6 ASC Turnarounds

Written by Lindsey Dunn | January 26, 2010 | Print  |

The Center for Special Surgery (San Antonio, Texas)

Background: When a group of physicians acquired The Center for Special Surgery from their former management company, they assumed full ownership of an ASC that was located in a neglected building and an "eyesore" for both patients and their physicians, according to Eric Day, MBA, ATC, LAT, the current administrator of the center. In 2006, the ASC performed an average of approximately 180 cases per month and made no distributions to physicians. The center "was on a further downhill slide," says Mr. Day.

What worked: The physicians at The Center for Special Surgery began efforts to turnaround their center by engaging a new management company, Regent Surgical Health, to aid them in improving the center's performance. Their first step was to sell the old building that housed the ASC and relocate to a state-of-the-art facility at the Texas Center for Athletes.

The team then focused their efforts on the ASC's reimbursement by reevaluating their current chargemaster and standardizing their charges to a percentage of the Ingenix fee schedule for their market. They reevaluated and adjusted the self-pay fee schedule for both cosmetic and plastic surgery cases so that it was more in line with current market rates. The center also made a strategic decision to remain in-network for all payors in the market, though it had previously considered going out-of-network. "There had been an evolution in the market to where we found it advantageous to remain in-network," says Mr. Day. "We had long standing relationships with many of the payors and we saw this strategy as being the best for the long-term success of the surgery center."

Next, the team began analyzing case costing reports and worked to secure better pricing for both implant and disposable products for orthopedic cases. The administration renegotiated improved rates with nearly all orthopedic vendors and switched GPOs, which led to increased margins on several sets of cases. The center also took advantage of rebate programs and maximized purchases with vendors that had such programs as well as the best pricing, says Mr. Day.

Finally, the team looked at physician referral patterns and began to focus on reasons why investors were not utilizing the center to their full potential. "Many of the surgeons had been referring to the same facility for years, and, although they were investors and located in the building, we still had an uphill climb to prove to those physicians that we could provide equal, if not better, service than they had been provided at their previous facility," says Mr. Day. The ASC's leaders emphasized putting the surgeons and patients first and assessed the needs of the surgeons to ensure that the ASC would be a comfortable, accommodating facility, he says.

Results: As a result of turnaround efforts, the ASC experienced an 85 percent growth in volume in 2009, compared to 2006. The ASC also more than doubled the number of physicians who utilized the facility in a year, adding 15 additional physicians from 2006 to 2009. The ASC is now profitable and able to produce monthly distributions to the investors. "We are now comfortable that we are maximizing utilization from our surgeons who have offices in the building and have recently began to recruit new surgeons outside the building," says Mr. Day. "Patient satisfaction scores consistently show that at least 95 percent of the patients seen in the facility would recommend the facility to their family or friends. We were only a fraction of that before the turnaround."

High Pointe Surgery Center (Lake Elmo, Minn.)

Background: When High Pointe Surgery Center opened in 1999, it was a joint venture between a hospital and physician-investors who worked at the hospital. Its administrator lacked experience in running an outpatient facility, the center had developed a culture where add-on cases were discouraged and the anesthesiologists were uneager to stay for additional cases. The center lost nearly $1 million in its first year while performing approximately 100 cases per month when 200 cases were needed just to break even. Additionally, standard processes for collections were inexistent and, at its worst, the ASC was 180 days behind on accounts payable. "Its physician-investors had lost faith in the center," says Kyle Goldammer, senior vice president, Surgical Management Professionals, the ASC management company involved with the center's turnaround.

What worked: ASC leaders and staff from SMP began by focusing on cleaning up the center's business practices and playing catch up with accounts receivable. Additional coders were brought on site to help the center's one part-time coder and standard accounting practices were implemented. Other business procedures, including standardizing admissions processes to ensure that the center had accurate demographic information on hand, were also implemented. After the collections were in order, those functions were moved off site to SMP, and the team moved to adjust the culture of the ASC by emphasizing the importance of putting the patient first, taking additional cases and making the ASC an enjoyable and efficient place to work, says Mr. Goldammer. The physician investors were educated on the importance of bringing their cases to the center, and a new administrator was eventually hired. Additionally, the board provided profit sharing incentives to all employees to better align the staff, and the scheduling team held meetings with physician offices to begin the new effort of marketing the center. .

Results: Eighteen months after the turnaround, the ASC turned profitable and started making distributions to its physicians. As the culture improved, more physicians brought their cases, and the center experienced approximately 30 percent growth in case volumes for nearly six years, until it stabilized. The center currently performs 400 cases per month and has average days in A/R of under 40 days. In its second year post-turnaround, the center made almost a six figure net profit. Since then, the center has made a very healthy seven figure net profit annually, especially considering the size of the facility and organization, according to Mr. Goldammer.

Melville Surgery Center (Melville, N.Y.)


Background: This Long Island, N.Y., multi-specialty ASC was on the brink of bankruptcy and destitute. It had not made money or any profit distributions in five years when ASCOA purchased it and set out to turn it around.

What worked: The center's physicians, along with ASCOA, began by restructuring the organization and working to create an environment where physicians would want to practice. The team renovated the facility, updated equipment and then went to work to employing benchmarking and best practices in staffing, supplies, case costing and accounts receivables — as well as other strategies to remedy a high rent and lagging accounts payable. After the renovation, the center was promoted as a state-of-the-art surgery center. The ASC eventually reduced its turnaround time to less than 10 minutes and was able to attract several high-volume, profitable surgeons through requesting names of unaffiliated surgeons from current partners and bringing them in to the facility for visits.

Results:
Within seven months, the ASC was able to turn itself around. Staffing costs went from 52 percent to 20 percent of revenue; supply costs went from 29 percent to 14 percent of revenue; rent went from 14 percent to 5 percent of revenue; A/R went from 94 to 29 days outstanding; A/P went from three to less than one month outstanding; and average revenue per case increased threefold, from $846 to $2,586.
Outpatient Surgical Center of Ponca City (Ponca City, Okla.)

Background: Outpatient Surgical Center of Ponca City was more than 20 years old and managed by physician-owners, who had not seen a distribution in seven years or an employee raise in five, when the board began to search for a corporate partner to help turn the center around. The ASC's salaries, wages, benefits and equipment costs were higher than industry averages, and fixed expenses were well above the national average for facilities of its size. Many of the physicians had become disheartened with the return on their investments, and some investors were no longer performing cases at the center and wanted to divest.

What worked: Physicians at ASC engaged Nueterra Healthcare as a corporate partner and its team worked with the ASC's administration to evaluate wages, benefits and salaries to increase net revenue without significant layoffs, says Emily McCarthy, group vice president, Nueterra Healthcare. They also completed a supply value analysis and explored GPO strategies to reduce inventory costs. After conducting a thorough review, Nueterra also moved the facility under its insurance umbrella, resulting in $16,000 in annual savings, and transferred billing operations to its regional billing office, resulting in a reduction in the average A/R days and giving the facility the ability to bill within 24 hours and collect within 45 days. Finally, Nueterra identified potential new physicians to increase volume.

Results:
The changes at the facility resulted in it becoming profitable within a year after resyndication. The operational improvements also led to improvements in employee morale and patient satisfaction, according to Ron Kregar, MD, a physician at the center. "For many years we had not been profitable and a lack of raises affected morale," he says. "[Our turnaround] has lead to a significant improvement in efficiency and morale leading to profitability. This has resulted in improved esprit de corps that has been noticed by patients, staff and physicians."

Terrence Boring, MD, chairman of the ASC's board, says its affiliation with Nueterra and the turnaround saved his ASC. "Now we are on our way to financial recovery with a sound business footing," he says.

The center experienced a 95 percent patient satisfaction rating in 2009 and continues to conduct long-term business planning. The ASC's goals for the future include further reducing supply costs and increasing case volume, according to Ms. McCarthy.

Santa Barbara Surgery Center (Santa Barbara, Calif.)


Background:
With 22 physicians on staff and a location in a well-populated, affluent market, Santa Barbara (Calif.) Surgery Center was well positioned to be a successful ASC but found itself barely breaking even. The ASC had several million dollars in debt, poor payor contracts and its partners weren't maximizing the number of cases they brought to the ASC. Additionally, the ASC had several operational issues, says Jon Vick, president, ASCs Inc., an ASC consulting firm that specializes in helping physician-owners of ASCs develop strategic partnerships.

What worked: ASCs Inc. analyzed the situation and recommended several ASC management companies to the physician-owners. After ASCs Inc. helped the center select a management-company partner with experience in turning around similar centers, the ASC and its new partner worked to renegotiate the outstanding long-term debt by agreeing to repay the loan over a longer time period at a lower interest rate. The management team also analyzed case costs and renegotiated payor contracts by requesting rates significantly higher than Medicare — increased rates that the ASC was able to secure because it still offered significant savings compared to hospital rates, says Mr. Vick.

The team then sat down with the 22 physician partners individually and asked them why they weren't bringing all of their ASC-appropriate cases to the center. "Usually the biggest reasons include scheduling and supply issues, which can be resolved by offering block time and the desired supplies for the physicians in order to create a facility that is preferred by physicians for most of their cases," says Mr. Vick.

The management company, along with the local staff, then worked to improve scheduling, turnover times and operational efficiencies that attracted new physician-partners to the ASC whose cases would be profitable.

Results: Within a year the ASC operations had become more efficient, the partners were bringing more cases, the payor contracts were generating a profit on every case, more partners were recruited and the center moved from just breaking even to very profitable. The ASC had doubled the number of procedures it performed monthly and added 13 additional physicians to its staff, says Mr. Vick. These results were possible because the ASC selected a management company that was experienced specifically in helping similarly-sized centers in like markets, he says.

Southern Indiana Surgery Center (Bloomington, Ind.).


Background:
Southern Indiana Surgery Center opened in 1993 as a multi-specialty ASC and was initially profitable but later lost one of the orthopedic groups that utilized the center. As volumes dropped, numerous efficiencies were exposed. At its worst, the center had $2.4 million in A/R, according to J. Nicholas Sarpa, MD, the board chair at the center.

What worked:
After becoming board chair, Dr. Sarpa and his partner, who eventually became president of the board, began searching for a company that could provide the physician owners with assistance in managing the ASC. The board eventually selected ASD Management (formerly Woodrum/ASD) as a partner, which helped the ASC turn its business office practices around. A/R was initially reduced by $800,000, despite the loss of the orthopedic group, and income went up due to refining the coding, billing and collecting procedures, negotiating more favorable payer contracts and adopting a new fee schedule. Specific processes for collections were implemented for pre- and post-surgery collections, including co-pays prior to surgery. Additional physicians were recruited to the center, and the legal and operational arrangements were restructured. Finally, the ASC reduced its inventory and updated its fee schedule, which had not been updated since the ASC's opening, 15 years prior. "No one looked under the sheets, so to say, because the center was profitable, but the loss of the orthopedic group made being more efficient necessary," says Joe Zasa, co-founder and managing partner of ASD Management.

Results:
Although ASD Management estimated that it would take a year to turn the center around, the physicians saw drastic improvements in three months and saw "real results" in six months, with its largest distribution ever, says Dr. Sarpa. The ASC continues to be successful today, which is a result of very dedicated clinical and administrative leaders, who were with the ASC before the turnaround, says Dr. Sarpa. "Both our business office and clinical managers put in an incredible amount of time to turning around this center," says Dr. Sarpa. Everyone worked to quickly turn it around. It doesn't just take management, but the staff and the physician partners — everyone worked diligently together to turn the center around."

Visit www.beckersasc.com/asc-turnarounds/ for more information on ASC turnarounds and ideas to improve surgery center performance.


© Copyright ASC COMMUNICATIONS 2019. Interested in LINKING to or REPRINTING this content? View our policies by clicking here.

To receive the latest hospital and health system business and legal news and analysis from Becker's Hospital Review, sign-up for the free Becker's Hospital Review E-weekly by clicking here.