Case Costing: The Key to Maximizing Financial Performance

Administrators must regularly cut costs and increase revenues to get beyond the break-even point

In the world of outpatient surgery, case costing is an absolute must. Think of it as your ASC’s essential financial health check-up.

Just as you wouldn’t dream of paying your employer to work, it’s equally illogical for healthcare facilities to operate at a loss. The more cases or variables involved, the thinner the profit margins. As business leaders, administrators need to aim beyond breaking even—they need to actively seek ways to cut costs and increase revenues. This is where case costing comes in, providing a clear understanding of expenses and revenues.

The benefits of case costing

Case costing offers several advantages. First, it allows administrators to spot cost variations for the same procedure, helping them identify inefficiencies and implement corrective measures. This could involve standardizing supplies, exploring cost-effective product alternatives or optimizing staffing models—all of which can streamline operations and reduce costs.

Second, armed with accurate case costing data, administrators can negotiate better contracts with payors and suppliers, ensuring terms that align with the center’s financial goals. Finally, by sharing precise case costing data with physician owners, administrators can gain their support for cost-saving initiatives and foster a collaborative effort to improve financial performance.

Getting started with case costing

To start a case-costing project, define the project’s scope and identify the procedures to include, with a focus on high-volume cases. It’s vital to ensure preference cards are accurate and up to date. The actual cost to perform the procedure is calculated by considering supply, personnel, equipment and overhead costs. Once the costs are calculated, review the results for validity and then share that information with key stakeholders.

Administrators can then look for areas to decrease case cost or increase reimbursement. This could involve standardizing supplies used by providers, converting products, adjusting staffing models or renegotiating payor or vendor contracts.

Keeping case-costing data up to date

Case costing isn’t a one-off exercise — it’s a continuous process. Regular updates to preference cards and periodic reviews of costs and reimbursement rates are essential to ensure the data remains accurate and relevant. A system should be established to continually update preference cards and monitor changes in costs and reimbursement. OSM