The operating room (OR) is the second front door to your hospital, generating more than 60 percent of hospital revenues. There’s a busy new surgical group in town that you want to bring to your hospital, and you hear about ‘capacity issues’ from your team. Your top surgeons and your most trusted staff are telling you that it’s time to make that door bigger, but how can you be 100 percent sure building new OR space is the right move before investing your finite capital resources?
Before you invest in new ORs, consider this seven-question sanity check:
- Have you achieved operational excellence?
If you haven’t recently compared your OR’s key performance indicators (KPIs) to industry benchmarks, the time is now. Your current 25-minute average room turnover may feel like a success, but did you know your high-performing competitors average 20 minutes or less? Assuming you and your competitor both run a 24-room OR suite that turns four cases in each room per day, that seemingly inconsequential 5-minute difference gives them a full one-room edge.
Bottom line: Don’t build until you’re 100 percent sure you can’t optimize your current OR suite any further.
- Have you optimized your block schedule?
Your block schedule was an asset for your hospital as you grew your surgical program. Over time, it helped you to attract new surgeons. Are you still able to add new surgeons to your block schedule? Is your door still open to growing new business? It might be time to re-evaluate blocks — and it’s not just about giving and taking away time. Optimizing block schedules and creating some rooms that are first come, first served can help you squeeze more capacity from your OR.
Bottom line: Don’t let a poorly optimized block schedule hold the last 20 percent of your prime-time capacity hostage. Make room for your hospital’s future.
- Is your labor productivity management on par?
Efficiency in your OR has a direct correlation to labor dollars. If you’re not starting rooms on time each morning (first case on-time starts), you’re almost surely paying incremental overtime to finish the caseload at the end of the day. Proper room utilization techniques are critical for managing labor. Are the first cases of the day in line with the number of rooms and the number of teams needed to stay productive for a full shift? Pay attention to how your teams are deployed.
Bottom line: Building more ORs will help drive your top line, but make sure your bottom line is on target before gambling with your razor-thin margins on a new OR suite.
- Do you have the right case volume and mix?
Not all 80 percent utilized OR suites are equal. Just because your OR is busy, it doesn’t mean it’s busy on the right things. At the end of the day, case volume is the outcome measure that matters when grading the throughput of an OR. But even this number doesn’t tell you if you have the right case mix. If 50 percent of your hospital OR capacity is consumed by low acuity, low margin endoscopy cases while your competitor is enjoying the high margin orthopedic cases, should your first priority be to build more ORs or develop a strategy to rebalance your case mix? Is there a better solution to address both?
Bottom line: Investing in new ORs should drive a strategic growth in case volume (with the right case mix) instead of creating capacity that equalizes your high utilization.
- Is your utilization KPI enough?
Your decisions are only as good as the data you base them on. You’ve heard capacity is an issue, and you’ve seen it in reports — but have you dug in deep enough, or do you still have unanswered questions? Your OR utilization rate only tells half the story. Before moving forward, make sure you understand why your utilization has increased or decreased, the surgeons who account for it, when your utilization changed (and its predicted trend), as well as any other hidden patterns.
Bottom line: Use your data as an asset from which you can extract hidden patterns and insight that will help you make the most informed decision.
- Are your non-employed surgeons loyal?
Private-practice surgeons are often the lifeblood of your OR. They bring in a network of referrals and share a financial risk — and reward — with you for providing patient care. As small business owners, their entrepreneurial spirit will drive them to where they can be the most productive. Complacency on your end, however, can push them to seek a better arrangement with your competitor or split cases between multiple facilities.
If your surgeons are currently exclusive, you risk losing part (or all) of their cases to a competitor by not providing adequate case time. If your surgeons split cases between hospitals, giving them more available table time may entice them to bring more business. In either scenario, building new ORs may not be the right answer. Are you willing to risk your capital to accommodate your bottom 10 percent of surgeons instead of cutting ties with them in order to earn exclusivity from your best surgeons — while using your existing facilities?
Bottom line: Before building new ORs, consider the impact of every variable — including surgeon loyalty.
- Do you know your market?
Unless you’re on an island, knowing that your OR is consistently running at capacity simply isn’t a justifiable reason to build new ORs. Do you know how much of your market you’re capturing? Are you able to capture more, or could the recent increase in market share be attributed to a local competitor who recently experienced negative publicity? Your market analysis shouldn’t only serve to justify your capital investment; it should help you quantify the financial impact of alternative risk-based scenarios.
Bottom line: Don’t invest in new ORs without being 100 percent sure that you have a deeper understanding of your market than your competitors.
We’ve found that the best-performing hospitals operate near 80 percent prime-time OR utilization.
We’ve found that the best-performing hospitals operate near 80 percent prime-time OR utilization. Much lower and you have excess capacity; much higher and it threatens your sustainability.
When you’re consistently higher than 80 percent, building more ORs could be the right move. But isn’t it better to be confident you’ve exhausted other options before making such a critical investment?