Ensuring ASC profitability in a value-based world

A profitable ambulatory surgery center is the result of a number of components working together to offer high-quality care in a low-cost setting. At the Becker's ASC 23rd Annual Meeting: The Business and Operations of ASCs, Oct. 27 to Oct. 29 in Chicago, an expert panel discussed the keys to ensuring ASC profitability.

The panel included:

•    Robert Landerholm, MD, medical director and president of Puyallup, Wash.-based Eviva, formerly known as Puget Sound Bariatrics & Puget Sound Surgical Center  
•    Amanda Sosnosky, RN, administrator, Bellin Orthopedic Surgery Center in Green Bay, Wis.
•    Joe Zasa, JD, managing partner and founding partner, ASD Management based in Dana Point, Calif., and Dallas

The bundled payments era is coming
Mr. Zasa noted the ASC industry is going to see an uptick in bundled payment programs. The key to establishing these programs in your ASC is knowing your costs.

"Bundled pricing makes sense, but we have to get better at it," he said. "They have the potential to be a win for ASCs."

Ms. Sosnosky's ASC started performing total joints recently and entered into a bundled payment with Blue Cross Blue Shield for a 30-day episode of care. She agreed with Mr. Zasa that knowing your costs is essential, and also suggested going into the negotiations with an open mind and engaging your physicians.

"Don't blind your case-costing data," she said "Get them in a room or take them out for dinner and let them loosen up. Talk to them about the implants and devices they use. Most doctors aren't aware of what their peers are using."

While Dr. Landerholm has not yet moved into a bundled payment model, he is considering it. "It seems to be a natural fit for us," he said. "And having timely conversations with your physicians is key. Talk to them about their cost per case. These conversations need to be open."

Benchmarking is crucial
Running an ASC is a high-fixed cost business and the only variable costs are medical supplies and drugs, Mr. Zasa said. ASD Management uses a tool for financial benchmarks, such as cost per case, A/R days and so on. But, these tools are diagnostic in nature.  

"The data just shows you where the problem is and then you drill down to find out what it is," he said. "Sometimes it is not even an issue emanating from the center."

Mr. Zasa added staffing and supplies will likely be the biggest costs an ASC will see.
To keep costs lows, centers can align stakeholder incentives around offering high-quality and low-cost care. Successful centers will see net revenue margins of 50 percent to 60 percent.

Ms. Sosnosky uses Ambulatory Surgery Center Association's benchmarking program to analyze her center's financial data. The ASCA tool allows users to examine benchmarks by specialty and size.

"You also need to have a constant pulse on your A/R days," she said. "Keep your staff engaged with it and share the benchmarks with them. If you're not doing well on a benchmark, you need to find out why."

Focus on contracting and patient collections
Working with your payers consistently and showing them quality data can help ASCs negotiate solid contracts with payers, said Ms. Sosnosky. However, Dr. Landerholm noted there may be a downside to showing payers a center's quality data.

"The jury's out on that," he said. "Sometimes when you show them your quality data, the insurers will come back and say they are paying too much. Insurers do a great job, but they need to be educated on what we actually provide to our patients."

Mr. Zasa also suggested emphasizing to payers that they need ASCs in their networks as outpatient centers provide high-quality care at a good rate. Remind them that it will be twice as expensive for them to have surgeons perform procedures at a hospital.  

The final piece of the profitability puzzle is patient collections. All the panelists agreed that communicating financial data and being upfront about costs is the best way to avoid issues with collections.

"Things changed and it got hard to get money from folks, but it's best to collect upfront," said Mr. Zasa. "Things just keep changing. Keep your house clean and run a good ASC. Take care of your staff — you need them. Focus on the fundamentals, because even though things keep changing, we have to be the best we can be."

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