5 Management Problems Plaguing Unprofitable Surgery Centers

Ellen M. Johnson, Chief Operating Officer for Facility Development & Management, LLC discusses the problems that most commonly necessitate a surgery center turnaround.

1. Lack of compliance with state/federal regulations and accreditation.
Ms. Johnson says Facility Development & Management is often brought in to centers that have issues with federal/state regulation compliance or accreditation requirements. "We find centers are out of compliance," she said. "This in turn affects profitability because when you are out of compliance, it demonstrates inefficiency in operations." Some ASCs hire managers with little or no experience in ASC operations, who have to learn "on the job" rather than reviewing the regulations and accreditation aspects.

Managers can increase their compliance knowledge through the Ambulatory Surgery Center Association and their state associations, Ms. Johnson says. She gives the example of a neophyte manager in charge of compliance and accreditation who may incorrectly identify and prioritize compliance tasks. "They're not sure what it is that has to be done, so they don't ensure that recredentialing gets done or they don't create minutes after holding committee and governing board meetings — things like that," she says.  

Ms. Johnson says in turning around a non-compliant center, her company generally tries to work with the existing leadership and educate these people so that they can assume responsibility for meeting regulations. "Our first step is to perform an audit to determine areas of non-compliance," she says. "Then we evaluate each area of non-compliance, prioritize these areas and correct them until we are sure every issue is addressed." She recommends retaining an ASC consultant who can address questions and concerns. Depending upon the profile of your center, you may not need a full-time management company, but you should have a consultant who keeps you abreast of changing regulations and who can conduct periodical audits.

2. Decreased reimbursement due to a shift to managed care contracts. More surgery centers are moving toward in-network contracts as payors pressure physicians and patients not to utilize out-of-network facilities. Ms. Johnson says the move from out-of-network to in-network can negatively affect profitability, as out-of-network reimbursement is generally more lucrative than reimbursement from a negotiated contract.

She says when centers consider moving to managed care contracts, they should look first at the volume of potential in-network cases that are being taken elsewhere. "Sometimes you'll have a physician who does his out-of-network at one center and his in-network at either a hospital or another center," she says. "The first thing to do is find out how many cases are not coming to the center. Based upon the analysis, it may not be to the center's advantage to contract with certain payors."

She says if the surgery center is missing out on a significant number of cases from the larger insurance carriers, it's best to analyze current case profitability to determine how many additional cases the physicians would need to bring in order to compensate for the change in reimbursement. For example, a surgery center moving in-network may be required to perform three more cases to make up for a reimbursement loss from one out-of-network case.

3. Out-of-control costs. Even surgery centers with strong managed care contracts may see decreased profits if their costs are not kept in check, Ms. Johnson says. She says in many cases, surgery centers have no idea where they're losing money because they don't accurately track their overhead or case costs. She recommends investing in an ASC computer system that enables the center's management team to track and compare costs by specialty and physician. Since staffing and supplies are an ASC's two biggest costs, close monitoring of these two areas is paramount. For example, the surgery center may be inefficient in its staffing profiles, leading to extended patient recovery time and possible overtime for staff.  

The surgery center may also be spending too much money on supplies. Ms. Johnson recommends joining a group purchasing organization to ensure best pricing on medical supplies. She says it's also important to talk to physicians about what they spend on supplies by showing them usage statistics on various high volume cases. "Physicians are naturally competitive people," she says. "If you point out that one physician spends $800 on mesh and another spends $400, they'll want to investigate the other option." She also recommends ensuring that surgeon preference cards are constantly evaluated for accuracy to make sure the surgery center isn't ordering obsolete supplies.

4. Billing problems leading to poor collections. If your billing department sends out claims late or receives consistent denials due to poor processes in pre-certification, your profitability will suffer, Ms. Johnson says. She says operative notes are an area where physicians can ensure optimal reporting. Having comprehensive operative reports enables the coders to fully utilize codes for billing. "Billing may not be accomplished as efficiently as possible because the operative notes aren't comprehensive." she says. "You will leave money on the table if documentation on all aspects of the case has not been done."

She recommends comparing the center's accounts receivable days to national benchmarks to determine whether your claims are staying with the payor — or on your staff member's desk — too long. In addition to challenging denials, she says denials should also be tracked to determine the cause. Once staff members understand why claims are being denied, they can take steps to alleviate the problem.

5. Aging workforce. Ms. Johnson says staffing can be an issue for surgery centers. She says centers may have trouble recruiting and retaining staff if they can't develop a strong wage and salary program due to financial restraints.

A second challenge for centers is the average age of nurses — OR nurses, specifically. "The average age of this group of professionals is approximately 55 years of age," she says. "How do you maintain a quality level of nursing as your staff look toward a future of fewer hours or perhaps even retirement?" She recommends looking for opportunities for cross-training now, even if you aren't suffering from a staff shortage. "You may have a PACU nurse that has interest in learning to be an OR nurse," she says.

Learn more about Facility Development & Management.

Related Articles on Surgery Center Turnarounds:
10 Statistics on the Surgery Center Industry
5 Steps for Optimizing Key ASC Benchmarks
5 Things to Know About Acquiring an O-Arm for Spine ASCs




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