GI and endoscopy are high-volume, profitable procedures for ASCs and are dependent on advancements in technology and solid business strategies from start-up on. Here are seven important concepts about technology and development you should know for a successful GI-driven ASC.
Technology
1. Virtual colonoscopy remains a hot topic. Although virtual colonoscopy, or computed tomography colonoscopy, is currently not covered in the ASC setting, it still remains a controversial and much discussed topic for gastroenterology in ASCs.
Virtual colonoscopy is a non-invasive diagnostic tool used to detect polyps, which could be cancerous. Proponents have touted its use because it is a more comfortable, less anxiety-causing alternative to traditional colonoscopy, which may encourage more patients to undergo screening for colon cancer.
However, if a polyp is detected, patients must then undergo a traditional diagnostic colonoscopy, which is one of the reasons it is not covered by most payors.
"Virtual colonoscopy is an excellent imaging tool," says Dr. Sears. "It is less invasive and has a lower rate of complications but it has a number of significant limitations which will likely limit its use. It requires a full bowel prep and is a painful procedure as air is inflated in the colon and sedation is not administered (as it is during a colonoscopy)."
He also notes some other limitations. "It is unreliable for small polyps which can represent 80 percent of polyps seen in the colon," Dr. Sears says. "It has a high radiation exposure equivalent to 250 chest X-rays. Because of these limitations, the U.S. Preventive Task Force did not endorse it as a primary colon cancer screening tool. I do not feel it will impact screening colonoscopies, but it does offer an alternative to a barium enema in the event of an incomplete colonoscopy."
Dr. Bermudez agrees that virtual colonoscopy won't surpass traditional colonoscopies. "I believe the main role [of virtual colonoscopy] will be in screening average risk patients. It is possible that it will decrease the number of [traditional] colonoscopies in this group of patients. On the other hand, virtual colonoscopy will identify a number of lesions (real and not real) that will require diagnostic colonoscopies, increasing the demand for diagnostic colonoscopy," he says.
Mr. Tanner notes, "If and when it does get CMS approval, I believe that if the technology reached some percentage of the population that is eligible for screening but will not get screened due to fear of the invasive nature of the colonoscopy, then it will be good for patient care and will have limited impact upon GI ASC patient volumes."
2. Capsule endoscopy's impact on ASCs is not yet known. Capsule endoscopy, in which a patient swallows a small capsule camera that downloads digital images of the small intestine for diagnosis, is still in early phases of development. Therefore, its impact on ASCs and tradition colonoscopy is still relatively unknown.
Dr. Bermudez notes that questions regarding the device's sensitivity and cost need to be answered before it is considered a serious alternative to colonoscopy.
Mr. Tanner also does not think it will highly impact GI in ASCs. "Capsule endoscopy is not an approved ASC procedure, and currently it is primarily used for small bowel diagnostics. In that regard it is completely different from colonoscopy and non-threatening," he says.
3. Other new technologies are on the horizon, but may not improve on traditional colonoscopy. Endoscopy, like other medical fields, lends itself to new innovations such as chromoendoscopy, endo-capusle for colon examinations, third-eye endoscopy and narrow-band endoscopy. However, the new technology is only as effective as other non-technological procedures essential for clear screenings.
Dr. Bermudez says of new technologies, "Some of these techniques may have a significant cost that may not be justified by the potential benefits. I think that there are techniques that can significantly impact the quality of care at no cost, such as the quality of prep for colonoscopy, withdrawal time, polyp detection rate and adequate follow-up colonoscopies if polyps have been found."
Development
1. Make sure you leave room to grow when building a new center. While you don't want to overbuild, you should leave room for growth within the plans for a new GI-driven ASC. Not only will this help your center prepare for an increasing case load brought in by new physicians, it will also make your center more appealing to corporate partners if you end up looking for a partnership down the road.
"Most physicians start with two or three rooms in their center. A successful outpatient center lends itself to more patients, and, over time, the center will be more attractive to physician users," says Mr. Vick. "I usually advise physicians to add one more room than they think they will need because, in the end, they will need it."
According to Mr. Vick, one area corporate partners look at when deciding whether or not to partner with a GI center is capacity for growth. "A center won't be worth much to a corporate partner if there is no room for growth of the business or expansion of the facility," he says.
2. Be prepared to research corporate partners. With the right corporate partner, GI centers can see their revenue and profits increase substantially, according to Mr. Vick. The table demonstrates how one physician-managed GI endoscopy center Mr. Vick worked with improved its earnings and profits after partnering with the right management company.
| Dec. 2008 |
Sept. 2009 |
Change |
|
| 12 mo. before |
12 mo. after |
|
|
| Net revenue |
$3,030 | $3,520 |
+16% |
| Net income |
$780 | $1,090 |
+40% |
| EBITDA |
$811 |
$1,131 |
+39% |
| % EBITDA |
27% |
32% |
+19% |
| Net revenue/case |
$512 |
$672 |
+31% |
| EBITDA/case |
$137 |
$216 | +58% |
GI centers should take the time to research and perform due diligence when exploring partnerships with a management company. Mr. Vick suggests looking at several companies' track records with regards to same store growth, management services provided and satisfied physician-partners.
"The physician-owners need to see if a company 1) pays a fair market multiple, 2) helps their centers grow and 3) helps the physicians' distributions to increase," Mr. Vick says. "Ask for a wide range of references from the potential partner's centers. The company should be willing to provide a list of all of their centers rather than cherry picking the best. I've received a lot of phone calls from unhappy physicians who didn't take these steps."
3. The right corporate partner is not necessarily the one that offers the most money. Even if a GI center thoroughly researches corporate partners, many may be tempted to say yes to the one that offers the most money up front. However, it can be more advantageous to look at the long-term track record prior to signing an agreement.
"A company may offer a lower upfront multiple that is still competitive, but if they have a good track record, physicians may see a bigger increase in future distributions than may have occurred with a company with poorer management services but offering a higher upfront multiple," Mr. Vick says.
Another partnership arrangement an ASC can consider is bringing in a corporate partner to purchase a minority interest during the ramp-up phase of the center. "GI centers almost always increase in value in the first few years, and you [and the current partner] can look for a majority partner once the center matures and see a much higher return on investment," Mr. Vick says.
4. Joint ventures with hospitals can be beneficial if the terms are right. Many GI centers look to local hospitals to help with the management of the center and to take advantage of hospital contracts and relationships with local physicians. However, like with corporate partners, GI centers should ensure that an agreement with a hospital is what is best for both partners.
Mr. Tanner says that the benefits of a hospital partner depend upon what the hospital can add to the economic success of the joint venture. "Contributing factors to consider are 1) does the hospital own or control any group of patients or payors that the ASC would not be able to contract with absent the hospital's participation; 2) can the hospital improve upon third-party reimbursement and to what degree; 3) can the hospital add long-term security by being a partner as opposed to an adversary; 4) can the hospital purchasing power be leveraged to secure better cost for equipment and/or supplies; and 5) if the physicians are a coalition versus a single group, does the hospital benefit substantially from providing ancillary services such as pathology or even anesthesia," Mr. Tanner says.
Mr. Vick recommends ASCs consider bringing in a third-party management company if partnering with a hospital to make sure that the GI center continues to be operated efficiently and economically under the new ownership structure. "Most hospitals want to own 51 percent of the venture, but they don't know how to manage GI centers," he says. "Often, hospitals won't offer as a good purchase price and often overburden the business with overhead costs, and the efficiency and economics of the center can suffer."