6 Keys to Develop a Spine-Driven ASC
At the 10th Annual Orthopedic, Spine and Pain Management-Driven ASC Conference in Chicago on June 15, 2012, Kenny Hancock, president and chief development officer of Meridian Surgical Partners, shared six key ways for healthcare professionals to develop a spine-driven ASC.
1. Know your market drivers. Mr. Hancock said there are four main market drivers that have grown the spine ASC industry over the past few years, and prospective players need to be aware of them: a minimally invasive mindset, big advances in technology (e.g., implants, instruments and techniques), better anesthesia practices and more acceptance from health insurers.
2. Develop a detailed business plan. A detailed business plan has several pertinent components: surgical case volume goals, reimbursement structures, construction costs and more. Physicians and healthcare professionals need to have this plan ready to go before any progress is made.
In addition, Mr. Hancock said that although the business plan imbeds several financial goals to meet, which are important, the financial outcomes are not the be-all, end-all. Patient satisfaction and safety and becoming a part of the healthcare delivery chain should be the overarching goals as well. "It's not really driven by a financial outcome," Mr. Hancock said. "It's a byproduct. This should be about taking control of the future of the surgical environment and having a better environment for your patients."
3. Determine the scope of the ASC project. The scope of starting a spine-driven ASC is one of the most important parts of the planning process, Mr. Hancock said, because it determines the cost and investment needed to get it off the ground. Without the bare bones metrics, a spine ASC will have no idea if it can exist in the near- and long-term future.
Some of the primary objectives of the spine ASC's scope include determining the number of physicians at the ASC, working capital projections, construction costs, equipment costs and other facets that overlap with the aforementioned business plan.
4. Create the right partnership structures. When starting a spine-driven ASC, physicians and other investors usually form two partnerships: a real estate partnership and a surgery center partnership.
Mr. Hancock said the real estate partnership captures the land purchase, utilities, fees and permits and other construction allowance. Usually, the real estate partnership for a spine-driven ASC involves a total investment of $3.5 million. The surgery center partnership involves the physician owners and management partners, and it involves the investment of interior construction, equipment and other working capital. Usually, the surgery center partnership involves a total investment of $4.25 million. Between the two partnerships, total investment for a spine-driven ASC could reach almost $8 million, something Mr. Hancock said could create a financial burden without the proper planning.
5. Understand the financial commitments. Building off the partnership structures, Mr. Hancock said equity is huge with spine-driven ASCs, and it is a good idea to raise 100 percent of the working capital. "You can't raise enough cash," Mr. Hancock said. "You can always distribute capital back that you don't need. Strong operations and a growth plan are critical to success for growing capital."
He also recommended interested parties obtain a commitment for financing from other physicians and partners before starting the project, as an inordinate amount of debt could doom the ASC.
6. Know your operational challenges. Some of the biggest challenges involved with a spine-driven ASC are reimbursement structures with payors, implant costs, equipment costs, staffing and physician mindset. A well-prepared spine-driven ASC will address these concerns ahead of the game — for example, the ASC must demonstrate to payors the spine procedures are safe and cost-efficient, ASCs should negotiate carve-outs for implants, and an experienced equipment planner should be hired to help with equipment cost forecasting, Mr. Hancock said.
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