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Because the reimbursements for surgical services
stagnate or decrease, the costs of doing business
continue to rise. These rising costs include space,
insurance, staffing, and supplies, all of which reduce the
margin of profit on services. A 1988 study that broke
down the percentage of physician income related to vari-
ous practice costs—labor, supplies, and rent—to a total of
15%, did not look at plastic surgery.1 After their systematic
review of plastic surgery, Ziolkowski et al2 concluded that
specific cost-effective analyses within the specialty are nec-
essary and advantageous to the plastic surgeon.
The old adage that “I lose money on every one, but I
make it up in volume” is becoming a reality. In its March
2013 report to Congress, Medicare estimated a 2% in-
crease in volume per beneficiary.3 This suggests that be-
cause of inadequate reimbursements, physicians are
taking on a larger patient load as compensation. An objec-
tive analysis of office-based surgical services for both mi-
nor clinical suite procedures and for office-based surgical
suite (OBSS) is overdue.
Dr. Janevicius4 did the first objective analysis of costs in
coding guidelines for minor procedures for Plastic Surgery
News. We employ this technique to evaluate current costs
and extrapolate it to an OBSS. We add in new expenses
that are now federally mandated (but unreimbursed),
such as the cost of maintenance of electronic medical re-
cords, meaningful use, and facility certification.5 It is an
important safety and quality standard to perform surgery
in a certified facility, but it too adds costs. Costs that are
specific to cosmetic surgery are complementary revision
rates and the discrepancy in profit margin when com-
pared with reconstructive surgery.
Costs can be defined as fixed, fixed variable, and vari-
able.6,7 Fixed costs are those that remain at the same price,
independent of the volume, for example, rent, space, and
insurance, which are the same each month. These ex-
penses do not change, no matter how much work is done.
Fixed variable costs require a basic minimum—a nurse or
a desk receptionist—but are dependent on volume. These
costs can increase in increments and are a per-case costs
(ie, adding another recovery nurse on busy days). Variable
costs depend directly on volume—supplies, medications,
Received for publication November 6, 2015; accepted May 27,
2016.
Copyright © 2016 The Authors. Published by Wolters Kluwer
Health, Inc. on behalf of The American Society of Plastic Surgeons.
All rights reserved. This is an open-access article distributed under
the terms of the Creative Commons Attribution-Non Commercial-No
Derivatives License 4.0 (CCBY-NC-ND), where it is permissible to
download and share the work provided it is properly cited. The work
cannot be changed in any way or used commercially.
DOI: 10.1097/GOX.0000000000000831
*DAVinci Plastic Surgery, Wash; and †Georgetown University
School of Medicine, Wash.
Introduction: Operating costs are a significant part of delivering surgical care.
Having a system to analyze these costs is imperative for decision making and ef-
ficiency. We present an analysis of surgical supply, labor and administrative costs,
and remuneration of procedures as a means for a practice to analyze their cost
effectiveness; this affects the quality of care based on the ability to provide services.
The costs of surgical care cannot be estimated blindly as reconstructive and cos-
metic procedures have different percentages of overhead.
Methods: A detailed financial analysis of office-based surgical suite costs for surgi-
cal procedures was determined based on company contract prices and average
use of supplies. The average time spent on scheduling, prepping, and doing the
surgery was factored using employee rates.
Results: The most expensive, minor procedure supplies are suture needles. The
4 most common procedures from the most expensive to the least are abdomino-
plasty, breast augmentation, facelift, and lipectomy.
Conclusions: Reconstructive procedures require a greater portion of collection
to cover costs. Without the adjustment of both patient and insurance remunera-
tion in the practice, the ability to provide quality care will be increasingly difficult.
(Plast Reconstr Surg Glob Open 2016;4:e803; doi: 10.1097/GOX.0000000000000831;
Published online 19 July 2016.)
Cost Analysis of an Office-based Surgical Suite
Disclosures: The authors have no financial interest to
declare in relation to the content of this article. The authors
have no conflicts of interest. The Article Processing Charge
was paid for by the authors.
Special Topic
Gabrielle LaBove, BS*
Steven P. Davison, DDS, MD†
ORIGINAL ARTICLE
PRS Global Open • 2016
2
and per-case contract labor. The amount of these costs var-
ies with demand. The sum of fixed and fixed variable costs
is also called overhead.6
The Institute of Medicine estimates 750 billion dollars
of wasted resources in the health care budget in 2009.8
Little information is available on individual practice costs
and their contribution to this. The purpose of this article
is a long overdue analysis of costs to assist practices in mak-
ing fiscal, rather than emotional, decisions in provision of
care.
METHODS
We based our analysis on the specific schedule of the
office. We calculated 700 office procedures (local anesthe-
sia) and 200 major procedures (general anesthesia) that
were performed in the OBSS in the past year. We analyzed
4 core cosmetic procedures most routinely performed in
our OBSS—abdominoplasty, facelift, breast augmenta-
tion, and liposuction.
For minor procedures, we evaluated costs that were
used in every case, or fixed, and those that were inciden-
tal, or variable. We estimated using these incidentals, like
special dressing supplies, about 25% of the time in the
office procedures. For surgical suite procedures, the ad-
ditional costs of packs, sutures, and consumables, such as
drains, were included. The number of sutures used per
case—a major consumable cost—was averaged from sup-
ply orders. Simple calculations were used to find the unit
cost for each supply based on contract prices with our sup-
pliers. The setting of the office also dictated the calcula-
tion of costs, based on square footage, quantity of rooms,
and time used for each surgery.
Minor kits were valued based on the costs and divided
by the estimated number of cases they last before having
to be repaired or replaced—300 cases. A similar deprecia-
tion for 1,000 cases was estimated for the higher quality
surgical trays; in addition, yearly sharpening costs were
computed. This calculation estimates the instrument cost
per case.
Staff costs were computed at an hourly rate. Pre/post-
operative tasks included patient intake, ordering supplies,
sterilizing, scheduling, etc. Perioperative tasks include the
cost based on hourly rates for a scrub tech and circulating
RN/MA. Indirect costs, like retirement, increase the staff
costs by 25%; this was added as an indirect surcharge. We
estimate initial training as dedicated 2 weeks followed by
40 hours maintenance per year. This reflects productivity
versus training of 97%:3% on an average.
The time spent supporting new office technologies—
Web site design and meaningful use—was factored. Soft-
ware support is a yearly fee; 20% of this cost was assigned
to the surgical procedures. Medical waste pickup occurs
weekly. The cost of the 3-year Accreditation Association for
Ambulatory Health Care certification cycle was calculated
based on 200 cases per year. Biomedical visits are required
for equipment maintenance. The malpractice insurance
cost was found based on its monthly cost and divided by
500 total surgeries per year. Weekly laundry delivery was
factored into cost based on unit price per quantity used.
A fixed variable cost not reflected in our practice is
hidden advertising. The practice growth is predominant-
ly by word-of-mouth; other than Web site optimization,
there was no direct advertising. A cost of Web site develop-
ment is appropriated as a percentage of site remunera-
tion versus total clinical income (see the below equation).
Indirect advertising costs were divided by the number of
annual cases; we approximate $1.65 a procedure for web
cost. Aesthetic surgery is singular in that revisions are
commonly at no cost to the patient. In our practice, any
major revisions incur additional facility fees (ie, implant
exchange for size). Therefore, some form of estimation
of this practice cost is necessary. A prospective analysis of
over 6 months to assess revision rates identified costs and
the most common procedures requiring touch-up.
Blogging,sitedevelopment,Web cost
×facilityfee
totalrenumerattionof cases
RESULTS
Table 1 summarizes the most frequently used supplies
for a minor procedure by unit cost and quantity. Similar
costs per unit were generated for all supplies. A standout
price is that of sutures. It is one of the most expensive but
also frequently wasted surgical supplies.
Table 2 summarizes the abstract costs that were ex-
plained in the Methods section. These are costs that had
to factor in labor contributions and other fixed variables
that depend on the caseload and type. For example, pre-
and perioperative time and cost include the labor time
of the nurse and office staff who went into educating the
patient before surgery; the administration cost includes
the amount to insure the practice for that day. The results
shown here for major procedures are for fixed costs. The
average major procedure base cost of fixed and fixed vari-
able cost without variable supplies was $951. The total cost
of a minor procedure was $64.
The last table ranks the four most common major sur-
geries in our practice, from the most expensive to the least
expensive. The length of procedure and sutures affect the
Table 1. Sample Supply Costs
Procedure Supplies
Item Unit Price Amount Cost ($)
Table paper 0.56933 1/6 0.09
#15 blade 0.2463 1 0.25
18-G needle 0.0738 1 0.07
1 mL 1% lidocaine with epi-
nephrine
0.06295 5 0.31
Disposable gloves 0.00708 6 0.04
4 × 4 gauze 0.0349 15 0.52
5-0 or 4-0 monocryl (average) 5.625 1 5.63
5-0 or 4-0 prolene (average) 8.625 1 8.63
Steri strips .5” 1.2938 1 1.29
Sterile gloves 1.88 2 3.76
Marking pen 1.0028 1 1.00
EZ-kill wipes 0.04375 3 0.13
instrument cleaning solution 0.1125 2 0.23
This outlines the average cost of sample supplies used in our office. Unit
amounts are based on contract prices.
LaBove and Davison • Cost Analysis
3
cost. The cost of lipectomy ($1,075) is the least, whereas
that of abdominoplasty ($1,279) is the most, reflecting
the use of more supplies—specifically suture. The cost of
providing a breast augmentation is surprisingly high at
$1,256. The office-based facility charge for augmentation
was $1,000; this is used in each major procedure, irrele-
vant of what packs, supplies, or sutures are used.
When analyzing the practice’s revision rates and ex-
penditure, there was $5,915 in supplies, manpower, and
costs used for touch-ups of 30 minor procedures and four
operating room cases performed at no charge to the pa-
tient. The four most common surgeries requiring revision
are gynecomastia, rhinoplasty, blepharoplasty, and lipo-
suction.
DISCUSSION
This updated practice analysis offers compelling data.
These costs are raw costs to a practice with no mark-up
or physician fees. They have two implications—what can
you afford to do in an office and what should you charge
for facility fees. Discussion of cost and responsibility for
fees is a sensitive topic in medicine. A survey by Ginsburg
et al9 showed that on an average, 45% of patients got an-
gry if cost was mentioned but that 49% accepted the ex-
planation for costs once they understood the resources
involved.
In a cosmetic practice, revision as re-do surgery is
handled differently from reconstructive surgery. In re-
constructive surgery, it is a potential remuneration and
in cosmetic surgery, purely a cost item.10 Certain elective
procedures are at higher risk than others, with elevated
revision rates. We analyzed the practice over a 6-month pe-
riod creating a “dummy code” for no-cost revision surgery.
Preliminary analysis indicates higher risk operations in
descending order: (1) gynecomastia, as the patients gain
weight postoperatively; (2) rhinoplasty, particularly for
areas that were not a concern preoperatively (ie, ala po-
sition);11 (3) lower lid blepharoplasties for scar/flap thick-
ness/canthal position; and (4) liposuction irregularities.
Planning what these additional practice costs are, irrel-
evant of subsequent surgeon time, is an ongoing project.
The methodology used allows an OBSS to set a price
based on real costs, not just market costs from hospital
out-patient surgery centers. There will be cost variations
based on location,12 rent, salary, and insurance. The cost
of supplies should be universal, but these numbers repre-
sent central urban costs that can be extrapolated to other
areas. The ideal pricing of procedures should reflect, at
minimum, a 22.7% profit margin, an average value calcu-
lated from physician-owned freestanding ambulatory sur-
gical centers (ASCs) in California; this margin increased
to 31.2% after a law that stopped physician ownership of
ASCs was passed. Interestingly, this regulation increased
the cost of delivering care under corporate, rather than
physician, directorship.13
To isolate costs, we did not extrapolate multiple proce-
dure cases. As the initial case costs are greatest at opening
packs, gowns, etc., we would have expected greater profit
margin for multiple procedures. However, this may be off-
set by lower charged costs for subsequent minutes after
the first hour.
A 1997 study by Rosenblatt et al14 referred to wasted
supplies in hospitals that were opened, but not used, as
“overage” and estimated these costs to be on average $5–
$13 per case. In 2013, this would be $7–$19 of unused sup-
plies per case.15 Anecdotal experience would suggest this
as a significant underestimation—particularly if sutures
are opened. Just one extra gown and gloves or an unused
suture are approximately $15 in waste. This effect was
shown where reconstructive procedures at an ASC over a
hospital had more profitability based on lower variable di-
rect expenses alone.6 The goal of providing cost-efficient
care without sacrificing efficacy begins with not wasting
supplies.
Sutures are a major consumable and greatly affect the
price of surgery, as seen in Table 1 and in the compari-
son of cost of the surgeries highlighted from the prac-
tice, as seen in Table 3. Abdominoplasty used the most
sutures, 10, and is the most expensive, whereas lipectomy
cost was the least, using one suture. Our suture usage is
conservative, as sutures are opened when they are needed
to ensure that there is no waste intraoperatively. Wasting
sutures can drive cost up and profit down. Breast aug-
mentation surgery is slightly more expensive than facelift
surgery, despite using half the number of sutures; this is
mainly due to the addition of a surgical bra and extra pre-
cautions for sterility when dealing with implants—extra
gloves, no touch technique with a Keller funnel, and an-
tibiotic irrigation.
An internal analysis of our facility pricing shows the
financial risk of setting costs on market norms for price-
sensitive procedures such as breast augmentation. At our
locality, the surgeon’s fees were fiscally subsidizing the
cost for breast augmentation. At the end of this analysis,
we raised the facility fee for this procedure by $250 to re-
flect the actual cost of quality care, taking into account the
Keller funnel for no-touch surgery.
Table 2. Summary of Additional Major and Minor
Procedure Costs
Cost per Case ($)
Minor procedure item and task break down
Minor procedure supplies 25.71
Variables 0.66
Staff 21.63
Room 5.83
Instrument depreciation 0.53
Blogging/Web site 9.50
Total 63.86
Major procedure item and task break down
Preoperative time 90.60
Perioperative time 265.80
Postoperative recovery supplies 2.88
Sterilization supplies 3.68
Anesthesia administration 312.22
Office administration 156.94
Laundry 11.35
Room cost 98.00
Blogging/Web site 9.50
Total 950.97
This table summarizes total office costs for minor and major procedures, taking
into account factors like administration time, Web site development, and rent
per square foot of the rooms used.
PRS Global Open • 2016
4
This comprehensive cost analysis includes everything
from the depreciation of instruments over time down to
the saltines eaten in surgical recovery. Instrument cost and
value was determined based on the frequency in which
sharpening and maintenance is required. This is due to
use and wear over time and is factored into Table 2 with
“instrument depreciation.” Historically, insurance compa-
nies paid an A4550 surgical tray code to cover these instru-
ment supply costs16; this rarely happens in current times.
This practice billed A4550 code a total of 200 times in
5 years and have been paid 3–4% of the time.
The perception at a hospital is that plastic surgery loses
money. In a study entitled “surgeon contribution to hos-
pital bottom line,” Resnick et al7 identified plastic surgery
cases as the lowest hospital margin per case with negative
contribution. Contribution margin was case number inde-
pendent, so it is not, in fact, possible to make it up in vol-
ume. This study was hospital based, where the very large
fixed building costs were distributed evenly. In our OBSS,
fixed building costs constitute less than 10% of the case
cost. The total fixed cost per case was $950 per case. In re-
ality, plastic surgery cases by comparison with orthopedic
or spine cases are lean in direct consumables, averaging
$261. In addition, plastic surgery cases do not incur many
fixed variable costs, such as specialized nursing or radiol-
ogy costs.
Conversely, an analysis on hospital versus freestand-
ing facilities by Pacella et al6 found that it was statistically
significantly profitable to perform plastic surgery in an
ASC related to decreased fixed cost assignment. With the
exception of reconstructive laser cases, aesthetic surgery
cases had a greater profitability over reconstructive cases,
which was only magnified at the ASC.6
The average plastic surgery case cost in our practice is
$1,202.80. This case cost can be extrapolated to most plas-
tic surgery cases. If the facility receives remuneration above
$1,202.80 per case, it constitutes a profit margin. Surpris-
ingly, it costs more to underwrite a breast augmentation
versus a facelift, and abdominoplasty costs 20% more than
liposuction, despite similar site and position. Based on the
results, the surgical fees were subsidizing breast augmenta-
tion and our facility fees were raised. These estimates set a
price point that must be paid by insurance companies for
reconstructive/insurance cases in an OBSS and have set
fees accordingly. Unburdening case costs from high fixed
facility costs has an opportunity for profit margin.
The average minor procedure cost was $63.86. As the
remuneration for minor procedures decreases, the cost of
supplies and manpower may soon make provision of this of-
fice-based care impossible in a network or at Medicare rates.
This fails the goal of providing cost-effective quality care.
The area reimbursement for a single mole removal code
11402 for Blue Cross Blue Shield is $114.7617 and for Medi-
care is $71.83.18 As such, the cost of care without physician
cost now constitutes 75% of remuneration. Doing multiple
procedures at the same visit can reduce the high percent-
age ratio of costs to remuneration. The costs are fixed, yet
there is more remuneration, albeit reduced by multiple pro-
cedure discounts. The intersection point at which provision
of the service is too expensive is rapidly approaching.
To compensate for low reimbursement, we maximize
personnel efficiency. We have moved all minor procedures
to a dedicated 4-hour block. This afternoon block is suffi-
cient for 10–12 minor procedures and can be expanded to
add larger cases, such as a labiaplasty or umbilicoplasty. Ex-
perience has shown that although minor facial cutaneous
surgery is a loss leader, it can be offset by “down-feeding”
through facial rejuvenation consults. That is, the recon-
structive aspect of a patient’s mole removal may not be prof-
itable, but his/her curiosity about cosmetic injectable is. We
have a philosophy of “turning a mole into a mountain.”
The pivotal point in downgrading surgery to “minor”
procedures, which cost 10% to cover, is a success of regional
analgesia. Localized areas, such as upper-lid blepharoplas-
ties and local Mohs reconstruction, allow highly effective
local analgesia. The success of tumescent local anesthesia
has made procedures more cost effective.19 The single best
example in our practice is labiaplasty where a $500 facility
cost differential between local analgesia and sedation cou-
pled with no need for an accompanying adult has led to an
efficient low cost procedure with 9:1 local versus sedation
acceptance. This is an example of cost savings being passed
through to the patient while maintaining efficacy.
CONCLUSIONS
Facility fees should be based on cost, not anecdotal
norms, to avoid practice losses. Informed accounting,
combined with maximization of manpower and minimiza-
tion of supply costs, is important to provide cost-efficient
care. The minor procedures cost an average of $64, con-
stituting 75% of the remuneration for insurance-covered
care in our practice. A baseline rate of $1,204 per major
anesthesia case sets a cost structure for accurate costing of
procedures. We outline an effective formula so that proce-
dure and surgical suite costs can be accurately identified
and factored.
Table 3. Rank of Major Procedure by Cost
Procedure
Cost of
Specific Supplies ($)
Added Fixed and Fixed
Variable Expenses ($) Total ($)
Abdominoplasty 327.53 950.97 1,278.50
Breast augmentation 304.67 950.97 1,255.64
Facelift 289.06 950.97 1240.03
Lipectomy 124.05 950.97 1074.82
This summarizes the 4 most common major surgeries in our practice, ranked from greatest-to-least expensive and resource intensive to coordinate and perform. A
multiple procedure saving in the realm of 50% that could be anticipated as the opening cost of a case is the greatest expense.
LaBove and Davison • Cost Analysis
5
Steven P. Davison, DDS, MD
Georgetown University School of Medicine
DAVinci Plastic Surgery
3301 New Mexico Ave NW
Suite 236
Washington, DC 20016
E-mail: kylie@davinciplastic.com
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