lean Supply Chain Management


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