Perfecting the ASC Business Model: Why Size Matters
"The difference between the two extremes [small and large] is complexity," says Roy Bejarano, president of Frontier Healthcare. "There is no comparison between two rooms and seven." Complexity affects each element of an ASC from development to everyday operations. Here are four key factors making an impact.
1. Future development. "You are defined by the real estate you pick," says Mr. Bejarano. A site may have the capacity for the addition of one or two operating rooms, but a small ASC does not often make the leap to large without relocation. Relocation is disruptive and, particularly in the case of certificate of need states, not always possible. Though expansion is possible and potentially beneficial, an ASC's business model will be built on its actual size, rather than its potential. Once an ASC becomes successful in its existing space, owners can discuss growth and relocation possibilities. What form future development takes, whether physical expansion or the addition of new physicians and service lines, will depend on each individual ASC's owners and situation. Each business model should be customized to take these factors into account.
2. Physician involvement. Small ASCs will naturally have a smaller number of physicians. The key to a small ASC business model is striking the balance between overwhelming the space with too many physicians and letting the number of physicians slip too low. Once you drop below four physicians you are at risk if even one physician cannot perform cases for a period of time—such as a sudden illness or prolonged vacation, says Mr. Bejarano. Each additional physician diversifies risk.
In the case of a large ASC, a significant number of physicians are necessary to maintain the case volume, but each additional physician adds a layer of complexity. "Keeping 22 physicians happy based on their individual needs is not easy," he says. "You need a functioning board and you begin to resemble a large, formal corporation."
3. Resource utilization. Less complexity equals less formality and greater flexibility. What takes three or four people to accomplish in a large ASC often only takes one a smaller ASC. Staff members at a smaller ASC may fulfill many different roles so three or four staff members can effectively and efficiently run a small center.
On the other hand, a large ASC will need more staff members in defined roles to eliminate confusion and ensure there are enough hands on deck. "A patient will notice the difference. Is there enough staff, enough equipment? This all forms an impression and if it is done well it forms a positive impression," says Mr. Bejarano. Though quantity of people, equipment and supplies will vary by size, the key to a successful business model is finding the right amount.
4. Investment in the future. Any business model, whether in the ASC industry or not, is built to last. Does size limit or extend an ASC's future? "I don't think there is an irrefutable argument for forming a small or large ASC," says Mr. Bejarano. The answer comes down to myriad variables including an ASC's ability to keep up with the changes in healthcare and its environment.
Larger ASCs are well positioned to attract larger partners and the accompanying stability. "Hospitals are looking for the opportunity to partner with physicians and gain outpatient capacity," he says. "They lean towards larger ASCs, rather than smaller."
On the other hand, smaller ASCs are more nimble. ASCs that grow too large begin to resemble small hospitals and tend to lose money, he says. Size may be dictated by circumstance, but with motivated owners and the right business model it need not determine success.
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