Operating Room Profitability | Analyzing Costs To Reimbursements - Hospital Supply Chain Management
Hi, I'm Lisa Miller, the CEO of VIE Healthcare. We're going to talk today about the cost impact and the related revenue and reimbursements to supply and implant costs.
I want to talk with you about today is how we achieve cost savings for our clients. And our approach is a little bit different than others in the marketplace. We like to look at costs and the relationship of costs to reimbursement. And so to give you an example, I'm going to specifically talk today about spine procedures and a little bit about how we identify cost savings opportunities, but we also map those costs, as you will see right here, understanding your true cost impact to your actual reimbursement and how we dive down into every DRG, how we look into the analysis by a physician, by the payer and even by revenue code. And that's how we're able to uncover a tremendous amount of cost savings by looking at that whole continuum, that holistic view of what does an item costs and how does that cost maps to actual reimbursement.
For today's purposes, I want to talk today about the Operating Room. The OR is your largest opportunity for profitability and revenue, but it's also your biggest driver of cost. And so we're going to talk about spine implant cases. And specifically, these are DRGs 459, 460, 471, 472, 473. It's lumbar and cervical fusion cases. And those cases have the high-cost implants, the rods, and screws and the biologics that are used on those cases. So what's unique about our approach is that we'll look at your costs for your implants. So you may have numerous spine vendors, numerous biologic vendors, and different physicians utilizing different ways and different approaches. So we still will look at analyzing your costs by component, costs by biologic, and we'll benchmark that cost to national best practices based on the hospital of your size or utilization, market share.
The difference that we do at VIE Healthcare is we also request additional information and we tie that information back to reimbursement. So what we like to get, and we want to make it very simple because sometimes when hospitals are looking at DRG analysis, they kind of get buried with all the information and it's very difficult to put all the information together and then present the data. And so we want to make things very simple. So what we ask for, what we looked for our data is claims data, actual build data for your last 12 months of spend, so your last 12 months of cases for these DRGs. And so we get that information. We want the detailed revenue codes, and specifically what we're looking for in mapping the cases to costs are rev code 272s and rev code 278s.
So rev code 278 are the actual implants and the rev code 272 are supply costs. And those two revenue codes, we want to understand the relationship of that, those costs to your actual reimbursement. So what I want to talk in more detail about is all profitability analysis starts with understanding your true costs, then mapping to actual reimbursement, connecting that to your systems, processes, item master, chargemaster, then to your managed care agreements. And that's how you uncover opportunities for cost improvement, utilization improvement, and process improvement.
As look at benchmarking your pricing, we also look at getting that billed patient data or claims data. And so when we get the details, we're able then to understand a couple of things. We're able to understand, what's it costing the hospital for, let's say a lumbar pedicle screw case. And what are the costs? What is the actual reimbursement by the payer? And are there other opportunities that are being missed? And I'll give you an example. From the claims data information, we're able to find out sometimes that items are missing that aren't on the chargemaster or items not on the item master. And we're able to see on that claims data, that there were a couple of components that should have been billed. What we're also able to see is, in many times is if you've got managed care agreements, and sometimes some carve-outs and carve-outs have been updated, that those carve-outs haven't been maximized or optimized.
And so there are ways that the hospital can derive more reimbursement, but because of the way the managed care agreement states those costs need to be reimbursed, they're a little bit out of the typical norm of just sending a bill in, an invoice has to be sent in, or there's another process, but we always like to map these cases even to the managed care language. So we understand what the reimbursement is.
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