As the world continues to navigate the impact of the pandemic, it’s important to reevaluate your facility’s goals and strategies.
Healthcare that improves quality of life is the ultimate focus of Ambulatory Surgery Center (ASC) administrators and providers. From there, administrators need to focus on managing margins to ensure the surgery center can continue providing quality care. A recent Ambulatory Surgery Center report projects that ASCs are expected to reduce Medicare costs by $73.4 billion from 2019 to 2028i. As more payers and patients recognize the cost savings of having procedures performed in an ASC instead of a hospital, patient volume will continue to increase. But increasing volume alone won't enable ASCs to become more profitable—managing margins is key.
Managing facility profits and margins ensure that the facility can continue operating and providing care to their communities, while also staying competitive with local hospital systems. Penny Williams, Sr. Consultant of Clinical Operations for Cardinal Health, shared, “Contribution margins and profitability can be optimized by your ACS’s surgical specialty mix. After determining the specialties, surgeons, and procedures, which generate the highest revenue, you will be able to further prioritize strategies and operations to maximize and increase profitability. For example, total joint procedures generate as much higher net revenue than cases such as endoscopy, ophthalmic, and pain. These types of procedures can be managed to ‘fill in the gaps’ in the OR schedule. With that being said, supply chain expenses, management, and the consideration of clinically acceptable products are crucial to the outcome of costs and margins.”
ASC administrators with a profitable surgery center can reinvest in the practice by purchasing innovative equipment and recruiting top doctors, expanding market sales dollars, and helping more patients over time.
Reviewing the terminology
Understanding the financial terminology is beneficial for all ASC administrators. “Profit" and “margin" both measure the success of your ASC. While healthcare ultimately has shifted its emphasis to value; care offering better value to patients will also lead to increased margins. The term “value-based care" means that providers are given incentives based on the quality of care they provide rather than the quantity of care.
Specifically, profit and margin are different—profit is measured in dollars while margin is measured as a percentage based on overall revenue. Reporting on the facility's margin gives a better view of efficiency and effectiveness whereas reporting the profit is clear in monetary terms. Digging deeper into the topic, there are multiple types of margin and profit. What is helpful to remember is that increasing margins generally means decreasing operating costs and increasing revenue. Focusing on increasing profits alone won't help your ASC grow, especially if your operating costs remain high. As your margins increase, the more flexibility your ASC will gain in sharing profits with owners and reinvesting into your facility and staff for future growth.
If you are building a growth plan for your ASC, here are five strategies to increase margins:
- Cross-training staff members: When employees can perform multiple roles, it provides more flexibility with staff scheduling during busy times. Some examples are training clinical and surgical staff in multiple roles, or cross-training front-desk support staff with and patient experience positions.
- Adding higher-margin procedures, such as total joint replacement or cardiology. More advanced technology and increased payer reimbursements are bringing more of these procedures to ASC settings. By adding them to your surgery center, you can bring in additional patient populations to your facility.
- Negotiating prices with implant and equipment vendors. Since these purchases make up a large percentage of overall operational costs, decreasing expenses for implants or new capital purchases will make significant impacts on your margins.
- Creating process improvements. Investing in technology to better understand patient and staffing volume could lead to more efficient operations. Solutions that enable administrators to discover those optimal scenarios take out the guesswork and allow facilities to begin the appropriate staffing and case volume models sooner.
- Recruiting top surgeons and providers. By adding well-known surgeons, your facility can quickly bring increased patient volume. This long-term strategy can also help your ASC add service lines it may not yet offer. However, this approach takes time to find the right surgeons to add to your practice, especially if they have contracts at their current employment.
While the healthcare industry may be reporting shrinking margins, successful ASCs can reverse that trend by incorporating several efficiency, cost-cutting and revenue-increasing strategies discussed in this article. Williams also adds, “Information derived from data and analytics will drive strategies and efficiencies for optimal profitability and continued success. We have all heard ‘if it can’t be measured, it can’t be managed.’ Additionally, let’s not overlook the fact that patient satisfaction rates are high in ASCs. A large percentage of this is attributed to lower cost, high quality of care, and more personal attention.” Actively managing margins in your facility while continuing to provide quality patient care creates a strong foundation for long-term success.
Find additional resources from Cardinal Health to enhance your ASC's performance here.
ihttps://www.advancingsurgicalcare.com/advancingsurgicalcare/reducinghealthcarecosts/costsavings/reducing-medicare-costs