6 areas of focus for ASCs to improve efficiency & increase the bottom line

Improving efficiency while increasing the bottom line is the primary objective of nearly every ASC. In a recent webinar titled “Is Your ASC as Efficient and Profitable as it Should Be?” representatives of Ambulatory Surgical Centers of America (ASCOA) shared best practices for profitable ASCs. 

Jeff Péo, chief development officer; Margaret Chappell, RN, MS, CASC, senior vice president of operations; and Jason Beam, RN, BSN, CASC, senior vice president of operations, addressed six areas for ASCs to target to ensure they're getting the most out of their centers.

1. Optimize each OR with appropriate scheduling, supply management and communication. "Your OR time is the number one asset you have to offer to your physicians," Mr. Beam said. 

Institute a compressed or vertical schedule to optimize your ORs. If a center has multiple operating rooms, and each one has a few cases assigned to it, consider whether shifting operating times would allow each OR to accommodate an increased caseload. By adding additional cases to an already active operating room, administrators save money by not having to staff or supply additional rooms.

Mr. Beam suggested breaking down the individual supplies used to identify further savings. Administrators can work with their materials manager to ensure the right amount and quantity of supplies are ordered on a weekly basis; inventory is expensive when it's in use, or when it's on shelves sitting unused. When it comes to getting supplies from a distributor, ensure the item is on contract and then take the additional step to see if a LOC (Letter Of Commitment) is available that can decrease cost even more.

Finally, to see an increase in profitability and an uptick in efficiency, an ASC administrator needs to analyze their accounts receivable policy. Ask the business office enough questions to build communication between the ASC and the payer. Communication is key, Mr. Beam says.

2. The use of metrics is quintessential. Ms. Chappell identified several areas for administrators to focus on including:

  • Accounts Receivable days: "One of the most important things you can do is to keep money coming in the door," she says. The industry average is around 40 AR days, but ASCOA holds its centers between 30 and 33 days. Medicare cases are the exception to the rule because Medicare pays between 14 to 21 days.
  • Turnover time: The time physicians spend between patients is as important as the time spent in the room. Administrators can examine how much time is spent between visits and identify ways to decrease turnover time between patients. "We pride ourselves on a fast turnover time," she says. "Physicians want to be in your surgery center when they can work efficiently, and then get out to spend time with their families."
  • Late starts: Analyzing the start time of physicians and staff is important. If a physician has a coveted 7 a.m. OR time slot, but they consistently come in an hour late on Thursdays; an effective administrator can schedule another procedure during the time.
  • Cancellations: Administrators want to examine each cancellation and get to the bottom of it, if possible. Compile data on cancellations and find out the root causes to eliminate them. Scheduled surgeries that are suddenly cancelled are a large liability on the bottom line.
  • Profitability: The most important question metrics can answer is: how much money is in the bank, and how much does it cost to run the center? "Those are things you need to look at everyday," she says.

Ms. Chappell suggests using benchmarks, and referencing them frequently. "If you can trend it and track it, you can make changes," she says.

3. Perform case costing to evaluate profits. ASOCA gathers case-costing data on a trailing three-month basis. The three-month lag allows for ample collection time, Mr. Beam says.

Mr. Beam uses a simple formula to evaluate overhead cost per minute:

  • Run a profits and loss report in an accrual basis

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) in the month

That will equal the overhead cost per minute, which can be considered on a case-by-case basis.

ASCOA uses this equation to answer two questions: Is the case a good fit for the center and is the procedure making money? The data is explained and shared with physicians, and it helps them develop a better idea of procedure cost.

For example, a pain physician used a drug costing the center $73 per vial. Mr. Beam saw the drug was on contract, but then found a LOC that dropped the cost to $6 a vial. With that factored in, every case the physician had was profitable. 

4. Recruiting is an essential tool to bring in new revenue. The best thing an administrator can do is to "always be recruiting." Mr. Péo suggests working with physicians to bring new cases to the center and have physicians help with recruitment as well.

Adding specialties is a good way to expand a caseload, but careful analysis is essential to ensure that the new specialty is not a costly mistake. ASCOA suggests renting or trialing equipment until an administrator is sure the new physician and specialty make sense for the center.

Finding new physicians can be challenging, but one tip is to look for doctors at the end of their employment contracts. "There's no magic wand you can wave and have the recruits pile in," Mr. Péo says. "Roll up your sleeves. Recruiting is hard work, but it can really add substantial value for the center." 

5. Improving reimbursement is a hard thing to do as the industry shifts towards value-based care. ASCOA is shifting from an all out-of-network scenario to completely in-network. Administrators shouldn't be afraid to bring in an outside party to negotiate a contract.

Data and communication is invaluable during payer contract negotiations. Ensure staff is on the same page when it comes to reporting, and institute comprehensive metrics that account for every financial aspect of an implant procedure to maximize reimbursement.

6. Improve the center’s collections. When it comes to improving collections, the following questions need to be asked to start the conversation:

  • What do you do to collect money owed to the center?
  • What is the collection process and how many employees know the process?
  • Do you look at each case on an individual basis?
  • Do you verify with insurance and verify that you're going to get paid?
  • How does your staff follow up with each payer?
  • What information is available to you?

Like many of the other elements, communication between staff is crucial. Develop and follow a process while making sure all employees of the center know their roles. 

"You can never over-train your staff. They're your most valuable asset when it comes to collecting," Ms. Chappell says. 

Listen to the recording here and view the webinar's slides here.

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