From: Becker Scott <>
Subject: Distinct Approaches Help ASCs Find Turnaround Success: 2 Case Studies; Fewer Than 30 Spots Left at Fall Conference


September 26, 2007
In This Issue
Distinct Approaches Help ASCs Find Turnaround Success: 2 Case Studies
News and Notes
Fewer Than 30 Spots Remain at Fall Conference
Companies to Watch
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Distinct Approaches Help ASCs Find Turnaround Success: 2 Case Studies

Specific expertise can help ASCs successfully turn around financially struggling facilities. Our next ASC Review will be released in November. We have an outstanding article written by Dana Kulvin that speaks to different approaches that five different ASCs have used to find turnaround success. Certain of the different methods used are very intelligent. A preview of two of the case studies follows.

Case study No. 1: Owners and management turned around ASC with new operating system and proactive systems management policies. A marginally profitable large Midwest multi-specialty ASC took proactive measures and contacted WoodrumASD to help it increase its profitability and avoid future financial problems. WoodrumASD examined the ASC's revenues and expenses and found opportunities for improvement in both areas. "Fortunately this ASC approached us early so money had not been lost yet and its problems were solved in a manner that did not disrupt its business; we found essentially that no one was watching the till," says Joe Zasa, ASC consultant and CEO of Woodrum Ambulatory Systems Development.

On the revenue side, the ASC had not been operating to its fullest financial capacity in three main ways. First, it had not raised its fees in 10 years. Second its contract with its one major payor did not provide for carve-out reimbursements for expensive implants and other high-cost items. Lastly, none of the ASC's payor contracts were loaded into the database system so those payments were not part of the system's accounts receivables. WoodrumASD evaluated the ASC's fees and adjusted them to market rate.

"So much in regards to technology and processes had changed in ten years, that the ASC's rate structure did not provide adequate compensation for the services it was providing," explains Mr. Zasa.

In addition, WoodrumASD renegotiated those payor contracts that did not provide for carve-outs and loaded all of the ASC's payor contracts into the data system so that the ASC could properly monitor its payments and accounts receivables. As Mr. Zasa details, "accounts receivable days is the financial measuring stick for a business office and provides the necessary data needed to determine if the business office is operating efficiently."

Further, the center took important proactive measures.

"To avoid similar revenue issues in the future, we established policies requiring the ASC to review its fees and payor contracts at least annually and established a management program to monitor billing, coding and collecting," says Mr. Zasa.

On the expense side, the ASC had not evaluated its vendors' costs, including its group purchasing organization in years and as a result was overpaying for a lot of supplies and equipment. It also had not converted its employee benefit plans to other, less expensive but equally suitable plans, resulting in overpaying on this line item. WoodrumASD evaluated the ASC's supply costs and identified GPOs and vendors that offered less expensive options.

"This worked out well because the physicians did not have to change what they were using but simply got to pay less for those items," says Mr. Zasa.

In addition, WoodrumASD presented the ASC with alternative employee health plans that provided the same or better coverage but at lower rates. Lastly, WoodrumASD again established policies that required the ASC to examine it equipment, supply and health insurance costs on an annual basis. As a result, by lowering its fixed costs and realizing all of its revenue, WoodrumASD helped the ASC to increase its profits exponentially.

"Professional management and the necessary policy changes provided this ASC with the tools to thrive and flourish," says Mr. Zasa.

Case study No. 2: Center renegotiated key fiscal contracts to pull an ASC out of the red. In 2002, a failing multi-specialty ASC approached Prexus Health Partners for help. The 13,000 square foot center opened in 1999 and had 19 physician investors. Despite a volume of more than 6,000 cases in the previous year, the ASC lost approximately $300,000 that year. Prexus discovered many fiscal and operational problems within the ASC. There were four main problems: inadequate managed care contracts; rent far above the community standard; debt financed by excessively high interest rates; and disproportionately high used equipment costs.

The company and the center worked together to resolve most of the problems. First, they evaluated the ASC's managed care contracts and renegotiated those that were unprofitable so that they would provide adequate compensation. "In some cases Prexus was unable to obtain sufficient compensation and in those cases advised the ASC to drop contracts," says Donald J. Jansen, MHA, vice president for development of Prexus Health Partners.

Second, Prexus renegotiated the ASC's facility rental contract to a monthly payment the ASC could afford and one that was more reflective of the market rate for the community. The ASC had been paying a rent that was 65 percent higher than the standard in the community. "This renegotiation was not an easy one and basically occurred 'under the threat of bankruptcy', a concept the landlord could understand," says Mr. Jansen.

Third, to cure the enormous debt expense, the ASC refinanced its debt to a more manageable rate that better reflected the current lending market. "We were able to work with a bank experienced working with our company in order to achieve a more reasonable interest rate for the ASC's loan," says Mr. Jansen. In three years, Prexus successfully decreased the ASC's debt expense by more than 25 percent. Lastly, Prexus helped the center address the issue of the equipment costs.

Prexus's turnaround scheme at the ASC has been a great success. After instituting these changes and making the ASC more efficient, in three years the ASC went from a loss of 8 percent of its net revenue to a gain of 23 percent. "We continue to work with this ASC and the physician owners continue to garner a profitable return on their investment," says Mr. Jansen.

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News and Notes

Department of Justice suing Tenet's ex-general counsel. The government continues to crack down on and punish parties involved in cases of prohibited physician self-referral. The Department of Justice has filed a complaint alleging that the former general counsel of Tenet Healthcare Corporation violated the False Claims Act, the Justice Department announced recently. According to the suit, Christi Sulzbach submitted false certifications in 1997 and 1998 to the Department of Health and Human Services, allowing Tenet to bill Medicare for millions of dollars in claims that it was not entitled to receive, according to a Justice Department statement.

Further, Ms. Sulzbach allegedly certified to HHS that Tenet was in compliance with all federal program legal requirements despite knowing that contracts between North Ridge Medical Center, a Tenet-owned facility in Florida, and certain employee physicians, were illegal under the Stark Statute. At the time that Ms. Sulzbach signed the certifications at issue, Tenet's outside counsel had concluded that the contracts between the physicians and North Ridge violated the Stark Statute, says the Justice Department.

The $22.5 million settlement reached in 2004 between the government and Tenet to resolve the allegations of improperly billing Medicare for prohibited self-referrals did not release Ms. Sulzbach's liability, according to the Justice Department. You can download the complaint here.

ASCs must ensure strict sterile compounding compliance. ASCs compounding sterile products must vigorously ensure that they are complying with the sterile compounding regulations, United States Pharmacopia (USP), Chapter 797 Pharmaceutical Compounding - Sterile Preparation. Compliance is not only necessary for patient safety but also because, according to Brian Williamson, the president and CEO of JCB Labs, accrediting organizations, such as AAAHC and JHACO, have started zealously scrutinizing sterile preparation by ASCs. "If an ASC cannot ensure complete safety and compliance with the regulations, the best option is to outsource the compounding," advises Williamson.

JCB Labs is a compounding pharmacy that specializes in developing sterile products specifically for ASCs. "Because our sole focus is on sterile products, injectibles and other products are developed in an environment created to ensure sterility. As a result, our products are top-notch in regards to quality and safety and are in strict compliance with the sterile compounding regulations," says Williamson. The best way to ensure that a laboratory is producing sterile products is to ask for sterility test results with each product purchase. "The regulations do not require that every single batch be tested but a good company focused on quality will test even if it is not required or at the very least show a recent history of testing," Williamson adds.

Project coordinator positions open. Surgery Consultants of America, a well-known and rapidly growing ASC development and management company, is seeking full-time project coordinators. RN, MSN, MHA, or BSN with previous experience in ASC development and management required. Additional requirements include financial expertise and knowledge of Medicare and regulatory standards. Ability to travel a must. Come join our team. Competitive salary and benefits. Please e-mail resume to Attention: Project Coordinator at or fax to (239) 482-0888.

Meridian Surgical Partners opens new ASC in Cleburne, Texas. The 8,000-square-foot Cleburne Surgical Center a state-of-the-art facility specifically designed for outpatient procedures with two ORs, a spacious procedure room, four pre-operative and six post-op bays (including one for isolation) has opened its doors. The partnership between physicians and Meridian to develop the center was initiated in May 2006. Cleburne Surgical Center resides in the newly constructed Cleburne Health and Wellness Center, a 26,000 square foot medical office building. It will provide outpatient surgical procedures in gastroenterology, general surgery, gynecology, orthopedic surgery, ophthalmology, pain management and urology.

New downloads at our Web site. We recently added several new papers to under the "Hot Topics" section on the front page. These include the following:

  • "CMS Issues a Revised Payment System for Services Provided by Ambulatory Surgery Centers." This outlines the changes in the final rule.

  • "CMS Issues New Conditions for Coverage for Ambulatory Surgical Centers." This discusses certain of the most important new changes and conditions for coverage for surgery centers.

  • The Sept./Oct. issue of Becker's ASC Review. This is our largest issue to date. We hope that you will find it a pleasure to read. We do our best to provide informative business focused information that can be used practically by ASCs.

Preview of the upcoming issue. Our next Becker's ASC Review will be released in November. A preview of an outstanding article written by Dana Kulvin, which speaks to different approaches that five different ASCs have used to find turnaround success, is in this E-Weekly. We also have a whole section in the Nov./Dec. issue on healthcare information technology for ASCs. It is focused on methods by which ASCs use technology to drive profits and better results. For example, there are ASCs that use technology and the Internet for patient consent, to better know their case costs, to handle transcription, and for improved A/R and collection purposes and for a whole number of other purposes. There are also several terrific core software providers in the ASC market. The ASC Review will discuss a number of these developments.

Thank you to conference exhibitors. We'd like to extend our thanks to our gold exhibitors for helping to make our fall conference a success.

Please note we only have three to four sponsorships remaining, including networking break, keynote speaker and Thursday cocktail party sponsorships.

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Fewer Than 30 Spots Remain at Fall Conference

We are expecting a very full house for the 14th Annual Ambulatory Surgical Center Conference on Improving Profits and Business and Legal Issues for ASCs. The No. 1 networking and business development opportunity for ASCs and ASC companies in the country will be held Oct. 18 to 20 at the Westin Michigan Avenue in Chicago. Because it attracts the highest level audience and the very best speakers possible, registration spots are filling up. Fewer than 30 remain! There are three ways to register:

  1. Download the registration form and fax it to FASA at (703) 836-2090;

  2. Download the registration form and mail it to FASA, 1012 Cameron St., Alexandria, VA 22314; or

  3. simply call FASA at (703) 836-5904.

The Westin Michigan Avenue is SOLD OUT. For your convenience, we have compiled a list of nearby hotels. You can download it here. We can also provide you additional hotel choices. Don't miss out -- register today!

Companies to Watch

We are delighted to highlight the following companies in this week's E-Weekly.

Regent Surgical Health. As buyers, developers and managers of outpatient surgery centers and physician-owned hospitals around the country, Regent Surgical Health is an experienced developer and specialist in turnaround situations. Partnering with Regent can result in almost immediate improvements in financial health. In addition to acquiring underperforming ASCs and physician-owned hospitals, the company also thrives on turning single-specialty ASCs into multi-specialty, larger entities. Regent believes that doctors need to own the majority interest in their facilities and to control their own destinies. As a result, Regent typically owns about 20 percent of the ASCs and 10 percent of the physician-owned hospitals in which it partners. Its principals invest their own capital and expertise in each facility, sharing risks side-by-side with surgeon partners. Regent employs a limited liability company business model, which places the control of the business in the hands of the physician members. You can learn more by visiting Regent Surgical Health online.

Transworld Systems. John Morgan is a national account manager with Transworld Systems, focusing on helping the ASC industry and their physician partner practices recover money on past due patient accounts and insurance claims for a flat fee of around $10 per account rather than charging a percentage. Some of John's clients include Surgical Care Affiliates, Nueterra Healthcare Single Specialty Division and Practice Partners in Healthcare. The Transworld Systems profit recovery system is designed to reduce costly internal processes regarding past-due accounts and improving cash flow by getting accounts paid quicker. The company's 24/7, Web-based system is user-friendly and allows for a simple reporting mechanism for both ASC corporate partners and independent facilities. E-mail John or call him today at (800) 873-8005 to begin spending less and recovering more. You can also visit him online.

ProVation Medical. ProVation MD software is designed by 12 full-time, in-house physicians and coders, working together with more than 75 clinician and coder consultants to create software that mimics a physician's or nurse's natural preferences and workflows. At its core, ProVation is intuitive software developed by physicians to help their colleagues focus on patients rather than paperwork. ProVation software enhances patient safety through better documentation, automatic data tracking, and quality improvement. This includes the automated population of post-procedure orders and patient instructions; automated recall functionalities for patient follow-up and pathology results due; and device tracking and many other features. The software prompts the clinician to document efficiently, then generates the corresponding CPT and ICD-9 codes and CCI edits ready for review by HIM and coding staff. The result is coder-ready documentation delivering compliance, proper reimbursement, and shortened days in accounts receivable. For more information e-mail Laura Gilbert.

*           *           *

If you have any questions on any of the items listed in this letter, please contact me at (312) 750-6016 or by email at

Very truly yours,
Scott Becker

P.S. We have planned our next Webinar for Dec. 5. It will feature John Cherf, MD, discussing the forecast for orthopedics as well as how ASCs, hospitals and medical device companies can best work with orthopedic surgeons.
Scott Becker, JD, CPA
(312) 750-6016

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  • Scott Becker is a partner in and the co-chair of the health department at the national law firm of McGuireWoods in Chicago. Practicing exclusively in the area of healthcare, Mr. Becker's core clients include ASCs; tax-exempt and for-profit hospitals; national and regional companies that own and operate multiple hospitals and ASCs, physician-owned hospitals, physician-owned ASCs; private equity funds that invest in healthcare companies; and large medical groups. View Scott Becker's McGuireWoods profile.
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