Keeping a Tight Rein on Unnecessary Expenditures in Oncology Practice

Jay T. Bishoff, MD

Jay T. Bishoff, MD

When Intermountain Healthcare in Salt Lake City, Utah, was preparing to spend upward of $3 million on new ventilators in its intensive care unit (ICU) 14 years ago, a few doctors decided to first see if they could improve outcomes of patients placed on the expensive machines. Ventilator settings and blood gas testing protocols, which each physician had been handling differently, were standardized and then periodically adjusted as they observed what worked best.

The doctors soon found they were doing far fewer tests and their patients were leaving the ICU 3 days earlier compared with before, said Jay T. Bishoff, MD, director of the Intermountain Urological Institute. In the long term, the changes led to reductions in ventilator-associated pneumonia and per-patient costs. The work to standardize protocols ultimately allowed Intermountain to avoid spending large sums of money.

“We dropped the cost by focusing on improving our outcomes,” Bishoff said. “How did we focus on improving our outcomes? By doing it the ‘same way’ for a while, until we figured out what the ‘right way’ was. And guess what—we didn’t buy those expensive ventilators.”

Bishoff, an enthusiastic and outspoken advocate for medical efficiency, has many stories about waste and successful improvement efforts. He was frustrated about unused supplies that are thrown out after surgery, so he started rewarding nurses with gift cards for not opening packaged equipment until it was needed. The nurses soon averaged $1400 in monthly savings, with one avoiding $7800 in costs in a single month. Bishoff primarily focuses on improving outcomes through process standardization, but he’s fanatical about eliminating wasteful spending.

“I’ve been on a crusade to get our cleaning people to turn the lights off,” he said. “I’m usually here first, about 5:30 in the morning, and the lights are all on in the whole clinic! They’ve been on all night long. It’s just waste—pure waste and inefficiency. I’m looking at even the cost of electricity. So, let’s do it the ‘same way’: Let’s have all the cleaning people, when they clean a room, turn the light off. You just want to focus on every area where you can cut unnecessary waste.”

Billing and Ordering Strategies

Avoiding wasteful spending has never been more important, considering the intense pressures to keep costs down and the ever-present risk of having to close down or merge with a larger system. “You want to be as efficient as possible. When you’re facing everdeclining reimbursement from payers, you’ve got to find a way to work smarter and control costs,” said Kari A. Young, who was the executive administrator at Hematology Oncology Associates of Albuquerque, New Mexico, until the practice merged with a hospital last year.A natural place to start is drug handling and billing. Kathy Oubre, MS, chief operating officer of Pontchartrain Cancer Center in Louisiana, which has 2 oncologists at 2 offices, said she regularly audits her practice’s billing for discrepancies between the electronic record of drugs pulled from cabinets and the amounts actually billed by nurses.

“Every 90 days I probably find $10,000, $15,000, $20,000 of errors,” she said. Correcting those mistakes could put “an extra $20,000 in a practice’s pocket, which is essentially a lower employee’s salary,” she said. Practices that fill out itemized forms by hand are at even higher risk of making expensive errors—for example if they write a charge on the wrong line or write 2s that look like 7s, she said. Pontchartrain handles billing internally, as Oubre finds that billing contractors charge too much and lack expertise in chemotherapy, but she does use an external auditor. That firm keeps a percentage of any overlooked revenues it finds, but Oubre reasons that it’s worth it for the practice to recover a portion of the money that it otherwise would have lost.

To avoid wasting expensive pharmaceuticals, savvy practices use just-in-time ordering, backup generators for refrigerators, and electronic storage cabinets that monitor expiration dates, and they transfer unused medicine to other offices. “We’re ordering drugs based on patients we expect to see 4 days out,” said Brad Prechtl, chief executive officer of Florida Cancer Specialists & Research Institute, a mega-group with 220 physicians. “We’ve got to have some excess inventory, but our inventory level is typically at 2 days or less, because the cost of carrying the inventory is exorbitant when you’re talking IV and infusion drugs.”

Other areas with potential for savings are communication services and medical and office supplies. Oubre says she calls her phone and Internet providers about once a year to “rattle their cages” and threaten to switch unless they sweeten their deals. “Sometimes we do move. At 1 of my locations, we just did that 2 years ago, and I’m saving $150 a month,” she said. For tangible goods, she’ll tell vendors how much she’s paying and ask if they can offer better prices. “It’s not always just about the high-dollar chemo drug. Medical practices spend thousands of dollars every year on paperclips, paper, pens, chemo gloves, exam gloves. Those things really do add up,” Oubre said. “Shop them every now and then. Think of your top 20 items and just compare the vendors.”

Economies of Scale

Practices may be missing out on opportunities to save on rent or make better use of their existing office space, Prechtl said. “Sometimes I’ll see a practice that has 3 physicians and they have 4 locations. They have so much unused space sitting idle,” he said. “Could they have rented space part time in an office where maybe there’s a surgeon who’s in surgery 2 days a week, and used that same suite 2 days a week? That’s another area that I see practices not really homing in on.”For deeper savings in areas from drugs and supplies to billing and collections, economies of scale provide a major advantage. When Florida Cancer Specialists & Research Institute acquires a practice, centralized offices take over a wide range of functions—including management, legal, accounting, purchasing, technology, and human resources—cutting the practice’s administrative costs from 6% of revenues to 3% or 4%, Prechtl said. The organization uses sophisticated analytics to make sure it has the right staffing levels in different departments, with incentive programs and employee surveys to promote productivity and performance. Smaller practices do not have the wealth of historical data that allows that kind of analysis, he said.

When a practice joins McKesson’s US Oncology Network, expert teams examine every aspect of its operations with an eye toward boosting efficiency and avoiding “non-value-added expenses,” said Christina Arellano, MBA, vice president of business process, program management and operations with McKesson Specialty Health. They sometimes find that practices are thinking of hiring more people to help overwhelmed nurses, but the better and less expensive solution typically involves improving workflows, delegating tasks to clerical staff, automating processes, and switching from paper to digital tools.

“Ninety-nine percent of the time we find the process just isn’t efficient. It’s not optimally designed,” Arellano said. “It may have been many years ago, but there have been a lot of technology changes and new regulatory requirements. In any practice, whether they’re affiliating or have been with us for a little bit, you’ll start to dig in deeper and you’ll see they’ve been operating in this manner for a long time and never really had someone looking at the end-to-end flow to set it up appropriately in the first place.”

Limits to Efficiencies

A common theme for waste-cutting advocates is the need for continuous improvement and regular reviews of current procedures, whether that means updating technology, rebidding for supplies, or looking for “pain points” in office workflows. “There are always opportunities to improve a process, no matter how good it is. We’re constantly looking at data, at metrics, collecting feedback. We’re doing ‘lessons learned’ and postmortems on activities. We’re asking all the stakeholders what worked well and what didn’t work as well as it should have,” Arellano said.Yet managers differ on the extent to which efficiencies can help the bottom line. Like Arellano, Prechtl says most practices he encounters can do more to cut excessive spending, whether they are solo practitioners or 20-physician groups. “In some cases, they’ve had the same staff in place for a number of years and maybe they haven’t continued to learn and look at ways of doing things more efficiently or more effectively,” he said. “People get used to doing what they’ve always done. We never stop trying to constantly improve upon what we have in place. If we’re at 2 days with drug inventory, we’re trying to look at ways to drop that to 1.9 days, because a 0.1 change can be significant dollars.”

On the other hand, Young says she doubts most small practices will find much “low-hanging” fruit to trim. They have already had to become more efficient in recent years, particularly since federal sequester cuts went into effect in 2013. Many of those that could not reduce costs or boost revenues have closed their doors or were acquired. “There maybe is a misconception that most practices are operating inefficiently and at a higher cost than they should be,” Young said. “The people I know who are managing oncology practices are pretty darn good at their jobs. They run very efficient practices and they don’t have a lot of excess wasted costs.”

Bishoff argues that even the smartest administrators are not going to achieve huge savings by cutting waste, whether at the practice level or in the healthcare system generally. But he says there are still many opportunities for smaller improvements that are meaningful in the aggregate.

“If there was 1 idea that would save the healthcare system hundreds of millions of dollars, we would have already implemented it,” he said. “At Intermountain Healthcare, we like to look at the small things that save us money and improve care. When you add up all of those small things it turns into hundreds of millions of dollars we can save the healthcare system every year.”