10 Top Reasons to Invest in Surgery Centers Now
"The future right now is unknown; the only thing we know is there will be fewer physicians, more patients and less money to provide care," says David Ayers, CEO of Nueterra Healthcare. "However, investment in a surgery center can be the first step surgeons need to prepare for what is coming their way."
Here, industry experts discuss the top 10 reasons why now is a great time for surgeons to invest in ASCs.
1. Ambulatory surgery centers are still profitable. Despite the turbulent healthcare market and declining reimbursements, investment in an ambulatory surgery center can still be a profitable venture.
"There is a tremendous profit margin in surgery centers; even though it's less than it has been in the past it's still much larger than the vast majority of all investment opportunities and limited risk if you are a physician because you are the one who is generating the business," says Mike Lipomi, President and CEO of Surgical Management Professionals. "The options for investing with a reasonable rate of return right now are few, and this remains a great investment."
Surgeons who invest in an ASC where they regularly bring cases are able to make additional revenue based on the success of the center. "Surgery centers are still profitable and if someone is going to make a profit off a surgeon's activity, why not it be the surgeon?" says Bruce Kupper, CEO of Medarva at Stony Point Surgery Center in Richmond, Va.
Given the benefits of surgery center investment, surgeons may want to jump on the opportunity now while it's still available to them. "There a potential risk for future legislation that would make it more difficult for surgeons to invest in surgery centers," says Mr. Lipomi. "Surgeons who waited to build physician-owned specialty hospitals are now out of luck, which has become a huge problem. With the pending election, and the uncertainty of what will happen with taxes and capital gain, surgeons may want to put their money somewhere that it will be protected by capital gains instead of regular income."
2. Surgeons can remain economically independent. In an era where increasing regulations and decreasing reimbursement makes it difficult to remain financially independent, and hospitals are eager to employ physicians, surgeons who want to remain independent may find themselves running out of options. Investing in an ASC can provide them the financial return necessary to remain independent.
"Whenever you have an investment where you can control the cost and revenue stream through patient flow, you have an ability to affect the margin," says Mr. Ayers. "Today we are seeing every provider getting hammered on their reimbursement and the specter of nationalized healthcare — which was purposefully set up with the PPACA to limit access or deny care if it can't be provided at a reduced cost — there is no way providers are going to make more money on per unit of business unless they have other revenue streams like this. ASC investment helps to ensure the financial viability of the surgeons."
In many states, surgeons and surgeon groups aren't allowed to have ownership of ancillary services, but surgery centers remain a safe investment for physicians. "ASCs may be one of the few investment opportunities physicians have within their own scope of business," says Mr. Lipomi. "They can no longer invest in labs, physical therapy, imaging or hospitals, but they are specifically allowed to invest in ASCs where they practice. Investment experts say you should invest in something you know about; if you are a physician, you know about medical practice and this is one of the limited investments you have."
3. Loans are still available. While banks have been holding their funds close over the past few years due to the recession, new loan opportunities are beginning to surface again. Since ambulatory surgery centers have been proven as a safe and effective investment, many lenders are more willing to fund those projects than others.
"There has been along period when we could not get loans and now the purse strings are starting to loosen up and the banks are looking for solid, quality investment," says Mr. Lipomi. "The healthcare sector is the number one market right now, so banks are willing to invest in those types of facilities."
Venture capitalists may also be willing to work with physicians to invest in surgery centers. "When you look at the financial markets, they are accepting with ASCs because they are familiar with it," says Mr. Ayers. "There are a lot of lenders out there willing to invest in ASCs. They are proven and easy ventures to finance, which makes it attractive right now."
4. Surgeons have control over their surgical environment. One of the reasons why surgeons originally began taking cases from the hospital and to the outpatient surgery center setting was to have more control over the surgical environment. Surgeons who have ownership in the ASC can participate in the decision making about surgical supplies and equipment along with other daily activities that impact the quality of their outcomes and patient satisfaction.
"An investment in the surgery center gives surgeons more control and greater input in what happens here on a day to day and policy basis than in a hospital bureaucracy," says Mr. Kupper. "In an ASC you are going to find surgeons who are more entrepreneurial, who are intelligent risk-takers. They aren't going to be satisfied in an institution trying to balance the needs of a lot of different people. In the ASC, the surgeon and patients are the priorities."
Control over the surgery center can have an impact on how the surgeon practices and outcomes for their patients. "The ASC was developed to provide an environment where physicians could control their working environment for the benefit of the patient," says Mr. Ayers. "A lot of people take that for granted, but that reason hasn't lessened over time. Understanding the patient flow, purchased supplies, patient selection and how employees are treated helps provide better outcomes for the patient and livelihood for the physician."
5. Investment positions specialists as low cost providers. The healthcare industry is shifting to a pay-for-performance model of care and looking to reduce costs at every corner, which makes ASC investment ideal for surgeons. Surgery centers receive a lower reimbursement than hospitals and many boast an infection rate lower than the local hospital. As a result, surgery centers are going to be attractive to accountable care organizations.
"I think freestanding ASCs have a place in the healthcare system going forward," says Mr. Kupper. "ACOs are going to be looking for low cost providers, particularly for high volume procedures like GI, ENT and pain management. If you are responsible for providing care to patients, you are going to be looking for high quality, low cost providers."
While early ACO pilots and payment programs have involved hospitals, the advantage surgery centers bring to the market could be disruptive. "Whenever you are looking at the formation of ACOs or medical homes, many of those groups are looking for low cost opportunities for their patients," says Mr. Ayers. "A surgery center can very easily be a plug in piece for those ACO groups if you can make that happen."
6. Surgeons can do more cases in ASCs because of the efficiency. The staff members at surgery centers are much more efficient than at hospitals because they are focused on working with surgeons to perform the same procedures every day. This is especially true if the surgery center is single-specialty, such as an orthopedics-focused ASC.
"The reason surgery centers are so successful is because they focus on doing one thing and doing it well," says Mr. Ayers. "Any time you do one thing repeatedly, you get better at it, and when you are better at it you can think about how to cut costs."
Once surgery centers are efficient and focused on cost cutting, surgeons can operate with only the staff members they need in the room. Surgery centers can also get supplies at a lower price because they are ordering large quantities from fewer suppliers, which is another way surgery centers cut costs.
"Physicians have to be efficient in their practice and they can't be waiting for the hospital OR to turnover," says Mr. Lipomi. "It's much quicker in the surgery center and they can do more cases, which is important with the reduced reimbursement."
7. Administrators are easy to access. The surgery center environment is very different from the hospital environment, especially when it comes to accessing leadership at the top. Hospital CEOs may seem out of reach for surgeons who need to discuss an issue or make a change, but surgery center administrators are often right around the corner and able to address requests quickly.
"In a hospital setting, there are a number of layers before you get to the CEO, and in an ASC there is not," says Mr. Kupper. "My office is right down the hall from the ORs and the clinical director is right there as well. Surgeons don't have to go far to find us; most administrators are very visible in the ASC for physicians."
8. Surgery centers are flexible for innovative technology and ideas. Since surgery centers are often physician-led and administrators are easily accessible, they can be on the forefront of new ideas and technology in the field. "If managed properly, a surgery center should be prepared to respond to innovative ideas much faster than a hospital or institutional-based surgery program," says Mr. Kupper. "We make decisions on technology acquisitions much faster than hospitals."
In addition to the flexibility afforded by physician management, surgery centers are driven to experiment with cutting-edge business models and collaborations by their need to maintain efficiency and cut costs. "We are going to be much more innovative because we are looking for new ways to generate revenue," says Mr. Kupper. "We are underwriting programs or developing new programs to draw patients and surgeons to the surgery center. We must create an environment that surgeons want to operate in and patients enjoy coming to."
9. Surgeons learn more about business which translates to their practice. Surgeons who invest in surgery centers become more aware of the economic and financial aspects of running the business, which they can also use in their individual practices and careers.
"When once-employed surgeons take ownership in an ASC, that investment brings them back to reality with financial systems," says Mr. Kupper. "If they are employed, they don't pay attention to cost, payor mix, reimbursements or other financial metrics. In a surgery center, those numbers become real very quickly and refocus the surgeon on their impact in the ASC."
Surgeons also get a crash-course in areas such as employment law and malpractice when they become investors in a surgery center, which is important for their practice as well. "By having an investment in an ASC, surgeons are able to better understand the business of healthcare and relate it back to their practice," says Mr. Ayers. "If they are part of a multispecialty ASC that is governed by their peers and a professional management company, that allows them to learn how to strategically plan for the future."
10. Enables partnerships with other physicians and new physician recruitment. Investment in a surgery center can bring together several small physician groups within the community — whether they are competing groups or from different specialties — to rally around an alternative option to hospital use and employment.
"If there are several small groups in the community that don't want to be employed by the local hospital, an ASC is a place they could rally around so they don't feel separate from their peers," says Mr. Ayers. "They aren't isolated on an island by themselves in healthcare. The surgery center also breaks down competitive barriers between practices and gives them a mutual goal to succeed; that can be stepping stone for the future because they might want to share services to lower cost and that wouldn't happen without the ASC."
A physician group's investment in a surgery center can also attract new physicians who may want to remain independent. "The additional revenue stream helps them recruit partners to their practices," says Mr. Ayers. "Without the ASCs, it's very difficult to maintain independence from health systems that are buying up practices left and right."
More Articles on Surgery Centers:
8 Key Considerations During ASC Ownership Transitions
12 Steps to More Robust Reimbursement in a Surgery Center
5 Creative Ways to Slash Costs and Boost Profits in Surgery Centers
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