6 thoughts on improving ASC profits

"Over the past 15 years, surgery center reimbursement has stayed flat or declined. All the while, our costs have continued to increase," said Ambulatory Surgical Centers of America CEO Luke Lambert at the Becker's ASC 23rd Annual Meeting in Chicago. "But our industry has been able to maintain its health."

During their presentation, Mr. Lambert and Hanover, Mass.-based ASCOA's Chief Development Officer Jeff Péo discussed six ways ASCs can improve their profits through cost reduction strategies and recruitment.

1. Benchmarking. In simple terms, benchmarking involves "comparing your center's metrics to another center's metrics," said Mr. Péo. "It's a good idea for you to look at these things and identify areas where you can improve."

An ASC can compare its metrics — including EBITDA and costs for wages, supplies and rent — to those of other centers in the area with similar volumes. A center can compare its profit to the national average using guidelines like VMG Health's national average estimation.

2. Schedule compression. "The idea behind schedule compression is to get as many cases in a day through as you can," said Mr. Péo. After all,  the "No. 1 asset you have is your time in the OR," he added. While working to compress your center's schedule, analyze whether you can reduce the number of days you're open.

"[Schedule compression] is not necessarily easy for doctor partners to understand," so be sure to communicate your plans with physicians and staff members, said Mr. Péo.

3. Case costing. Case costing should be done on a monthly basis. ASCs should be sure to look at every case and figure out the overhead cost per minute for each case. "We also tie in what [physicians'] reimbursement for that case was," Mr. Péo added. A center should be sure to include all available data — including collections and supply costs — in the process. Again, the resulting information should be shared with the center's physicians.

4. Mergers. Merging with another center in the market can be a valuable way to improve overall profits. Mr. Péo gave an example of two centers operating near each other. One was bringing in $300,000 in profit, while the other had $900,000 in annual profit. When the ASCs merged, they combined labor costs, utilized one center's space and used one center's better contracts. By joining forces, they saved money on rent and brought in $2.175 million in annual profit.

5. Materials management. This step involves the planning, organizing and the control of materials from their initial purchase through their usage. To best manage your center's supplies, utilize rebate maximization. In addition, conduct regular audits to ensure pricing amounts are being honored.

6. Increasing case volume. ASCs should take three primary steps to increase their case volumes. First, they should work with their existing physicians. "If you have doctors that are non-owners, do everything you can to roll out the red carpet for them," said Mr. Péo. "Talk to them every time they come in."

A center may also recruit physicians with the same specialty. Doing so prevents a center from having to purchase new equipment. It's acceptable to recruit from competitors, but a center should always undergo a trial period with the new physicians to guarantee they're a proper fit.

Finally, an ASC may add new specialties to increase case volume. However, be aware of the dangers of adding too many specialties. "Don't be afraid to look at it, but be very realistic with yourself," said Mr. Péo. "Make sure you know what it's going to cost you."

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