Management Essentials

Look Before You Leap Into ASC Ownership

By Farrell “Toby” Tyson, MD, FACS

Many ophthalmologists at one time or another have considered building or buying into an ASC. The conventional wisdom is that an ASC is a very lucrative profit source. While this may have been true back in the 1980s, in today's economy, buyers should beware. ASCs can still be a good revenue source for the operating ophthalmologist, but it is crucial to weigh your options before jumping in.

Single vs. Shared

The first thing to consider is whether this is going to be a single doctor/practice ASC or a shared facility. Having a single doctor/practice ASC has many benefits since there is a common goal and the financial structure is simplified. The workforce can also be optimized, as it is relatively easy to share staff between the clinic and surgery center. This allows the ASC to run on minimal staffing when not in use, thus lowering overhead.

In a shared facility it is much more difficult to share clinic staff from multiple practices with the ASC. Therefore a full-time OR staff is required, driving up overhead if the ASC is not fully utilized. Single-surgeon ASCs do have the downside of not being able to spread the cost of equipment over multiple providers, but there is also no argument over what equipment and implants are used.

Who Will Use the ASC?

High volume, efficient cataract surgeons can make an ASC very profitable through the high ratio of surgeries to time utilized. This limits staff costs and usually decreases the inventory of disposable supplies.

Oculoplastic surgeons can be very efficient but their supplies can become expensive. Another problem arises when they are dealing with cosmetic procedures, as they are inclined to have the lowest facility fees possible so they can have a greater share of the procedural bill allocated to the surgeon's fee. This inherent conflict needs to be worked out equitably.

Recent reimbursement increases for glaucoma and retinal surgeries have made these subspecialties in an ASC more palatable. Still, both glaucoma and retinal surgeries can have a minimal return on investment at an ASC, primarily due to the length of the cases and the cost of supplies needed for the procedures.

Partner Structure

One method of partnership is percentage shares. While this sounds great and fair at the get-go, it can fall apart since different partners have varied amounts of production. This method usually leaves the higher-producing partner angered at the fact that he is subsidizing the lower-producing partners.

The other end of the spectrum entails having one owner while the remaining surgeons have no financial interest. Due to Stark laws, the non-shareholding surgeons are not eligible for a share of the facility's profit. This lack of incentive draws these surgeons to other facilities where they have the possibility of buying in.

A third type of partnership allows a fair split of the fixed costs with a split of the variable costs based on production. This method allows the higher-producing surgeon to take home more without resenting the lower-producing surgeon who helps keep the overhead down. More complex to set up, this structure requires the assistance of a healthcare lawyer to make sure the agreement is in compliance with Stark laws.

The buyout or partner termination clause is often overlooked at the beginning of a relationship. Things do happen. Surgeons retire, get in accidents, have health problems, and on occasion just can't get along. These scenarios require a well thought out exit strategy that is fair to all parties so that litigation does not bring down the whole ASC.

Once these basics have been thought through, the purchase or formation of an ASC can proceed with a better chance of success. An ASC can be very rewarding both professionally and financially if handled in a proactive manner. OM

Farrell C. Tyson, MD, FACS, is a refractive cataract/glaucoma eye surgeon at the Cape Coral Eye Center in Florida. He may be reached at tysonfc@hotmail.com.