5 Ways a Surgery Center's Location Impacts its Business

Whether your surgery center is located in the heart of New York City or a small town in rural Montana, your location has an impact on how much money your ASC has the potential to earn. Here are five ways your surgery center's location is impacting your profits.

1. Amount of development. The rate of development in a surgery center's community can greatly impact its business, as rival ASCs and local hospitals take market share and keep valuable physicians from bringing cases to the center. While the rate of ASC development has stabilized over the past few years, rapid growth over the past 20 years means many markets are saturated with centers. Between 2000 and 2008, the number of Medicare-certified ASCs in the United States jumped from 3,028 to 5,174, an increase of 71 percent. In 2007, the five states with the most ASCs were California (668), Florida (358), Texas (346), Maryland (357) and Georgia (253). In Jan. and Feb. 2011, Becker's ASC Review reported the opening or announcement of 38 new surgery centers across the country, including four in Texas, three in California and three in Florida.  

Surgery centers in certificate of need states can benefit from decreased competition. If your ASC is located in a CON state, new centers and hospitals may have difficulty receiving approval to develop a facility in your area, giving you a greater hold on your market share. As of 2007, 22 states — predominantly those in the southeast and northeast United States — required a CON. Some states have pushed for greater restrictions on ASC development; in March 2009, New Jersey issued an amendment that placed a moratorium on the issuance of new licenses to ASCs by the N.J. Department of Health and Senior Services. Some exceptions include changes of ownership of an existing center, relocation of an ASC to within 20 miles or, with DHSS approval, entities owned in whole or in part by a New Jersey hospital or medical school — but for most ASCs, the moratorium means no new development.

2. Average salaries. One of the two biggest expenses for surgery centers is staffing (the other is supplies), meaning administrators must maintain salary costs if they want to keep expenses down. While compensation differs from facility to facility, wages and salaries are generally dictated by the average pay in the local community. Either administrators research data on average local salaries and follow suit, or potential employees let the ASC employer know that the offered rates are lower than neighboring facilities. Here are 15 statistics on employee salaries, categorized by facility location, according to data from VMG Health:

Nurse staff average hourly wages
West: $35.33
Southwest: $31.34
Midwest: $27.51
Southwest: $29.36
Northeast: $31.32

Tech staff average hourly wages

West: $22.24
Southwest: $19.33
Midwest: $18.38
Southeast: $18.84
Northeast: $20.34

Administrative staff average hourly wages
West: $24.21
Southwest: $21.30
Midwest: $21.62
Southeast: $22.96
Northeast: $24.15

Administrator salaries also vary depending on location — sometimes significantly. In the western United States, the highest-paying area for administrators, administrators earn an average salary of $115,000. In the Midwest, the lowest-paying area, administrators earn an average salary of $89,000.

3. Payor mix. A surgery center's revenue depends heavily on its reimbursements, meaning an ASC with poor payor contracts will find it difficult to survive. If an ASC is dependent on a high percentage of Medicare or Medicaid patients for its case volume, the center may struggle to make a profit on high-cost cases. Payor mix differs depending on the community; lower-income areas are more likely to see a greater percentage of Medicaid patients, while areas with aging populations are more likely to depend on Medicare. Commercial payors represent the biggest piece of the pie in all areas of the country, but the Southeast depends the least on commercial payors (54 percent of gross charges) and the most on Medicare (30 percent of gross charges). The western United States sees more Medicaid (4 percent) than the rest of the country, which sits at 2 percent. The West is also highest for workers' comp cases, which represent 6 percent of gross charges compared to the average 4 percent.  

In addition, ASC experts warn centers against depending on a single payor for the majority of their payor mix. If a single payor dominates the local area, ASCs may be at risk of losing money if the payor implements a substantial rate decrease.

4. Physician and patient convenience.
According to data from VMG Health, facility location has a "medium" impact on a facility's value, with 40 percent of ASC operators and developers agreeing that patient and physician convenience has a moderate effect on profits. Most agree that ASCs should build in a financially sensible area, meaning developers should not build in an overly expensive area because it's trendy or an overly inconvenient area because it's cheap. If your ASC is located close to physician offices or a local hospital, you may enjoy more business because physicians can bring cases to your center with minimum inconvenience to their schedule. Developers agree that while location is somewhat important, the look and feel of your facility has a greater effect. Forty-two percent of developers agree that signs of age or poor layout will have a high (negative) impact on ASC value.

5. Case mix. A surgery center's specialty mix is generally somewhat dependent on its area, as reimbursement, competition from other facilities and patient demand determine which cases will be profitable. For example, surgery centers in areas with geriatric populations are more likely to see demand for cataract cases, boosting the profitability of ophthalmology. Here are 10 statistics on the most and least profitable areas for five common specialties, based on data from VMG Health:

ENT net revenue per case

Highest: $2,109 (Southwest United States)
Lowest: $1,407 (Southeast United States)

GI/endoscopy net revenue per case

Highest: $831 (Southwest United States)
Lowest: $629 (Midwest United States)

Ophthalmology net revenue per case
Highest: $1,329 (Southwest United States)
Lowest: $1,199 (Northeast United States)

Orthopedics net revenue per case
Highest: $2,855 (Southwest United States)
Lowest: $2,012 (Midwest United States)

Pain management net revenue per case

Highest: $1,218 (Southwest United States)
Lowest: $651 (Northeast United States)

Read more advice on operating a successful ASC:

-8 Challenges and Opportunities for Large Multi-Specialty Surgery Centers

-6 Areas of Focus for Starpoint Health to Keep Costs Low for Surgery Centers

-15 Statistics on Surgery Centers in the Midwest United States

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