By Regina Boore, B.S.N., M.S.,

San Diego, Calif.

From an operational and administrative perspective, the primary advantage of a single-specialty center is efficiency. When you have a high volume of a select few procedures, you can maximize teamwork and streamline operational systems. This narrow focus can be extremely cost effective — especially when you’re purchasing supplies and equipment.

In my experience, it’s more difficult for multi-specialty ASCs to be as efficient and cost-effective as single-specialty centers. While direct expenses are generally fixed, indirect expenses associated with a multi-specialty center are greatly affected by the breadth of specialty coverage. These indirect expenses can include staff training and education, instrumentation, capital equipment, maintenance and repairs.

So why give the multi-specialty concept a second thought? It may be more challenging to achieve the same level of efficiency and cost-effectiveness with a multi-specialty ASC, but changing reimbursement considerations may counterbalance this issue.

Reviewing the proposed Health Care Financing Administration (HCFA) Ambulatory Patient Classifications (APC), you’ll find winners and losers. Ophthalmology is generally a loser in that reimbursement for the two highest volume procedures — cataract and YAG laser — is going down.

A limited scope of care increases your vulnerability in an era of declining reimbursement, particularly when your procedures are primarily Medicare-dependent. The reality that ophthalmology is subject to the whims of Medicare is further compounded by the fact that other payers use HCFA rates as the standard from which they set their own rates. In broadening your scope of care, you can hedge your bet, so to speak, by limiting your dependence on reimbursement tied to one or two Current Procedural Terminology (CPT) codes.

Besides insulating you from further Medicare reductions in ophthalmology, a multi-specialty ASC can be very profitable. The key to success is in selecting the right case mix for your facility. The first rule is to seek out specialties that, like ophthalmology, generate high volume with few procedures. Ideally, you should have two or more of this type of specialty.

Compatibility may be the most critical issue that you need to consider. Here are some pointers:

• Team up with specialties that are as efficient as your own
. This should be your guiding principle. Efficient ophthalmic ASCs are geared toward high-volume and rapid turnover. Basically, the staff deals with one procedure — cataract extraction — that they can perform very efficiently. This is true of other specialties such as gastroenterology (GI), pain management, podiatry and general surgery. These four specialties involve primarily one or two procedures, which account for more than 75% of their volume.
Specialties such as otorhinolaryngology (ENT), plastics and orthopedics have a broader range of procedures and less predictability in terms of timing and patient flow. Beyond the impact on efficiency, they also have a higher degree of variability. Variability has implications in terms of the depth of instrumentation and equipment required to support the service, as well as the depth of experience and training required of the staff. Obviously, these issues have financial implications.
• Stay away from specialties that use a lot of general anesthesia
. Rarely needing to use general anesthesia puts you at an advantage because it minimizes recovery time, facilitating patient flow and early discharge. It also means that you don’t need much recovery space. As you know, many ophthalmic ASCs have a shared pre- and post-operative area.
Because your staff has limited experience with general anesthesia, you may need to train or hire additional staff if you include a general-anesthesia-intensive specialty in your center. You would need people who are comfortable enough or sufficiently trained to manage emergent situations that can arise.
The majority of pain management and GI procedures can be done with local or minimal intravenous (IV) sedation, whereas many ENT, gynecology (GYN) and orthopedic procedures require general anesthesia.
• Stick with adult populations
. Because the ophthalmic patient population is primarily elderly, you’ll need additional equipment, supply and staff if you pursue a specialty with a large pediatric population. With ENT, for example, you’d need to deal with screaming post-op tonsillectomy and adenoidectomy toddlers who obviously are not the best post-anesthesia care unit companions for the geriatric set.
• Consider the drawbacks of your options
. Some multi-specialty ASCs offer gynecological care. After all, this specialty accounts for about 10% of all outpatient procedures performed today. However, the incidence of post-op nausea associated with laparoscopic GYN procedures is considerable. This can extend recovery time and, consequently, affect patient flow. Also, the controversial nature of some GYN procedures demand a circumspect evaluation of the implications on staffing and facility safety.
• Make space a deciding factor.
Do space requirements demand that you share an operating room with another specialty? If so, consider the logistics involved. If you perform both procedures on the same day, is your operating room (OR) large enough to move your ophthalmic equipment — phaco, video cart and microscope — off to the side and still accommodate the other required devices? If not, do you have storage outside the OR that won’t impede the work or patient flow?
Theoretically, if you have two or more operating rooms, you can run different specialties concurrently without dealing with space considerations.

Determine your case mix before recruiting and selecting your staff. As I mentioned, ENT and GYN will require a staff that has experience with pediatric and general anesthesia populations. Likewise, if you include plastics and orthopedics, your staff will need to be trained to use a greater variety of instruments and equipment.

One extremely important move will be to hire an operating room supervisor who has experience in the full range of specialties that you plan to offer in the facility. This experience will be invaluable when:

• making purchasing decisions on supplies and equipment
• establishing credibility with surgeons in the various specialties that you include
• providing strong leadership when training other staff members in specialty procedures.

A multi-specialty ASC is a more complex version of a single-specialty center. Therefore, while the basic principles of effective ASC operations and management still apply, you’ll face some of the new challenges I’ve just reviewed. Remember to look for compatibility with ophthalmology, in general, and the unique characteristics of your center, in particular.

If you make your plans carefully and evaluate all of the administrative and operational implications of your decisions, launching a multi-specialty ASC could be the best choice you’ll ever make.

By Jim Rienzo,

Smithtown, N.Y.

Why are more ophthalmologists choosing multi-specialty over single-specialty ASCs? Most of them do it because they know that teaming up with the right specialties under good management expands the universe of cases coming into their centers, producing a higher top line. Such a venture requires a lot of financial planning, but it helps these physicians overcome the challenges of the current medical business climate. Read on to find out how you can achieve common goals, using your financial books and key considerations.

Multi-specialty ASC success is tied to a sound plan that uncovers accurate, up-to-date financial information. This means you’ll need to get extensive, pertinent financial data on each specialty and physician that you plan to include in your venture. Don’t take anything for granted, especially in other specialties. It’s much easier to gather meaningful information about your own specialty than it is to obtain or understand details in others.

Also, as you look at what and who to include in your venture, you should start to determine how many operating rooms you’ll need. This is one of the most important issues when setting up a multi-specialty ASC.

Chances are, your volume will grow for years to come. Now more than ever, hospital administrators are realizing that it’s more cost effective to perform outpatient surgery in ASCs. So base your size and physician determinations on:

• Case mix.
Look at the case mix for each specialty that you plan to include.
• Case volume
. Get information from each specialist on how many of the selected procedures he performed during the previous 3 years.
• Speed
. How quickly can each specialist perform procedures? You don’t want to tie up your operating room with 40 minute cataract operations.
• Cost
. Determine how much each procedure will cost.
• Reimbursement.
What is the reimbursement for the specialties that you plan to include? Have you researched each specialty’s facility reimbursement for your state?
• Hours of operation
. Decide how many days the center will be open.

Once you’ve done this, put together a financial pro-forma. You’ll need this when you go to the bank.

Let’s assume that you’ve done your preliminary research and have decided on a multi-specialty ASC with four operating rooms (ORs). Now you need to figure out how much space you’ll require. Allow for about 2,000 gross square feet per operating room — this takes into account space needs for pre- and post-op, as well as common areas.

This logic suggests that you would need an 8,000-square-foot facility for four ORs. But multi-specialty ASCs are unique and require additional space for capital equipment and central supply storage. Equipment from one specialty may need a "home" away from the OR while another specialty’s procedures are being performed. It’s also important to have an appropriately sized central supply area for surgical packs and inventory.

To accommodate the multi-specialty facility in this example — with four operating rooms — it would be prudent to pursue a 10,000 square foot facility. The additional 2,000 square feet of space won’t go to waste.

The added space requirement is one of the most overlooked aspects of successful planing for these ASCs. Make sure that your floor plan and your budget reflects this need. It may cost a few more dollars up front, but it will prevent a logistical nightmare down the road.

Once you’ve determined how much space you’ll need, look for an ideal location. Your decision to build or lease should be based on what you need and what’s available.

Look for a convenient location, near a major roadway, with plenty of parking. You also might want to keep your eyes open for space in a building that houses a variety of medical practices. This could pave the way for future expansion.

Should you choose to build, consider that average build-out costs — including base services only — are about $130 per square foot. Construction of a 10,000-square-foot building, housing four operating rooms, should cost about $1.3 million — plus or minus 10% for overruns and contingencies. Of course, this number varies. You should research your local market for an accurate figure.

The dollar amount may seem staggering as a stand-alone number, but you’ll find it more acceptable when you consider it in the context of estimated revenue figures.

If you’re building, you’ll also need to hire an architect. Typically, an architectural firm will charge 7% to 8% of the cost of base services, not including fit and finish. Once the plans are complete and the final product is delivered, this sum probably will be converted to a dollar figure based on the agreed-upon percentage. Using the same example, this represents about an $104,000 charge to complete a 10,000-square-foot project.

When you’re seeking an architectural firm for your ASC endeavor, remember to solicit references from several well-regarded firms that have shown that they can handle a job of this magnitude and that have solid healthcare and hospital experience.

Obviously, you’ll need reputable legal counsel during the planning process. Counsel should:

• set up legal structure for ownership
• lend support in the licensure and certificate-of-need (CON) areas
• provide guidance related to entity governance issues
• handle any other legal details that may arise.

This advice will cost about $8,000 to $12,000, depending on the scope of surgical services you plan to provide.

Also, if you’re in a state that requires a CON, seek additional help in monitoring your application through the process. Consultants knowledgeable in the CON process can help prepare the application and move it through the maze of bureaucratic channels so that it will be viewed more favorably and expeditiously. Fees for this type of assistance usually range from $15,000 to $20,000 per application.

Frequently, when physicians join forces as equity-integrated partners in an ASC, they do so as a limited liability corporation (LLC) looking to collectively borrow the necessary funds. Each project is different, and there are many ways to organize ownership and obtain financing. But, for taxation reasons, an LLC is usually the best way to form a multi-specialty ASC. Also, if your center doesn’t work out, the recourse for your partner investors won’t exceed the amount that they had initially invested.

Partners will most likely be required to personally guarantee their pro-rated portion of the loan. This personal guarantee not only helps in the bank credit process, it also increases assurances that each owner will focus on making the center as profitable as it can be.

Loans commonly cover 80% of the total amount. Sometimes, you may even get a lender to finance 100% of the project. Generally, the higher percentage of the total that you borrow, the more interest you’ll pay. Even if you need to borrow the full amount, a multi-specialty ASC can still be a viable and profitable undertaking. And don’t forget, when you apply for your loan, you need enough cash on hand for at least 90 days of working capital.

When you’re ready to choose a lender, here are some of the factors you should consider:

• Rate
. Obviously, secure the best financing rate available.
• Service
. Look for a flexible lender. For example, is the lender willing to work something out with you if you run into construction delays?
• Terms
. You’ll probably have to pay out quite a bit when you first open your doors, and the initial revenue probably won’t cover this amount. Look for a lender that will let you pay only the interest for the first couple of years. The lender will want to review the CON, financial pro-forma and personal financial statements from each partner.

We’re all looking for long-term professional viability. Maybe you can reach that goal by launching a multi-specialty ASC. To find out, do your homework. Remember, solid financial planning is as essential to the decision-making process as it is to running your operation.

Here are some of the charges that you’re likely to incur when establishing an ASC:

• Consulting/Project Management Fees:

• Architectural Design — 7% to 8% of base services.
• Legal Review — $8,000 to $12,000.
• Land/Building Purchases — as needed.
• Construction Costs — build-out of approximately $100 to $130 per square foot.
• Equipment Purchases — depends on specialties included.
• Furniture and Fixtures — based on preference.

Jim Rienzo is a Management Consultant at Allergan’s Services Consulting Group. He specializes in ASC development and refractive surgery marketing

Put it to the Test

by Ron Blair

Incline Village, Nevada

The major advantage of a multi-specialty ASC is that it lets you combine volumes of surgery.  This means that all of your fixed costs can be spread over a greater number of surgical procedures.

Once you've decided which specialties to include in your center, identify and validate each procedure category.  To find out if launching a multi-specialty ASC is a viable option, put your figures to the test in a pro forma.  Below is a simplified example.   (You'll need more detail in your actual pro forma.)

Ron Blair is Vice President of Surgery Center Services of America.  He specializes in ASC development, Mr. Blair is a member of the American Society of Ophthalmic Administrators, Medical Group Management Association and Outpatient Ophthalmic Surgeons Society.