To ensure a healthy bottom line, you need to treat case costs as you would infection control or risk management: as if they were a continuous quality improvement initiative. And to do that, you need to know what to measure and how your facility stacks up against those numbers. Focus on these five financial benchmarks.

1 Salary and benefits
Your primary expense is comprised of salaries and benefits. The benchmark we strive to meet here is 20 percent or less of net revenue monthly. To meet this goal:

• Be creative. Consider using an employee leasing company. This lets you purchase competitive benefits at the cost of a major employer. The greater the number of employees, the more negotiating power the lease company has to decrease cost on benefits such as healthcare insurance. Shopping for the right fit in a leasing company can make a difference in the quality of staff you attract, the type of benefits you offer and the cost of the benefits.
• Control employee-hours per case worked and paid. A center performing 250 cases or fewer each month should run 12 employee-hours worked or less per case. If you're performing more than 250 cases, that figure should be 11 or less per case. Worked employee-hours per case generally run from one to three hours more than paid each month. Factors that influence the paid hours include holidays in the month, the age of the center and how long employees have been with you, which in most cases increases the amount of paid-time-off employees receive.
• Curb excess. Eliminate overtime pay by tracking employee hours daily.
• Take advantage of part-timers. Hire a core full-time staff and a large part-time and PRN staff. This allows flexibility in staffing. Staff exactly what you need to provide safe, quality patient care.

2 Medical supplies
Your second largest expense , medical supplies, is a vast and varied category that includes drapes, gowns, suture, gloves, dressings, pharmaceuticals, anesthesia supplies and implants. According to MGMA's 2005 report, if you're in a multi-specialty center, you should try to keep your outlay on supplies at 18 percent or less of net revenue, or $230 per case as the median amount. To accomplish this benchmark, there are several processes you need to have in place.

• If you don't belong to a group purchasing organization, join one; and if you belong, you'd better be getting as much use as possible out of your GPO contract. When you can negotiate a lower cost locally on a high-use item, take advantage of the opportunity. Communicate your needs to your GPO representative frequently.
• Maintain accurate preference cards. Cost out your top 20 CPT codes monthly. If you have time, cost out your top 50 CPT codes monthly - and no less often than quarterly.
• Educate your staff and physicians on cost of supplies as often as needed to drive the point home.
• Keep supply inventory in the center for 30 days or fewer by developing par levels; ordering weekly rather than daily (the soft cost of a purchase order is $80) determining orders by walking around your facility to find out what you really need; limiting the areas where supplies are stored; and using an electronic ordering system. It's better to have money in the bank collecting interest than supplies on the shelves collecting dust.
• Keep accurate cost information in your inventory software. Audit your invoices to the price in your system at least quarterly to ensure accuracy.
• Track implant usage against implants billed monthly. This decreases your chance of lost revenue from an implant that wasn't billed.
• Work with your distributor so that your common supplies stay on the distributor's shelf and you receive them just in time to cover your cases scheduled for one week out.

3 Accounts receivable
It's not a cost in the sense that supplies are, but how cash flows - or doesn't flow - will affect costs. If you and another center do an identical number of the same type of case and you meet the goal of 35 days or fewer in accounts/receivable, while the other center has an A/R of 60 days, you're going to be more profitable. Some tips:

• Collect upfront estimated co-payments (unless your managed care contract doesn't permit you to do so) any deductible that the patient hasn't met.
• Contract with a full-service clearinghouse so you can send claims and receive payments electronically.
• Audit your A/R monthly. Keep your current A/R (current being zero to 90 days) at 75 percent to 80 percent of total A/R.
• Develop coding, billing and collecting processes. Audit the processes no less often than quarterly.

4 Non-clinical supplies
Office supplies can be a financial drain if you don't control them - and you often don't, because they're out of the clinical purview. Besides paper, pens and toner, monitor paper chart backs, numbering system tags, printing and brochures. Our benchmark is $11.50 per case. Some tips for controlling these costs:

• Buy supplies from companies on your GPO contract.
• Standardize supplies such as pens, pencils, sticky notes and even paper clips. Make one person responsible for ordering office supplies.
• Negotiate a printing contract and purchase printing at a breaking point, usually 500, 1,000, 1,500 items or more. Re-negotiate printing annually; there's much competition for this service.
• Converting to electronic medical records can slash paper costs.

5 Miscellaneous factors

• Equipment maintenance. Control equipment maintenance costs by negotiating contracts for biomedical services, manufacturer service and third-party companies that maintain specific items such as GI scopes or broken instruments.
• Utilities. Electricity costs are steadily increasing in line with rising fuel costs, so consider installing light switches with sensors in storage areas, bathrooms and offices. This can reduce monthly energy usage by 10 percent or more. Zone your HVAC system and adjust temperatures electronically in the non-sterile areas when the center is closed. Documented cost savings from zoned HVAC have ranged from 15 percent to 20 percent in the summer months.
• Postage and shipping. E-mail patient satisfaction surveys instead of mailing them with a stamped return envelope. Avoid paying overnight shipping fees for supplies by having processes in place where cases are pulled at least 72 hours before they are to be performed.

Don't let up
Set incremental goals for each of these case cost benchmarks and monitor your progress monthly to ensure they're impacting your bottom line. Tracking and reporting results frequently helps create a transparent environment that encourages everyone to work together for an efficient surgery center that provides cost-effective quality care to the patient.