Value of Single-Specialty Surgery Centers: Q & A with Richard Jacques of Covenant Surgical Partners
Richard Jacques, president and CEO of Covenant Surgical Partners, discusses the pros and cons of single-specialty ASCs.
Q: What are some of the benefits of single-specialty ASCs versus multi-specialty centers?
Richard Jacques: To me, there are two significant benefits to single-specialty ASCs. The first benefit has to do with downside risk. In single-specialty centers, individual physicians typically retain a significant portion of the surgery center, so they are motivated to use the center and are more likely to see the center as an extension of their practice. In these situations, it is rare that a physician would leave the ASC. As a result, volume is unlikely to decrease due to the loss of a physician. This isn't the case with large, multi-specialty ASCs, where investing physicians may only own a small portion of the facility.
Another benefit of single-specialty ASCs is that it takes less effort to grow these centers. We don't have to syndicate or attract a large number of physicians as a multi-specialty center would need to do. A single-specialty center that can bring in 1-2 non-affiliated physicians (meaning they don’t have an ownership interest in another single-specialty center) in a 5-6 year period can increase volume by as much as 30-40 percent.
An additional benefit of single-specialty centers is greater efficiency. A center that focuses on one specialty or two complementary specialties has a staff and facility that are specifically trained and designed for that specialty, which leads to more efficient care.
Q: What are some drawbacks of maintaining a single-specialty center?
RJ: The biggest drawback is that you are limited in regard to expansion, both in facility size and the number of physicians you can bring in. A single-specialty ASC may only have two or three ORs with full schedules, leaving little room for bringing in additional physicians or procedures.
Additionally, in a single-specialty ASC, the facility management and administrators don't have as much control as they might have in a large, multi-specialty ASC. Because physicians are more invested emotionally and financially in these centers, management and administrators are required to create consensus for decisions and develop deeper and stronger relationships with the physician partners.
Q: What types of specialties are most profitable right now in the ASC setting?
RJ: Single-specialty ASCs are popular and will continue to grow in popularity, in my opinion. Of the approximately 6,000 ASCs today, about 55 percent of them are single-specialty. Eye, GI and pain centers are the most popular. Plastic surgery ASCs are also very popular, but they are sort of an anomaly because those are mostly an extension of the physician's practice where there is no facility fee. There are also a small number of orthopedic- and urology-only centers, but not nearly to extent of eye, GI and pain. To be profitable, a single-specialty orthopedic ASC requires a very large group of physicians, because of the costs involved. Eye, GI and pain centers can typically be profitable with fewer physicians.
The key to profitability is volume. Because GI cases are non-invasive, these physicians tend to do a lot of cases, so you don't need a lot of physicians doing them to be profitable. In this specialty, 2-3 physicians can justify their own center. What prevents physicians from having a profitable single-specialty center is if they don't have the volume to warrant their own center.
Q: How do you see the profitability of single-specialty ASCs changing in the future?
RJ: I think reimbursements will continue to come down or at least stabilize. I don't see that changing. However, ASCs are still a low-cost site for service. In a market where we're trying to pay for an aging population, ASCs are a solution to a problem because they can reduce costs. I see the future being very bright for GI and ophthalmology, because of this aging population. I also see a bright future for pain management as well. I am very bullish on the future of single-specialty ASCs. I see more physicians trying to participate in these as well. At smaller, single-specialty centers, they get better scheduling and the staff has a better understanding of each physician’s preferences.
There is some concern about what is going on politically with healthcare reform, but I believe if you're doing the right thing and providing something that is good for healthcare and for the economy, then you'll continue to have success. ASC reimbursement rates are 59 percent of hospital outpatient departments today, so we're clearly a low-cost option, and because of that, ASCs are very well positioned to be a solution to the healthcare crisis.
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