Southern Indiana Surgery Center Turnaround: From Decline to Profitability

Three leaders in the ambulatory surgery center field give an inside look at the process of turning around a struggling surgery center.

Southern Indiana Surgery Center opened in 1993. The multispecialty center has four operating rooms and two GI suites. The center performed well until 2008 when the orthopedic group working with the center left to establish their own facility. As the orthopedic surgeons left, so did a significant amount of case volume.

JoeZasaFor the first time since its opening, the center began to struggle. ASD Management stepped onto the scene in April in 2009 and began the process of turning around an ASC that was slipping further and further away from a viable future.

Joe Zasa, cofounder and principal of ASD Management, Southern Indiana Surgery Center's business office manager Misty Scales and J.R. Sarpa, MD, ENT physician and chairman of the ASC's board, paint a picture of a faltering center's journey back to profitability.

The problem
At the time of the orthopedic group's departure, Ms. Scales was a secretary single-handedly juggling employee payroll and benefits, accounts payable, insurance and training for accounts receivable. A transcriptionist worked from home, providing minimal support. Nearly everything, from ACL procedures to septoplasties, was being coded and billed incorrectly and managed care contracts had not been updated in nearly 10 years.

With a diminished case volume, issues running throughout the center began to step fully into the light.

Dr. Sarpa stepped into the role of chairman of the board as the center began its fight to stay afloat. "I was worried about cost-effectiveness, the staff and especially contract negotiation," he says. Dr. Sarpa recognized a need for help and began searching for a management company's support.

He visited industry meetings, talked to several different companies and even came close to selecting a company, before realizing the fit wasn't quite right. He finally connected with Mr. Zasa and took the first step in reshaping the operations, and future, of Southern Indiana Surgery Center.

Getting the ball rolling
Dr. Sarpa invited Mr. Zasa to the center for an initial visit. The ASD Management founder immediately recognized symptoms common in problematic centers. The inventory on hand was excessive and there was no functioning business system in place.

Claims were being dropped and fees hadn't been raised since the center first opened its doors. Mr. Zasa's game plan included managed care contracting, establishing a risk management program, leadership assignment and business office improvement. "The center needed an operational overhaul," he says.

The solution
The first place to start with any turnaround project is patient care. Is the environment safe? Mr. Zasa found the clinical aspects of the center were one of its strongest areas. However, they did install an active risk management program and brought more structure to the clinical side of the center.

Misty ScalesThen look to the staff that is running the center. "At the time, Misty was a secretary. We immediately promoted her to business office manager," says Mr. Zasa. Almost the entirety of the remaining business office staff was replaced. The administrator was replaced and ASD Management got to work putting in place new, effective processes.

ASD brought an entirely new inventory process to the center. "It was pointed out that having inventory three months ahead represented a lot of potential revenue sitting on the shelf," says Dr. Sarpa. Inventory purchased that far in advance faces expiration and represents wasted cash flow. They slimmed down inventory and channeled it into an efficient process.

The next step was to renegotiate managed care contracting. "Contracts with several insurance companies, including one that is next to impossible to work with, have been renegotiated and improved," says Dr. Sarpa. Contract negotiation is an ongoing process, but since the turnaround Southern Indiana Surgery Center has had the support of strong administrators.

As Ms. Scales stepped into her new role, the entire business office was reshaped. Transcription and coding was outsourced. New accounting controls were installed. A human resources company was put in place. "Before I was handwriting payroll slips and paying taxes manually, but now with a HR company in place I am relieved from the little duties to focus on collections," says Ms. Scales.

The fruits of turnaround success
The entire progression of replacing staff, reinventing the business office and creating an efficient operation took about six months and the results were almost immediately recognizable. "As the center began to do better, physicians started coming back," says Mr. Zasa. Volume increased and continues to do so today. Within 18 months, Southern Indiana Surgery Center had tripled its income.

The business office, still spearheaded by Ms. Scales, now has the capability to effectively and efficiently handle the volume of cases at the center. "Our A/R at that time was at 55 days. We are now as low as 32.2 days," says Ms. Scales. "Each month everything flows smoothly."

Dr. Sarpa still serves as the chair of the board. Mr. Zasa attends each board meeting and always remains available to lend a hand in the center's operations. "We now have help overseeing personnel, business and clinical departments. Our entire operation has been tightened up with improved management," says Dr. Sarpa.

Since Southern Indiana Surgery Center's turnaround, Ms. Scales has won the ASD Management Business Office Manager Award. Dr. Sarpa and his fellow physicians remain committed to the center.

"If the physicians didn't buy into the process, we would have failed. But, they did and we are still growing," says Mr. Zasa.

More Articles on ASC Issues:
6 Reasons to Be Optimistic Regarding the Future of Surgery Centers
4 Approaches to Improve ASC Profits Now
6 Things to Know for Controlling ASC Labor Costs

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