Cath Lab Expense/Cost Process Improvements

Author(s): 

Dennis Holloway, MBA, CVT, Director of Diagnostic Cardiovascular Services, Bay Medical Hospital, Panama City, Florida

Drug-eluting stent procedure payment, total impact decreased by up to -3% (the original proposed was -33%) (DRG, 558)

Cardiac Defibrillator implant W/O cardiac cath, total impact decreased by 9.6% (DRG515)

Chest Pain, total impact decreased by 5.1% (DRG 143)

On the flip side, other changes show an increase, emphasizing the need to verify procedures in the cath lab. These include:

A new DRG specific to Carotid Stenting (DRG 577), with an increase of 39%.

Cardiac Arrhythmia and Conduction Disorders W CC, (DRG 138) with an increase of 3.6%.

It is important to note that reimbursement can be different depending on the region of use.

Some of the steps in determining a Prospective Payment System (PPS) payment are as follows:

1. The base payment rate is comprised of a standardized amount, which is divided into a labor-related and no-labor share. The labor-related share is adjusted by the wage index applicable to the area where the hospital is located. If the hospital is located in Alaska or Hawaii, the non-labor share is adjusted by a cost-of-living adjustment factor. This base payment rate is multiplied by the DRG relative weight.

2. If the hospital is recognized as serving a disproportionate share of low-income patients, it receives a percentage add-on for each case paid through the PPS. This percentage varies depending on several factors, including the percentage of low-income patients served. It is applied to the DRG-adjusted base payment rate, plus any outlier payments received.

3. If the hospital is an approved teaching hospital, it receives a percentage add-on payment for each case paid through the PPS. This percentage varies depending on the ratio of residents-to-beds.

4. Next, the costs incurred by the hospital for the case are evaluated to determine whether it is eligible for additional payments as an outlier case. This additional payment is designed to protect the hospital from large financial losses due to unusually expensive cases. Any outlier payment due is added onto the DRG-adjusted base payment rate.

As the manager and/or director, it is your job to make it all happen. The process may start with a strategic and well-planned budget, but the process itself is really how well we manage our departments throughout the fiscal year.

The Proof is in the Results

Back in October of 2005, our cath lab department began an aggressive approach to cost reductions. A committee was formed, utilizing cath lab staff (nurses and technologists), and management. Initial meetings were conducted twice a month. At these meetings, a product, several products or programs were identified as targets for cost reduction. Over a span of the next 10 months, significant expense and price reductions were clearly evident. (This committee later became what is known today as the Value Analysis Team (VAT), aided by consultants from VHA Southeast.) The list of products/processes and their related cost savings consisted of:

1. Cath packs

2. Pacer packs

3. Sterile patient skin preps

4. Eliminate forms management on charge sheets

5. EP catheters: pricing reduction

6. Drug-eluting stents (DES)

7. Coronary and peripheral diagnostic and interventional core products

8. Vendor consolidation (allows for reduced inventory and offers better ability for pricing negotiations. This consolidation resulted in credit returns of over $84,000)

9. Catheter reprocessing

10. Inventory control

11. Credit & rebate for contrast

12. Negotiated pricing for closure patch

13. Elimination of Renografin

(Only used in the balloon prep bowl, where contrast can be drawn from the table when needed. This is also dependant on the type of contrast used. If Visipaque is hung, a small bottle of Optiray can be used instead. We found the elimination of Renografin resulted in a significant cost savings of a little over $9,800)

14. Eliminate 50 cc contrast

The total savings for this process has been $1,355,756. The VAT Committee currently meets once a month. The effort for cost reduction is an ongoing, work-in-process program. The committee's results have become a model for other departments to follow. VAT committees have now become a successful cost-savings system in many modality areas.

The Process

How is this done? Hard work, dedication to the cause and a lot of staff and physician involvement. An important factor in achieving such excellent results comes from staff and physician commitment to essentially operating the cath lab as an independent business. Everyone is a partner with a common goal. Each person takes ownership and a personal responsibility in the success, of all aspects, within the department.

By reviewing some of the items listed in this project, it will be possible to understand further what was accomplished:

1. Cath Packs and Pacer Packs: Specialty or custom packs are very useful because they provide one package, housing many consumable items. Typically there is a packing fee associated with most of the items included in the packaging; therefore, the determination of whether it is more cost beneficial to take an item off the shelf and drop it on the table, versus having it in the pack, needs to be made. For instance, an 18-gauge, 7-cm percutaneous needle may cost $2 (sample cost only). To have this needle available in a custom pack, a packing fee of about $5 would be applied, which is then added to the cost of the pack. By not having the needle in the pack, a cost saving of $3 (per pack) could be accomplished. Depending on the number of procedures a facility performs, this cost savings can be quite significant. For example: 7000 procedures (annually) x $3 = $21,000 in expense reduction. Decisions relating to other items can be made in the same way, potentially adding to the total cost savings.

2. Reprocessing has become a very good cost reduction system. This facility utilizes Ascent Healthcare Solutions for reprocessing and collection services. There are a limited number of FDA-approved products which can be reprocessed. The list can be obtained by any authorized reprocessing company. Authorization was obtained by the hospital Infection Control Team, Material Services, physicians and administration. Certain EP catheters, inflation devices and pulse oximeters can be resterilized and purchased at half price or less than that of the original product price.

3. DES pricing is probably one of the most difficult elements. With only two companies (at this time) involved in the market, Boston Scientific and Johnson & Johnson, being creative is a must. Physician collaboration is essential in negotiating pricing with any company, but with stent pricing, it's imperative. There are many ways in which a facility can work with one of these companies (or both) to get the best pricing possible. With reimbursement at approximately 1.8 stents per patient, multiple stent procedures can be quite costly and in some cases, decrease the contribution margin so much that it is beyond break-even.

Line item pricing is one way to start. Negotiating for a set price per stent can be obtained in particular for those facilities who utilize a large volume.

Bulk pricing has been beneficial in some instances. This usually requires a large inventory of stents. The difficulty that can be experienced with bulk pricing is in separating stents that are on consignment versus purchased stents. In most of today's cath labs, stents are consigned. If not watched closely, a facility can be double-charged. An example would be a purchased stent pulled off the shelf and submitted as if it were consigned. The stent could end up being paid for twice, once when it was purchased and a second time when it is used.

Another method would be to package core product pricing in association with stent pricing to give an overall cost savings. If a company is well-diversified in its products, this is particularly helpful.

Some departments have been known to offer 100% market share for a good discount. Utilizing a company at 100%, however useful and easy to maintain, lacks the market sense of competitiveness that leads to increased bargaining power.

Rebates have been used on occasion. This method can vary, but is usually done by signing yearly contracts with a specified company. In order to receive the annual rebate, the department must meet the prior year's usage, plus a 10% (or some percentage increase agreed on by both parties). When that is achieved, the department/hospital could receive up to 5% of total expensed money as a rebate. Rebates are not a bad option, with the exception that it can take up to three or four months following the year's end to receive the rebate funds.

Competition is a good thing, and with DES, it may be even more crucial. Once Medtronic receives FDA approval of their Endeavor drug-eluting stent, the current price for drug-eluting stents will most likely begin to drop.

4. Inventory control, although not a specific product or device, is a system that when improved upon, can result in a dramatic savings process. Here again, cooperation with staff and physicians is imperative. Vendor reductions need to occur in conjunction with inventory control and inventory reductions. How many times has a physician asked for a product or device only to receive the answer, We don't have any! This is not a situation staff appreciates, since they are the ones who are usually on the receiving end of an upset response. It's not their fault the item is unavailable; it's the system or process in use. By decreasing inventory and vendor size, inventory availability will increase. For example, if a department has been allowing four coronary and four peripheral companies' products to be used, the inventory room(s) will need to be enormous to accommodate all the different sizes, lengths, types, and ancillary pieces. How many facilities have that luxury? I would venture to say, not many. Choosing only two companies in each category would be ideal.

Which to choose? That depends on the individual department's use of market share per company. Choose the top two; these would be the primary vendors. This works in our lab, but in other hospitals I have been at or visited, a multitude of vendors are present. The choice of vendors or companies is a collaborative effort made by physicians, staff and management. This is where being part of the total process and/or operating a department as a unified business venture can be beneficial. There still may be a need to use other companies' products at a very minimal amount, but there would be no need for their representatives to be present, unless indicated for a specific procedure at the request of a physician. Once the decision is made as to which companies to maintain, eliminate the duplicate products of other companies. For instance, if one of the primary companies makes a JL4 Guide and a non-primary company makes the same or equivalent guide, eliminate it, thus reducing inventory. This also allows room, if needed, for additional products from primary companies. As a result, the chance of not having a needed product or device in stock is substantially reduced, if not eliminated. Working with two primary companies is much easier to manage in regards to price negotiations and inventory control. It results in fewer vendor representatives in the lab and increased collaborative working relationships.

References: 

References1. Centers for Medicare & Medicaid Services. CMS proposes changes to policies and payment for outpatient services: New steps to increase value in hospital outpatient care, with major revision of ambulatory surgical centers payments. August 8, 2006. Accessed October 11, 2006 at http://www. cms.hhs.gov/apps/media/press/release.asp? Counter=19382. Department of Health and Human Services, Centers for Medicare & Medicaid Services. 42 CFR Parts 409, 410, 412, 413, 485, and 489; Medicare Program; Proposed Changes to the Hospital Inpatient Prospective Payment Systems and Fiscal 2007 Rates; Proposed Rule. Accessed October 11, 2006 at http://www.cms.hhs.gov/AcuteInpatient PPS/downloads/cms1488f.pdf


Anonymoussays: March 26.2010 at 10:27 am

Really Nice article sir and would definitely be of help for my management project whereby I am suppose to make recommendations on achieving cost-efficiency in the usage of pharmaceuticals and consumables in the interventional cardiac procedures.

Regards,

Kandarp N Talati

Reply to this comment »
ramamurrthisays: June 8.2011 at 12:19 pm

can I have a common list of major items medical costs in cathlab and other non-medical costs associated with by pass surgery and single valve .

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