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Your golden ticket: 5 tips for obtaining a CON in New York City

New York City-based Gramercy Surgery Center's Jeffrey Flynn has been through the trenches with the state's certificate-of-need process, and has come out equipped with the knowledge and skill-set to develop successful centers.

JF Gramercy"After 10 years, patients still approach me about cutting corners," says Mr. Flynn, Gramercy's administrator and vice president of business development. Patients may refuse to be weighed, or want to forgo other measures that may ultimately compromise a center's license.

"If a patient wants to cut a corner, that is a patient you don't need. Your CON is your golden ticket that you have to maintain," Mr. Flynn adds.

The CON process may be a lengthy one; it could take anywhere from a handful of months to a few years. After applying for its CON in 2002, Gramercy Surgery Center opened its doors to patients four years later. The center was the last in the state to obtain a permanent license. The New York Public Health and Health Planning Council currently issues centers five-year limited licenses, and centers are required to provide as well as document charity care and Medicaid care. When filing a CON, ASC owners estimate the amount of charity care and Medicaid care the center expects to provide.

Mr. Flynn details five considerations for planners when filing a CON.

1. Hospitals: Roadblock or ally? Often, ASCs face opposition from hospitals when opening their center, as hospitals may view the center as an adversary. Gramercy Surgery Center experienced this firsthand before opening their facility in Queens. "Our application was supposed to be reviewed and we were thrown off the agenda," Mr. Flynn says. "There wasn't an answer. We had the state senator inquire why we were postponed."

Once the state senator began seeking answers, Gramercy Surgery Center's application was placed back on the next agenda. Mr. Flynn says it is imperative to call local politicians or leaders who can help move your center through the process.

However, sometimes, hospitals have legitimate concerns that a surgery center will take away their physicians and they will lose a set amount of income to the surgery center. Such complaints may be valid causes of concerns and differ greatly from hospitals underhandedly opposing an ASC's CON.

"Going through the process may be difficult," says Mr. Flynn. "You have to know what you are doing and what their concerns are."

A hospital may serve as a useful ally who can also benefit from building a relationship with an ASC. Hospitals may drive cases to the outpatient setting as reimbursement dwindles and operating expenses outweigh financial gains. Therefore, a hospital can sign a transfer agreement with a center. One hospital's executives approached Mr. Flynn about shifting cases to the center.

"Gramercy's operating room is $920 an hour to run," Mr. Flynn said. "One particular hospital system that I spoke with had an operating room that cost nearly $4,100 an hour to run."

2.  Choose your landlord wisely. A building's landlord is equally important as the space itself when choosing a location for your center. Some landlords may not be willing to meet an ASC's specifications. For instance, multispecialty ASCs often require a diesel generator that may need to go on the roof.

"You are going to be high maintenance tenants," Mr. Flynn says. "However, you will be a tenant that lasts forever. When selecting a building, you have to pick a building that will be cooperative."

Real-estate is quite expensive in New York City, posing a barrier for planners. In the Northeast, an 11,300-square-foot ASC pays an average of $29.20 per square foot, according to VMG Health Multi-Specialty ASC Intellimarker. In New York City, the cost per square foot far exceeds the average.

"One center I know is paying $96 per square foot," Mr. Flynn says. "There is another center that has its lease coming up in the next year. The increase could go $120 per square foot, given its location."

Because of these exorbitant prices, buildings often can't house ASCs on their first floors. As prices change a center's real-estate options, Mr. Flynn advises seeking landlords wanting to get into medicine. "You need to find a landlord who wants medical in the building," Mr. Flynn adds. "When we opened our center, our landlords wanted to transform into medicine. We were their anchor because that was the direction they wanted to go in."

3. Exercise a business approach when adding specialties. A center may have a wealth of well-qualified and talented surgeons who want to bring certain procedures to the table, but that may not be the most successful route for an ASC.

"The biggest concern is who will be managing your center and do they know how to manage it," Mr. Flynn says. "You may have a lot of different doctors with a lot of ideas for what they want to see medically, but these have to make sense on a business level."  

Having multiple specialties also makes centers an attractive option to insurance companies. "Insurance companies are not all that interested in two or three specialties," Mr. Flynn says. "You should aim to have 10 or more specialties in your business plan because the CON process is so expensive."

4. Assess your partners' character. Relationships between physicians at the center will likely determine success. A physician who holds back cases and performs them at another center may draw resentment from other physicians. Have honest and open conversations with the center's staff about how they will work together and your expectations.

If an issue — such as a legal or financial concern — prohibits one partner from moving forward in the process, planners have to go back to square one. Therefore, it is imperative to assess all partners' character competency from the beginning of the CON process before too much money or time is lost.

5. Accurately estimate charity care and stick to it. Centers have to ensure they are performing a specific number of charity and Medicaid cases, or risk losing their license. In January 2016, Surgicare of Manhattan applied for a two-year extension of its five-year license. However, the New York Public Health and Health Planning Council contemplated denying the ASC's application because it failed to fulfill a certain number of Medicaid and charity cases. The ASC estimated 4 percent of procedures would be Medicaid or charity care cases, but the department found only 1.5 percent of the center's cases was charity care and 0.03 percent was Medicaid in 2014. Before going through the CON process, planners must have a relatively extensive knowledge of what their center needs not only to open, but to stay open.

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