OR costs: Labor vs materials
Generic Clinical Sciences
Anesthesia accounts for 5.6% of perioperative costs. The operating room as a whole accounts for 40% of total hospital expenses, and it generates 70% of the revenue.1 As one might expect, there is considerable interest in reducing these costs in order to maximize profitability. Operating room cost can be described in terms of fixed and variable expenses. Fixed expenses (overhead) include those costs that do not change over a specified period of time and account for 56-84% of operating room costs.2 Examples include mortgage, administration and salaried employee costs. Variable expenses are those that fluctuate based upon caseload, such as part-time employee and disposable supply costs. Long-term operational costs can be reduced by controlling fixed expenses whereas the short-term cost per case can be influenced by controlling the variable costs. The two major variable and fixed costs in the operating room are labor and materials.
Efficient utilization of labor is a major goal in minimizing cost and maximizing revenue. It is important to ensure that the number and distribution of staff matches the workload. When scheduling cases in an operating room, one must seek to match the duration of the cases to the number of working hours expected of the staff. For instance, if the cases in an operating room finish before an employee’s work day is over, this results in underutilized time. However, if the cases last longer than the employee was scheduled to work this results in overutilized time. Both underutilized and overutilized time result in lost revenue; however, overutilized time is generally more expensive because of the extra cost associated with paying employees overtime.4
In summary, labor costs are largely affected by time-related concerns such as efficient utilization and strategic scheduling of cases and staff. Variable costs can be controlled best by effectively managing labor costs. On the other hand, material-related costs are more dependent upon free market issues and stewardship. Initial purchases of capital equipment must be made with careful consideration and the items must be maintained. Costs for disposable items will inevitably vary with case load and can be reduced by avoiding waste and substituting reusable or generic items when feasible.