Navigating Regulations, Reimbursements and Growth: Q&A With Minnesota Valley Surgery Center Administrator Sharon Richmond

Since opening in 2006, Minnesota Valley Surgery Center in Burnsville has aimed to improve the quality of patient care, maximize efficiency and reduce costs. Despite persistent regulatory and reimbursement challenges, the multispecialty center has largely succeeded in meeting these goals.   

"Our patient satisfaction scores are extremely high," says administrator Sharon Richmond. "Over the past five years, we've been successful in dropping cost considerably, and we've been able to pass those savings to the insurance companies."

Ms. Richmond discusses the surgery center's most successful pursuits, challenges and plans for the future.

Q: What have been some of the surgery center's most profitable developments in recent years?

Sharon Richmond: We opened a total joint program in 2007. Since that time, we've trained other centers throughout the state and nation on developing their own programs. We've done over 400 total joint surgeries, including hips, knees, elbows, ankles and shoulders, with the most frequent being hips and knees. The program has been hugely successful in terms of patient satisfaction (1:1 nursing care), reducing infection and complications. Above all, there has been a huge cost reduction to the insurance companies as well.

We also built an extended day surgery center that was patterned after a Hilton environment. We'd found that some people who spent three to four hours in the post-anesthesia care unit just aren't ready to leave at that point because due to pain or blood pressure issues. Extended Day Recovery allowed them to be in a room with all of the amenities of a post-anesthesia care unit and be with their family and an RN for an additional amount of time. We staff two ACLS registered nurses in that unit.

As our volume grew, keeping a patient in a total joint bed was taking a lot of our post-anesthesia care unit space — we could have three to four patients per day for total joints. The extended day recovery was a great alternative to provide a relaxing, comfortable area for continued recovery.

Q: Can you talk about the major operational challenges the center has faced?

SR: Managed care contracts are a huge challenge. As an ASC, you don't usually have the bargaining power of a large health system, so contract negotiations can become a challenge. One payor in our state delivers our updated contract after the effective date of our contract, which leaves us with no time for negotiation as far as the reimbursement. This particular insurer consistently significantly decreases our reimbursement every contract renewal.

Being a predominantly orthopedics-focused ASC, my other challenges are rising implant costs, supply costs and staffing costs.

Although reimbursement may decrease, there are additional costs associated with new regulations. ASCs offer patients a valuable service and alternative environment for surgical procedures as well as provide health care at a significant cost savings.

Most third party payors have eliminated carve-outs in their contracts. Total joint replacement in an ASC can offer a cost savings of 35 to 50 percent compared to a hospital, but one particular payor is still lowering the ASC reimbursement to the point it becomes a break even procedure for us right now. If all payors were to move to the reimbursement methodology of taking Medicare rate and adding a small amount on top of that, it would not cover our costs.

Another challenge is drug and medication shortages. Critical medications like fentanyl and propofol are becoming more and more difficult to obtain, and demand for these medications is driving an increase in pricing.

Q: How have you worked to address these challenges?

SR: The center looked at negations for sole vendor pricing for implants and supplies. We also pursued an aggressive standardization of products and supplies used based on cost. We have a very active Supply Value Analysis committee that reviews comparable products and costs every month, and we do alternative searches for supplies as we see costs increase.

You also need physician buy-in on products. Physicians may have preferences to a particular product or implant. We may ask them to trial a comparable product in order to reduce cost.

Q: How has the center dealt with increasing regulatory demands?

SR: Regulatory changes have brought increased cost to the center as additional staff and resources are needed. The state quality reporting and measurement system requires a significant amount of data collection and reporting. We have hired a patient safety officer, a radiology medical director and an infection control officer to name a few.

The required conversion to the 5010 billing system was a huge challenge for all of us this past year. Compliance dates were issued, however payors and clearinghouses were not prepared. This resulted in delayed facility payments.

I'm also concerned about pay for performance. Although our patient satisfaction scores run consistently high, a low patient response rate can affect the overall outcome if one negative comment is received. We have received comments such as "you don’t have a cafeteria on site." If there is a day when the surgery centers get a reduction in reimbursement because we didn't have a cafeteria on site, that is concerning. We should be looking at a variety of things — infection rates, turnover times, efficiency and case costing.

Q: What region-specific challenges has the center faced?

SR: One of our challenges in the Twin Cities is the hiring and retaining of RNs and surgical techs. Twin Cities is a highly competitive market with hospitals and ASCs within a small radius. It's difficult to remain competitive in wages and benefits when the ASC is not receiving the same reimbursement for the same procedure as the hospital.

Q: What new developments is the center planning in the near future?

SR: Since 2006, this facility has undergone two expansions and is in the process of planning a third. We look forward to adding additional surgeons, procedures, and product and service offerings. We are expanding our Outpatient Total Joint program and we added a spine surgeon and a periocular plastic surgeon.

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