Q: What impact is the economy having on ASCs?
One area that experts felt the economy was significantly affecting surgery centers was in case volume. Tom Mallon, CEO of Regent Surgical Health, says, “We are seeing lower case volumes by 7 percent overall compared to the budget. It is too early for cash to be affected.”
Many of respondents confirmed this trend of decreasing volume, which could be attributed to many causes.
Caryl Serbin, president of Serbin Surgery Center Billing, says, “Patients are choosing to have less elective surgeries.”
James McGehee, administrator of Cleburne (Texas) Surgical Center, says, “We are in a business where we do truly ‘elective’ cases. When customers have to choose between paying the mortgage and having their knee scoped or their hernia repaired or dealing with the pain for a little longer, they have to take care of their basic needs first. We have seen a high number of cancellations at the last minute because of this exact scenario. I would say the cancellations are one of the biggest indicators of the impact on ASCs due to the recent downturn in the economy.”
Brad Lerner, MD, of Chesapeake Urology Associates and Summit ASC in Baltimore, says, “We have noticed a decrease in the volume of feefor- service cases, such as vasectomy reversal and genital cosmetic surgery.”
As a result of lower case volume, growth within the ASC market is likely to shrink.
William Southwick, president and CEO of Healthmark Partners, says, “Without additional physician members to drive case volume, growth is likely to be anywhere between flat to down 5 percent. Higher deductibles and job loss inevitably will hamper growth from existing partners.”
Todd Flickema, senior vice president of Surgical Management Professionals, says, “I think that recent articles regarding layoffs may be a hint this storm has already hit our shores. What will be interesting to watch is how centers that have historically enjoyed very comfortable profit margins will react.”
On an optimistic note, some ASCs have not seen the effects of the struggling economy. Susan Olis, administrator of the Surgery Center of the Woodlands in The Woodlands, Texas, says, “Interestingly enough, we are not experiencing any downturn in our volume or reimbursement at this time. We are cautiously optimistic but also think that this is due to the fact that our center is in an affluent, diverse area where no large impact has been felt from this downturn.”
Q: What is the most important thing an ASC can do in 2009 to preserve profits?
Most industry experts surveyed said that watching expenses is critical to control spending and preserve profits.
In addition, they offered some areas in which their centers and companies have seen positive results.
Dr. Lerner says that ASCs can attempt to boost revenue by increasing case volumes and bringing in new lines of service to the center. “We try to analyze cases performed in our ASCs and the hospital and educate physicians that are performing cases in the hospital from a ‘convenience standpoint’ about the benefits of performing those cases in an ASC setting,” he says. He also suggests decreasing expenses by reassessing disposable product usage, negotiating with vendors and reevaluating staffing needs.
Marc Koch, president and CEO of Somnia, emphasizes the importance of understanding how a patient’s life can be changed by the economy while at the same time doing what is in the best interest of the ASC. “Surgery centers and patients are permitted to write-off co-payments or deductibles, but they should clearly document economic hardship and, in addition, not make this a matter of routine on each and every patient but only for patients who are facing genuine economic hardship,” he says. “In addition, understanding that a patient’s life may have been turned topsy-turvy, kindness, empathy, understanding and concern go along way. For instance, a patient may have forgotten to be NPO and enjoyed a breakfast the morning of surgery. Understanding that recent unemployment, failed mortgage payments and depleted 401K may have gained more mindshare than your preoperative instructions will go along way to developing patient loyalty.”
Mr. McGehee says, “The largest two largest [cost areas to look at] are supplies and labor. On the supply side, it is more important than ever to only order what you need for the week. If a center doesn’t have a contract that allows them to do that, it would be a great time to renegotiate. We are able to order Monday for an early morning Tuesday delivery. I meet with my materials person on Monday and go over the order for Tuesday. We only order what is needed for the week’s cases. On the salary side, we have cut way back on our PRN employees’ hours to assure our full-time employees of their needed hours. Employees are nervous during this crisis, with good reason. As someone who has a large hand in their immediate future, I have the responsibility to look at each financial piece of the puzzle and see where cutbacks can be made to assure profitability for my center.”
Doug Peter, vice president of operations for Healthmark Partners, says, “Manage the margin, and focus on being more efficient with same store volume.”
Q: Are there currently any opportunities in the ASC market?
In spite of the struggling economy, there are some opportunities for ASCs and other companies within the industry.
Dr. Lerner notes that the new lines of service can generate growth for a surgery center, and it has worked for his center. He says, “Within the past eight months, we have introduced microsurgery, genital cosmetic surgery and cryoablation of the prostate. The first two did result in increased expenses due to equipment needs but should eventually prove to be high revenue generators with the majority of the costs being fixed.”
Ms. Serbin says, “There are a few opportunities in the market. Most involve turnaround cen-ters. In addition, opportunities for management services are available, including evaluation of a center’s business practices, efficiencies, managed care negotiation and outsourced coding and billing services.”
Management and development companies have also found opportunities in this market that can benefit ASCs.
Mr. Mallon says, “More centers are in trouble, and more hospitals are in trouble. Both need assistance from management companies. So prospects are out there.”
Barry Tanner, president and CEO of Physicians Endoscopy, says, “I believe that the opportunities in the ASC market lie in the unprecedented need for professional management. The value of professional management services has never been greater than they are today. Purchasing, staffing, contracting, utilization analysis, billing and collections and customer service training are all areas that can add substantial value to an ASC. Effective management requires focus, experience and action. These are very often things that physicians simply don’t have the time address.”
Richard Pence, president and COO of National Surgical Care, says, “There should be opportunities assuming seller (price) expectations are adjusting down with the overall market. The potential prospect of the government becoming a payor for half of the population makes projections over the next five years challenging and very conservative. It would be almost impossible to project an increase in net revenue per case.”
Note: Visit www.BeckersASC.com to find more insight from industry leaders on ASCs in the current economy.
Contact Renée Tomcanin at renee@beckersasc.com.
