6 Best Specialties for Surgery Centers

Specialty choice can make or break an ASC, depending on reimbursement rates, supply costs, case volume and availability of market share. Here is a list of the six "best" specialties for ASCs, based on several advisors' assessments, ranked in order of preference based on the results from the 2010 ASC Valuation Survey by HealthCare Appraisers, which was completed by 17 ASC companies representing more than 500 surgery centers throughout the country.

Each listing includes advisors' thoughts on how to reap the benefits of a desirable specialty. Do you agree with these rankings? Please send your thoughts and feedback to rachel@beckersasc.com.

1. General orthopedics

What makes it good: General orthopedics is ranked the best specialty for ASCs, with 94 percent of HealthCare Appraisers respondents calling general orthopedics "desirable." Chris Bishop, senior vice president of acquisitions and development for Blue Chip Surgical Partners, says it comes as no surprise that general orthopedics leads the pack because of its historic popularity. The challenge of performing orthopedics now, he says, is the saturation of the orthopedic surgeon market in many areas of the country.

"Most of the busy orthopedists are already invested in surgery centers, so it's hard to find a group that's not invested or eager to leave a bad surgery center," he says. He says because most orthopedists can perform cases in a timely fashion, the biggest consideration for surgery centers should be contract negotiation. Since orthopedics has high case costs, administrators must take supply and implant costs into account when negotiating rates with payors.

Mr. Bishop says orthopedists are particularly suited to the ASC environment because of their tendency toward "alpha male or alpha female" personalities. "One of the biggest risks in the ASC industry is the hospital employing surgeons, and one of the things we find about orthopedists is that these surgeons tend to be more independent-minded and less likely to accept hospital employment agreements," he says. "When you're thinking about the risks of the surgery center industry going forward, orthopedists are a little less likely to trust the hospital to manage their practice effectively."

Mr. Bishop says orthopedics is also attractive to ASCs because it presents a wide variety of available subspecialties. He says surgery centers should look first to hand surgeons, who can provide high case volume, short case time and good reimbursement. Sports medicine physicians who perform ACLs and arthroscopies can also be a good fit for surgery centers.

How to do it right: Good contract negotiation is essential to profiting from orthopedics, Mr. Bishop says. He claims that most developers typically begin out-of-network and then determine whether the center can feasibly move in-network. "We explain to the payor, 'We'd prefer to move in-network with you, but here's the cost to provide these orthopedic procedures at the facilities, including implants,'" he says. "We ask them to help us negotiate a fair market value agreement that takes into account the high cost of the supplies or implants."

He says it also helps to case-cost every single case to help physicians understand pricing decisions. "One physician may use three shaver blades, while the other physician uses a single shaver blade," he says. "Part of it is the technique, but a lot of it is just unfamiliarity with the cost of supplies." He says showing physicians the difference between their preference cards can motivate surgeons to shave hundreds of dollars off a single case.

While adding orthopedics to a surgery center is a substantial investment — Mr. Bishop estimates an average cost of $300-$400,000 — the investment should pay off if case volume is high. "If you're talking about a three-person practice and they'll bring 1,000 cases to your center, you can certainly justify the investment in the equipment," he says. "You'll most likely pay it off over four or five years." He says surgery centers should look for a minimum threshold of 700 orthopedic cases per year before they start buying equipment.

2. Orthopedic spine

What makes it good: Orthopedic spine comes in second on HealthCare Appraisers' list of most desirable specialties, with 88 percent of respondents calling it desirable. Mr. Bishop says spine is attractive to surgery centers at the moment because it presents "fresh blood" to the industry.

"There are 6,000 surgery centers now in the United States, and most of the specialties have been pretty well picked over in the last 30 years," he says. "Spine has only become a viable option in the last five years or so." As technological advances allow physicians to perform smaller incisions and provide better post-operative pain control, spine surgeons and payors are increasingly comfortable with moving cases into the ASC setting.

He claims that spine is relatively easy to add for a surgery center that already performs orthopedics. "If you already have a C-arm, you can add spine for $100-$150,000," he says. "If you're already doing musculoskeletal procedures in your surgery center, spine is complimentary to what you're already doing." While Medicare has not yet approved spine for Medicare beneficiaries, Mr. Bishop says this delay is actually a positive for centers. "Commercial payors have not seen this kind of case volume shifting en masse from the hospital setting to the surgery center setting, so when we approach commercial payors, they're talking about a savings of 30-50 percent compared to what they're paying the hospital for the same procedure," he says.

He says spine surgeons, who are typically well-known and reputable providers in their communities, are the ideal addition to a surgery center that wants to focus on recruitment. The addition of spine to an ASC might also open avenues for recruitment of physicians in other specialties. "Pain is a logical recruit when you're doing spine because there are a lot of complimentary benefits between those two specialties," he says. "We also find that if spine surgeons make a call to ENT or other specialties, they tend to have a little more influence over what the other physicians are thinking."

How to do it right:
Since spine is still predominantly an inpatient specialty, Mr. Bishop says the average spine surgeon will be able to bring around 75 cases to the surgery center annually. This means an ASC considering spine should ensure case volume from several surgeons before investing in the specialty, he says. "If you have to spend $300,000 to perform spine, it doesn't make sense if you have a single spine surgeon," he says. "You have to do the math and figure out the return on investment."

He says negotiating managed care contracts is a critical component to ensuring a strong return. If your surgery center does not know how to negotiate managed care contracts, outsource to a professional with negotiation experience. It may take time to convince payors that spine cases can be brought safely into the ASC, but persistence should pay off eventually.

3. ENT

What makes it good:
ENT is listed as the third most desirable specialty on the HealthCare Appraisers list, earning the approval of 76 percent of management and development companies. According to Lynda Dowman Simon, RN, manager of St. John's Clinic: Head & Neck Surgery in Springfield, Mo., ENT cases are appropriate for ASCs for three basic reasons: they're short in length, they use minimal supplies and they have a quick recovery period. Reimbursement for ENT cases is also relatively robust; while reimbursement for some cases dropped in the last year, rates for many ENT cases remained stable and some increased. Ms. Simon says the majority of her center's cases can be performed at a significant profit because supply costs are limited — the exceptions are cases receiving Medicaid reimbursement and the few cases that require expensive implants.   

She adds that ENT complications are generally less severe than complications for other specialties, and postoperative patient education is easier because the surgeries are well-known. "There's a certain way you expect to feel after you have sinus surgery or a tonsillectomy, and people can talk about it over the kitchen table," she says. "They have an idea of what's going to happen."

How to do it right: Ms. Simon says case selection and efficiency are the two biggest factors impacting the success of ENT in a surgery center. "With ENT, you have to be careful about what you bring to a surgery center because of cost and reimbursement," she says.

As with all specialties, facilities should keep track of historic case costs and send cases to the hospital if they expect reimbursement not to cover costs. "If you want to put in a sinus stent that injects steroids to control polyp regrowth, and your cost for supplies is $10,000 or more, you have to send that case to the hospital," she says. You also have to be aware of the procedures that will not be reimbursed in an ASC setting. For instance, in Missouri, for a Medicaid patient, a frenulectomy is reimbursed at the hospital but not in the surgery center.

Luke Lambert, CEO of ASCOA, says good contract negotiation is also an important consideration for ENT: While sinus procedures can be profitable because they involve multiple procedures, contracts that do not pay the ASC for multiple procedures do not take advantage of the increased reimbursement. "If you're only getting paid for one procedure per case, you're not going to do well with sinus surgery, but if [payors are] paying for multiple procedures, it can work out well," he says.

In order to profit from ENT, Mr. Lambert also cautions surgery centers to watch out for physician practices that accept a majority of Medicaid cases. "A lot of the work in ENT is focused on pediatric patients, and families with children are disproportionately on Medicaid," he says. "If you're in a low-income area, you might see 70 percent of your practice being Medicaid, which, from a reimbursement perspective, makes it challenging for a surgery center to make money."

Because short case length is one of the biggest advantages of the specialty, ENT-driven surgery centers should get their cases "down to a science," Ms. Simon says. She says a bilateral myringotomy tubes procedure should have an average turnover time of around five minutes, while tonsil cases should turn over in approximately eight minutes. Mr. Lambert adds that surgery centers with ENT should involve ENT physicians in choosing an anesthesia group, as pediatric ENT cases will require particularly skilled anesthesiologists.

4. Ophthalmology

What makes it good: According to the HealthCare Appraisers survey, 76 percent of management and development companies approve of ophthalmology as a surgery center specialty. Mr. Lambert says ophthalmology is "terrific" for surgery centers because skilled surgeons can perform cases in 15 minutes or less. "Because they're fast cases, even though each individual case doesn't pay very much, you can do well with it," he says. Cataract surgeries represent the majority of money-making ophthalmology cases in surgery centers, and the patient population for cataracts tends to include a large number of Medicare beneficiaries. While Medicare reimbursement is not particularly high for these cases, surgery centers can profit if case and turnover times are short.

Mr. Lambert says ophthalmologists are often extremely loyal to surgery centers because of the increased efficiency compared to the hospital setting. "Typically a surgery center will provide the surgeon with two rooms to bounce between," he says. "He'll do one case, finish that case and go over to the next room. Surgeons can spend their whole day doing surgery and just walking back and forth between the two rooms, whereas in the hospital, they may not get two rooms and turnover times can be half an hour between cases."

How to do it right:
Surgery centers with large pre- and post-operative areas are best-equipped to handle ophthalmology, as the rapid pace of the cases means pre-op and recovery areas must be able to accommodate the number of patients. Mr. Lambert says the key to profiting from ophthalmology is efficiency: "You have to have all your processes functioning very well because it's a volume situation," he says. "If you do 10 cases in a room in orthopedics, you can make money, but you might be shooting to do twice as many in ophthalmology." He says the busiest ophthalmologists will perform around 1,000 cases per year.

While retina procedures are slowly moving into the surgery center setting, Mr. Lambert says the biggest profit driver is still cataract surgery. He says surgery center physicians can profit by providing the required "additional services" to cataract patients that choose to pay more money out-of-pocket for a presbyopia-correcting lens. "These lenses don't typically help center profitability because most centers are not marking them up to any significant degree," he says. "But because the surgeons have to provide extra services, they make more."

5. Pain management

What makes it good: Pain management is listed as the fifth most desirable specialty by ASC management and development companies, with 76 percent of respondents calling the specialty desirable for surgery centers. Amy Mowles, president of Mowles Medical Practice Management, says pain management is appropriate for surgery centers because it is relatively inexpensive to equip and cases can be turned over very quickly. "If you look at the actual cost of providing the vast majority of pain management procedures, even if you're only getting a facility fee of $294 for Medicare for the top of our most commonly-performed procedures, that should be a huge margin of revenue," she says. "If it's not, you're doing something vastly wrong."

She says the "vast majority" of procedures can be performed for a direct cost of $25, and ASCs that cannot perform procedures at this cost are either negotiating poor supply costs or scheduling staff inappropriately. She adds that the movement of pain management procedures from surgery centers to office-based settings has slowed down following the addition of pain management procedures to the ASC payment list. "It's clear that Medicare wants these done in an ASC," she says. "They realize the acuity of their beneficiaries, and they realize that pain management is a very provocative procedure. They want their enrollees to have the assurance of appropriate staffing, equipment and emergency protocol."

How to do it right: Ms. Mowles says pain physicians should perform approximately 20 procedures a day in an ASC to ensure robust profits. "You'll have to be doing 2,700-3,200 billable procedures per year to support one class B operating room," she says. "If the physicians can't do that, you don't want them." She says multi-specialty ASCs can also save money by pulling supplies on the shelf rather than ordering a custom tray. Single-specialty ASCs, on the other hand, may want to order a custom tray but evaluate their options to see if prices can be lowered by eliminating certain supplies.

6. GI/endoscopy

What makes it good: GI is the sixth most popular specialty on the HealthCare Appraisers survey, with 70 percent of management and development companies calling it desirable. According to Frank Principati, COO of Physicians Endoscopy in Doylestown, Pa., gastroenterology procedures work well for surgery centers because they can be performed efficiently with few complications and low risk of infection for patients. With short turnover times and relatively quick procedures, GI-driven centers should expect to perform around 3000-3,500 cases per year in each procedure/operating room, with each GI physician bringing around 500-1,000 cases to the center annually.

Mr. Principati believes GI-driven centers enjoy high patient satisfaction scores because of the specialty's natural efficiency. Open-access colonoscopy programs contribute to patient satisfaction by providing screening examinations without a pre-procedure visit, and shorter wait times and ease of scheduling give ASCs a leg up over hospitals. He also feels that the age of GI patients may be dropping as people pursue upper endoscopy for conditions such as heartburn and GERD, opening up a new segment of the market for surgery centers. "You may start seeing patients in their 30s and 40s who then become your patients for screening colonoscopies when they turn 50," he says.

How to do it right:
"A successful GI center depends on the efficiency of your cases," Mr. Principati says. Medicare cuts have impacted GI reimbursement over the last four years, so GI-driven centers need to be mindful of utilization and turnover times and keep track of variable costs to stay profitable. "There's a lot of great benchmarking available that allows you to see how you're performing [compared to other centers]," Mr. Principati says. "It comes down to monitoring metrics on staff, drugs, supplies and other variable costs."

He reports that while the bulk of GI volume and revenue comes from colonoscopies and upper endoscopies, some physicians may be interested in bringing other procedures, such as hemorrhoid banding, into the surgery center. "There are a number of centers that have realized the benefit of adding these procedures, and it's a great way to fill block time and expand services that we're providing to our patients," he reports.

While the number of GI physicians is declining — a problem plaguing many specialties — Mr. Principati says surgery centers can improve recruitment by offering ownership to physicians. "Having ASC ownership capabilities makes it more attractive, but it's still a very competitive process as far as recruiting," he says. Physician Endoscopy's partnered physicians have been successful in marketing their centers and actively participating in recruitment efforts.  

View the HealthCare Appraisers' survey.

Related Articles on ASC Specialties:
5 Worst Specialties for Surgery Centers
5 Surgery Center Specialties Predicted to Grow in 2011
5 Worst Specialties for Surgery Centers: Readers Respond

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