Medical school teaches physicians how to operate, not how to build an operating room. For physician owners taking on a new ASC, that means getting up to speed fast on land deals, zoning, easements and floor plans.
Leo Spector, MD, CEO of Charlotte, N.C.-based OrthoCarolina, is in the middle of that crash course. The practice just broke ground on its Steele Creek ASC, the first center it is designing from the ground up.
“The acquisition of the land itself was a wholly new process for us,” Dr. Spector told Becker’s. “It gives me a deeper appreciation for what the folks that do construction and development have to do every day, that I didn’t have before this.”
The physician-owned practice more than doubled its wholly owned ASC operating room capacity and sold its physical therapy business to help fund the growth. Its two existing wholly owned ASCs were built inside office buildings and existing spaces.
Here are seven lessons on building an ASC from scratch from Dr. Spector and panelists at Becker’s 32nd Annual The Business and Operations of ASCs meeting in Chicago.
1. Build the pro forma for the bad year, not the good one. Dawn Pfeiffer, RN, a director with Steris and founder and CEO of Nashville, Tenn.-based Triangles Healthcare Consulting, has worked on 20 to 25 de novo ASCs in 17 years. She said most early mistakes trace back to a pro forma built around physicians’ case volumes and payers that leaves out operating costs.
“That first year you’re kind of broke,” she said. Her advice: triple-check the pro forma and make sure it covers the first 12 to 18 months of operating costs after opening, not just construction.
E.J. Ledesma, CEO of Sarasota, Fla.-based 360 Orthopedics, said his team runs sensitivity analyses more than a year before breaking ground, including one question: If every case were reimbursed at Medicare rates, would the center still make money?
Dan Decker, MD, a urologist in northern Arkansas, warned that outside pro formas tend to overstate volume. “They look at your CPT codes, they say, oh, this is an outpatient surgery,” he said. “It’s always an exaggeration.”
2. Look past the map when picking a site. Dr. Spector said OrthoCarolina chose Steele Creek, in Charlotte’s southwest quadrant, based on population growth and where its practice locations sit. Then came the work he hadn’t anticipated: checking the site against noncompetes from legacy joint ventures, land costs, easements, zoning, and talks with neighbors about entrances, exits and signage.
“As a surgeon, we don’t think about what are the best places for residential versus commercial,” he said. “Is there a stoplight that’s going to allow them to easily get in? … You’re just thinking, how am I going to do surgery?”
His takeaway: “Sometimes the enemy of good is better. … If you spend the time looking for perfection, you probably are never going to find it.”
Panelists added their own cautions. Mark Mayo, who has worked on about 14 surgery center projects since 1984, said, “It’s not really a good idea to put an operating room with [a] microscope next to the railroad tracks.” Mr. Ledesma said Florida centers have to plan for hurricanes and storms. A nearby group’s air conditioning went down because it sat in the wrong spot, and its partners had to write a check for almost $300,000.
3. Build for the next three years, and leave room for the rest. Ms. Pfeiffer said many new ASCs are overbuilt from the start, sized for volume projected five to seven years out. She recommended building for the first three to four years and designing so the center can expand later.
She tested that on a center she designed herself, tracking staff movement for 99 days. Nurses were using every other recovery bay for storage and overflow, despite the cost of piping gases and suction into each one. Improper storage, she said, is the most common CMS deficiency she sees in surgery centers.
Dr. Decker’s version: “If you think you have enough storage, do more.” He also suggested shelling out extra ORs without finishing them as a cost-effective way to plan for growth.
OrthoCarolina is pacing its own expansion. It is taking its [Matthews] center from two to four ORs and plans a similar expansion at Mallard Creek after that. “We want to take on one expansion project at a time,” Dr. Spector said.
4. Get anesthesia and engineers in the room early. Dr. Decker recalled raising the question of anesthesia’s role at an early partnership meeting on a previous ASC. “They laughed,” he said. He now calls engaging anesthesia upfront one of the key clinical steps in moving cases out of the hospital.
Ms. Pfeiffer said a de novo that is six months from opening without an anesthesia group is “behind the ball.” Those talks should reach down to crash cart standards and drug costs that may not be in the pro forma.
She also brings mechanical, electrical and plumbing engineers, the architect and the general contractor to the first design session. “My idea is to reduce the change orders if at all possible,” she said.
5. Test the floor plan before you pour the concrete. Mr. Mayo said that if an architect can’t produce a 3D schematic showing patient, physician, anesthesia and supply flow, keep pushing. Sterile processing is “kind of an afterthought,” he said. “It’s never big enough.”
For its second ASC, in Venice, Fla., 360 Orthopedics is taking that further. The team rented temporary space and is building a cardboard mock-up of the center to walk through with community members and referring physicians.
6. Settle governance and culture before the doors open. For Dr. Spector, physician autonomy in a growing practice depends on governance. At OrthoCarolina, a physician who wants new equipment works with administration on a business case and pro forma, then takes it to a finance committee of peers, an operations committee and, finally, an elected executive committee.
“There’s no solutions, just trade-offs,” he said. “That governance structure, I think, is what allows us to be able to scale, have that uniformity while still allowing for enough independence and autonomy to make it feel not employed.”
Mr. Mayo said the same applies to culture: “If you don’t have a vision of your culture before you start, you’ll never find it.” He also urged teams to rehearse roles and patient flow before opening.
7. Think hard about who gets equity. Mr. Ledesma said he spent four years building partnerships for 360 Orthopedics’ second ASC. He cautioned against offering every specialty the same ownership stake. At 360 Orthopedics, he said, about 80% of pain management work is now done in the office, and he has seen partners at other centers push out pain physicians whose ASC volume dropped. Mr. Mayo noted that land and building ownership can be structured separately from the surgery center, giving groups such as anesthesia another way to invest.
At the Becker’s 32nd Annual Meeting: The Business and Operations of ASCs, taking place October 29-31 in Chicago, ASC leaders, surgeons and healthcare executives will explore strategies to drive growth, enhance operational performance, navigate reimbursement challenges and prepare for the future of ambulatory surgery. Apply for complimentary registration now.
