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Seven Common ASC Mistakes that May Lead to Failure Print E-mail
Written by Dana Kulvin   
Wednesday, 31 October 2007
Brent Lambert, MD, FACS, suggests the following seven reasons that ASCs fail and offers advice for improvement.

1. Poor case volume.
Inadequate case volume is often the primary reason for an ASC's failure and thus it is imperative that an ASC increase it. "The best way to increase case volume is to recruit qualified, active and efficient physicians who understand the benefits of an ASC and plan to use it," says Dr. Lambert. In return, the ASC must commit to supply those physicians with the space and equipment they will need to efficiently and effectively perform their surgeries. He adds that the ASC's existing physician-owners may be the best resource to locate and recruit the right type of physicians. In addition, get commitments from those existing physicians that they will use the center. "Many physicians are afraid that if they don't perform a substantial number of their surgeries at the hospital, the hospital will cut off their privileges. We have rarely, if ever, seen this to actually occur," he says.

2. High staffing costs.
High staffing costs, those that exceed 20 percent of an ASC's total revenue, generally are a big drain on profits.  The single most effective method to decrease staffing costs is to compress the ASC surgery schedule so that any vacancies in the schedule are eliminated. "The cost of keeping an ASC open without any surgeries scheduled is astronomical," says Dr. Lambert. "By compressing all the scheduled surgeries into, say, a four hour block of time or three days instead of five, permits the ASC to close down early and send staff home. Basically, turn off the lights when the cases are done." Of course, this method assumes that the ASC employs part-time or per diem staff that can be sent home without pay.

3. High supply costs.
High supply costs eat away at profits, and should not exceed 20 percent of total revenue, advises Dr. Lambert. Most struggling ASCs have supply costs over 20 percent because they have not taken advantage of group purchasing organizations, which leverage their large membership in order to purchase supplies and equipment in bulk and at a discount. In addition, ASCs should case cost all of their procedures in order to identify which physicians are cost outliers. "Physicians will likely decrease their case costs if they realize that another physician in the ASC is spending less on the same type of case. In one ASC, we discovered a $900 discrepancy between two physicians performing the same arthroscopy with meniscectomy. By uncovering this, we were able to encourage the outlier physician to cut his costs," says Dr. Lambert.

4. Ineffective operations.
Turnaround time between surgeries needs to be kept to a minimum in order to maintain the ASC's schedule, staffing and effective operations. "Unfortunately many ASCs take too long. To maintain efficiencies, turnaround times should average seven minutes or less, and certainly not be more than ten minutes," says Dr. Lambert.

5. Poor payor contracts.
Payor contracts that do not pay an ASC enough for its procedures must be renegotiated or cancelled. "All payor contracts must be reviewed annually to ensure adequate reimbursement and ASCs should not be afraid to cancel a contract and possibly go out-of network rather than losing money on a case," says Dr. Lambert. "We have found that payors start to pay up once they realize an ASC will not tolerate inadequate reimbursement."

6. Poor A/R management.
Poor management of accounts receivable usually results in decreased profits. The benchmark for A/R  days outstanding is no more than 40; accounts should generally be paid within 35 days or fewer. In addition, 65 percent of A/R should be current at all times, with nothing due after 90 days. To help reach these benchmarks, an ASC should always bill on the same day of service and do its billing and collection on-site, says Dr. Lambert. "Billing on the day of service is a necessary efficiency and on-site billing and collections allows an ASC to maintain proper control and ensure that the A/R is not falling behind," says Dr. Lambert. Be sure the ASC administrator is well-trained in coding, posting, collecting and submitting. "Only a knowledgeable administrator will be able to expertly manage and enforce the A/R processes and know immediately if there are problems."

7. Staggering debt service.
High debt service is a cost most ASCs can avoid by shopping around for lower interest loans or amortizing the debt over several years, recommends Dr. Lambert.
 
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