5 reasons ASCs are struggling to meet margins

ASC leaders recently joined Becker's to discuss five major reasons surgery centers are struggling to meet margins.  

1. Supply chain issues

Exacerbated by the COVID-19 pandemic, supply chain issues are still hurting ASCs as they struggle to secure necessary supplies. Particularly with increased prices, ASCs are having to be strategic with their supply chain contracts. 

"Everything seems to have inflated prices and the supply chain problems, including back orders, are cutting into the profit for ASCs," Michelle Eilander, RN, administrative director of Ankeny (Iowa) Medical Park Surgery Center, told Becker's. "There are many times that we have to order a higher-priced item due to the back order of the regular-used item."

Ms. Eilander also noted multiple times where her ASC had to order from multiple vendors. 

2. Staffing costs 

Staffing costs continue to plague ASC budgets. Surgery centers spend on average $2.2 million on employee salary and wages, about 21.3 percent of net revenue, according to the VMG Health's "Multi-Specialty ASC Benchmarking Study." 

"Paying very high rates for agency staffing can quickly negatively impact the bottom line," Michelle Fischer, administrator of Christus Surgery Center-Stone Oak in San Antonio, told Becker's. "ASC leaders should continue to look closer at creative and strategic avenues for staff recruiting and use all resources available to include existing staff and physicians."

3. Increase in publicly insured patients

Some markets have seen a rise in patients with public insurance, which makes it difficult for some ASCs to secure adequate reimbursements. 

"The increasing number of patients with publicly funded insurance plans, whether Medicare or Medicaid, can be challenging from an economic standpoint," Melissa Hermanson, MSN, RN, administrator of Vineland, N.J.-based Ambulatory Care Center, told Becker's. "While some procedures are predictable and acceptable for the ASC budget, others cross the red line. This often happens with podiatry and orthopedic patients with unexpected implants that exceed Medicare reimbursement for the procedure."

4. Declining private reimbursements

ASC leaders are having trouble securing reimbursements from commercial payers that are rising at the same price of inflation. 

"Even with inflation running at 5 to 8 percent currently, commercial payers are only willing to increase contract reimbursement rates by 2 to 3 percent," Mark Spina, director of operations at Hamden-based Endoscopy Center of Connecticut, told Becker's. "With labor and supply costs increasing at a 5 to 8 percent annual rate, this results in margin compression and can ultimately lead to a negative cash flow situation."

5. Lack of contract strategy  

ASC leaders must focus on contract strategy to meet margins. 

"The biggest is working on contracts that pay sufficiently per the surgical mix most common to their specific center," Michael Powers, administrator of Knoxville, Tenn.-based Children's West Surgery Center, told Becker's. "You cannot have most of your cases performed with minimal reimbursement and be successful."

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