The two biggest goals for ASC administrators are often improving efficiency and increasing revenue.
In a recent webinar titled “Is Your ASC as Efficient and Profitable as it Should Be?” Ambulatory Surgical Centers of America Chief Development Officer Jeff Péo and Senior Vice President of Operations Jason Beam, RN, BSN, CASC, shared best practices for leading profitable ASCs.
1. Integrate a compressed schedule. One of the most impactful things administrators can do is integrate a compressed or vertical schedule. If a center has multiple ORs with an under utilized caseload, the ORs aren't being fully utilized. If an OR is underutilized, shut down that OR for one or more days per week to condense the number of active ORs. By taking this initiative, an administrator could reduce spending on staff.
2. Proper inventory management. Mr. Beam recommended administrators work with inventory managers to ensure proper inventory management. The inventory manager should only order the necessary supplies and negotiate with vendors for the lowest cost. A letter of commitment and contract compliance from the vendor can lower the cost even further.
Mr. Beam said there's technology available that can help streamline inventory management. He said, "[The technology] has lowered the amount of time our managers had to spend on material management by half."
3. Keep a close eye on accounts receivable. Administrators should know the minute details of their accounts receivable Industrywide, the average AR return is 40 days. ASCOA centers are typically around 30 to 33 days, Mr. Beam said, although those numbers vary when taking Medicare cases into consideration.
4. Gain preauthorization and send claims out the door quickly. Mr. Beam stressed the importance of gaining preauthorization or precertification for patients before the day of surgery, and then sending the claim out within 48 hours. Technology has helped with the claim process; for dictation ASCOA prefers SourceMed's Command Health. The app improves EHR platforms to allow physicians to complete their case dictation electronically.
5. Staff the center appropriately. When utilizing a vertical OR schedule, every minute in a day should be in use. Whether it's a physician performing an operation or turning over an OR, Mr. Beam said if the center has staff waiting for an OR to open, he expects to see all available staff working to turn the rooms over
6. Start cases on time. Physicians who constantly starting late can bog down a center. If a physician has a 7 a.m. OR time slot but is consistently late, administrators can reiterate the importance of punctuality or move that physician to a different time block. "Late starts are detrimental for you especially if you're really compressing the schedule," Mr. Beam said.
7. Prevent cancellations. ASCOA expects to see less than 1 percent of its total case volume canceled. If a patient cancels the day of surgery, it can greatly impact the bottom line.
8. Perform case costing and benchmark profitability. Mr. Beam said centers should strive to achieve a profit margin of 40 percent, with medical supplies accounting for 25 percent of net revenue and payroll accounting for 28 to 30 percent. To help drive profitability, administrators can focus on case costing. ASOCA performs case costing on a monthly basis using a three month trailing data set and shares the information with physician owners.
9. Track overhead cost per minute. Overhead cost per minute is one of the most important tools an administrator has. Mr. Beam said as soon as he hands out the data, "Physicians start looking at this because they want to see where they stack up against their peers." Then the physicians can help administrators bring costs down.
Mr. Beam recommends this formula to evaluate overhead cost per minute:
- Run a profits and loss report in an accrual basis for the month you are costing
- Subtract out the cost of drugs, supplies, implants and any interest, depreciation or amortization expenses.
- Divide that number by total operative minutes (time in the OR) per month
10. Recruit new physicians. Recruiting physicians can be an easy way to add in new revenue. Mr. Péo suggests administrators "always be recruiting." However, in most communities there are few unaffiliated physicians to pursue. Mr. Péo suggests ASCs seek out physicians near the end of their hospital contracts. Several physicians take contracts with hospitals near the beginning of their career, and the second contract is often less attractive. Administrators should approach these physicians to gauge interest in becoming an ASC owner or user.
Mr. Péo says, "If you're not going to talk to them, other surgery centers will."
11. Add related specialties. Consider adding a specialty related to the cases already performed at the center. With a single specialty, administrators should work with physicians to bring in their colleagues. Administrators have to conduct a deep analysis when considering adding other specialties to ensure it's not a costly mistake, especially if the center would need to purchase new equipment.
12. Stay out-of-network as long as possible until the in-network contracts are right. Newly formed ASCs begin operations out-of-network until the administrator can negotiate in-network contracts. Established ASCOA centers are almost entirely in-network, but Mr. Beam warned administrators should not rush contract negotiations.
Use the center's data to make sure the in-network contract will support the bottom line. Transitioning in-network from out-of-network contracts does significantly impact revenues, but established contracts and case volumes breed long term success.