How to grow top-line revenue in ASCs

Ambulatory surgery center owners depend on top-line revenue to keep their businesses profitable.

"We know our expenses are increasing," says Reed Martin, COO of Surgical Management Professionals. "We see medical supplies and pharmaceuticals with shortages and upward pressure on costs and prices. Healthcare insurance costs have increased significantly in the last couple of years, and there is pressure on providing staff salary increases. Therefore, if a facility's costs are increasing, but revenue plateaus, the profitability will eventually decline."

That's when top-line revenue enhancement becomes critical. The biggest factors that impact an ambulatory surgery center's top line revenue are:

1. The number of cases and type of cases performed;
2. Specialties at the center and cases brought for those specialties;
3. The amount the facility is paid for cases performed.

"It's important for a facility to do it's efficiency homework in terms of first case lateness, block utilization and turnover times, which all relate to efficiency," says Mr. Martin. "If a facility can do more cases in a day, then it can increase the top line revenue."

Late first case starts often delay the entire day causing staff to work overtime to finish the surgical day. That adds labor costs as well as drives up operating room costs when ORs are not being used.

"You can also evaluate block utilization to increase blocks for high utilizers or allow them preferred advantages and similarly decrease blocks for low utilizers, thereby increasing overall facility utilization," says Mr. Martin. "Turnover times are also important because if there is less time between cases, there is more time for cases. Sometimes that takes additional staffing, and oftentimes the benefit of more cases is worth the cost."

Key thoughts for adding specialties
ASCs today are growing with higher-acuity cases like total joints and spine, and adding 23-hour stays when possible. Multispecialty ASCs have different challenges than single-specialty centers when making changes, but the key questions are largely the same:

• How much will it cost to add this specialty/procedure?
• Will the center need new equipment or renovations?
• How many cases will realistically be done?
• What is the payer mix for the new cases?
• Are there other physicians in the community you could bring in if you had the new specialty/procedure?

"The facility needs to do a financial analysis of the new specialties and add them if appropriate," says Mr. Martin. "Hold a meeting with physicians to figure out what cases they are doing at other facilities or hospitals and see what opportunities there are for you to bring those cases into your facility."

Growth challenges
ASCs have an advantage over other healthcare settings because they are high quality and low cost, but the ASC might not be an option for patients in the future if it's unprofitable.

"ASCs are similar to many other businesses in that they have a lifecycle," says Mr. Martin. "They start up, grow, plateau and then decline. The challenge ASCs have is when they plateau, to identify new opportunities, products and service lines to start them on an additional growth phase."

Other challenges for keeping ASCs profitable include:

• Significant payer mix shifts to higher Medicaid proportions
• Bundled payments with insurance companies
• Accountable care organizations

"The higher Medicaid payer mix is causing pressure to negotiate better rates with insurance payers," says Mr. Martin. "There is some opportunity to bundle payments for anesthesia, physician fees and the ASC fee, but our caution here is to not set the price too low in order to gain volume. We are also working with ACOs to drive additional volume to our facilities."

More articles on surgery centers:
The next 5 years—11 thoughts & best strategies for ASCs
Tenet completes USPI, Aspen acquisitions: 7 things to know
Challenges and advancements in the field of hand surgery: 5 surgeons weigh in

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