Foundations for Success in the ASC

Experts provide insights on how to develop and run a successful ASC.

By Sean McKinney, Contributing Editor

Experts say that now is as good a time as ever to build, or partner in, an ambulatory surgery center. However, they also emphasize that you should proceed with great care being mindful of regulatory, administrative, financial, partnership and patient management issues, all of which require detailed planning. Missteps can result in cost and time delays, under-performance of your facility and possible failure. Following the right steps, however, can produce optimal results and position your practice for decades of success.

Assessing Your Potential

To determine where you might fit into the ASC picture, perform due diligence, including a financial pro forma. Beth Hurley, RN, who has helped surgeons open multiple ASCs, say analyzing retrospective case costs and volume is key.

“Don't base your estimate on the number of cases you think you might perform,” says Hurley, a former ophthalmic consultant and current administrator for Phoenix Children's Surgery Center at Phoenix Children's Hospital. “Surgeons tend to overestimate the future.”

“I've seen doctors on the edge of having enough volume (50 to 55 cataract surgeries per month) build centers and, for whatever reason — a slowing market or competition — they have fallen below that 50-case floor, lost profit or even started slipping backwards,” says John Pinto, president of J. Pinto & Associates, Inc., an ophthalmic practice management and consulting firm.

However, the most significant pitfall is not having an ASC when you should, says Pinto. “It represents $300 in lost profit per surgery. If you have a practice in the right location and you're performing 60-plus cases per month, you're losing sizeable profits every day by not having an ASC.”

“If you're performing cataract surgery but you're only receiving the surgeon's fee, you're missing out on two-thirds of the income stream,” notes James Dawes, chief administrative officer at Center For Sight in Sarasota, Fla.

Regina Boore urges physicians to evaluate labor costs, land and/or space availability, anesthesia coverage and cash liquidity. “It's important to ‘right-size’ your facility to maximize profitability,” says Boore, chief executive officer of Progressive Surgical Solutions, a San Diegobased company providing management and consulting services for ASCs. “A solid pro forma will establish your plan. For example, you may think you need three operating rooms, but a thorough assessment may reveal that a one-room ASC is a better plan.”

Consider payer market forces. “Continuing access to your current patient base is crucial,” says Boore. “Is your market heavily dominated by managed care? Does another surgical facility have a lock on individual practice associations [IPAs] and health plans that will compromise your ability to capture patients? If you'll pull volume from local hospitals, how are they going to respond? In some cases, hospitals can be very influential with IPAs and health plans, limiting your ability to access patients. This occurs more often in secondary and rural markets, where the financial incentive to perform cataract surgery is greater than we typically see in urban and suburban markets.”

Figure 1. Teamwork is the key to efficiency during cataract surgery at the Aker-Kasten Eye Center. Surgeon Alan Aker, MD, is shown working with Linda Schopper, COA, CST, (middle) and circulating nurse Janet Nuzzi, RN (left).

ASC: A Sound Investment

An ASC can be very worthwhile, despite reimbursement cuts, says Alan Aker, MD, owner and operator of the Aker-Kasten Eye Center along with his wife, Ann Kasten-Aker, MD. Before their eye center opened, Dr. Aker says that each cataract procedure was reimbursed at $2,800 per eye — plus $600 if a second surgeon assisted — and the Medicare allowable payment was 100%. As reimbursements have dropped significantly, with allowable payments dipping to 70% and 80%, The surgeons and their team have mastered surgical efficiency and reduced costs to remain viable.

“Despite reduced reimbursements and increased costs, the incentives are still in place for anyone to open an ASC,” says Dr. Aker. “The future of health care will be cost containment and improving the ability to efficiently perform procedures. If you're not moving in the direction of an ASC, you'll be at a significant disadvantage in terms of scheduling and cost.”

Dr. Aker's administrator, Kim Harrington, provided the following reimbursement rates for surgeons who own ASCs in Palm Beach County, Fla.:

• $818 for a routine cataract procedure
• $1,137 for complex cataract surgery, using additional instruments
• $948 facility fee
• $323 for a YAG laser treatment
• $216 facility fee for a YAG laser.

James Dawes of Center For Sight notes that his facility also offers general anesthesia, which is reimbursed at $280, twice the rate paid in a hospital. (These Medicare and health insurance reimbursement rates vary according to plans and demographic regions.)

“My advice to young surgeons is to save every penny,” says Dr. Aker. “First, buy land and eventually build a surgery center. Land is less expensive right now. This is the best investment you'll ever make. I would say not to be concerned about competitors. Because of the tidal wave of baby boomers about to enter the Medicare ranks, there will be an increased demand for cataract surgery. And because surgeons are opting out of this surgery when reimbursements fall below $500, this situation will be compounded. Only the most efficient surgeons in well-run surgery centers will be able to profit from offering the procedure.”

Figure 2. The Aker-Kasten Eye Center opened in 1987.

Challenging New Environment

Ray Mays, practice administrator for the Eye Centers of Tennessee, says increased regulations have complicated management of ASCs. He once believed 1,000 or more procedures per year could justify a new facility by a single surgeon. But during the last 12 to 18 months, more inspections and state and federal requirements have made it necessary for his 1,400 procedure ASC to dedicate more time and staffing to compliance issues.

The increased regulation is associated with closer scrutiny of sterility issues brought on by the Toxic Anterior Segment Syndrome (TASS) survey that implicated many techniques in TASS infections.¹ In addition, ASC owners now contend with increased inspections from state inspection teams that were financed by $40 million in federal stimulus funds. The inspector's mission is to ensure that ASCs comply with ASC Conditions for Coverage issued by the Centers for Medicare and Medicaid Services (CMS) in 2009.

Mays doesn't expect inspections to abate because of recent cuts in the federal budget. “These inspections have created a whole new level of bureaucrats. Once you create government jobs, you rarely see them go away,” he says.

Among the new requirements is a need to document minutes of quarterly governance meetings that follow Robert's Rules of Order, keeping 5 years of business and clinical records ready for inspection at any time, ensuring that a 30-day health history is taken by someone other than the surgeon, requiring patients to make two trips to the ASC (the day before the procedure and the day of the procedure) and disallowing additional procedures the surgeon might discover a need to provide on the day of a procedure. “The government takes a sledge hammer to problems a laser could fix,” says Mays. “As a result, we have patients in distant locations who need to make extra 2-hour drives to have their surgeries completed.”

Subspecialty Investments

One strategy to firm up your business plan is to involve other subspecialists, some even outside the field of ophthalmology. The Eye Centers of Tennessee, with headquarters in Crossville, hired a retina specialist about a year ago. John Stone, MD, performs eye exams and injections at the Eye Center's clinic 2 days a week and performs surgery at a local hospital. According to Mays, the arrangement has worked well. “We're not ready to provide retina surgery in our environment,” he adds.

“Definitely consider retina surgeons as partners,” says Hurley. “This can be a huge benefit to the ASC because of the increases in reimbursements for retina procedures in recent years and it also positions your ASC to meet the ophthalmic surgical needs of more patients.”

“Adding retina makes a lot of sense,” agrees Boore. “One challenge of retina, however, is that it's not as predictable as cataract surgery. You run the risk of delaying your cataract surgeons by scheduling retina cases before cataract cases. If you can use a separate room for retina or schedule retina surgeries after cataract procedures.”

“If you have a retina specialist, make sure he's also very efficient — capable of doing maybe three to five epiretinal membrane peels in an afternoon,” says Dr. Aker. “Otherwise, it may not be worth the investment. Remember the financial resources needed for lasers, vitrectomy kits and other instruments.”

Dawes believes a variety of specialists are important to include — even if some don't have tremendous earning potential. “Some procedures are loss leaders in the ASC,” he notes. “Cornea transplants are a break-even proposition. But the results we get and the positive experiences of patients help grow the practice.”

Another important issue to consider is whether you're going to add general anesthesia. “It increases recovery time and risk to the patient,” Hurley notes. “The few cases that require anesthesia could be performed in a hospital.”

Oculoplastics provides great accretive volume in a cataract center. However, if there is insufficient ophthalmic volume, a multispecialty ASC is also a possibility. Recommended subspecialties are interventional pain, gastroenterology and podiatry. “These subspecialties typically don't use general anesthesia, thus you can avoid introducing a new a layer of complexity into your operation,” Boore explains.

Retaining subspecialty work is definitely an attraction, as well as a convenience, for your patients, notes Dr. Aker. However, the arrangement has to be profitable. “We had an excellent plastic surgeon at our center a few years ago, but we were unable to effectively achieve profitability because of the staffing and supply issues associated with the different case mix and more time-consuming procedures he brought to the center. As a result, we decided to maintain our focus on cataract surgery, where we could maximize efficiency and control costs more effectively,” he says.

Hurley emphasizes the importance of teaming with surgeons who are efficient and familiar with the outpatient surgery environment. “You can have someone who's using too much OR time and too many resources,” she notes. “It's important to have the same goal: Are you operating the facility as a business or as a convenience for the surgeons?”

Obtain copies of potential colleagues' preference cards and observe their cases. “Talk with staff who work with them and see what resources they use,” Hurley suggests. “Do they start cases on time? For retina surgeons, determine the predictability of their schedules and case length. Do they perform cases after office hours? Are you prepared to handle schedule fluctuations, including emergency add-ons at night?”

Dawes recommends implementing a standard preference card for all surgeons and monitoring cost per case, including staffing and overhead. “Drive volume as high as possible and cost per case as low as possible,” he says. “Understand fixed costs vs. incremental costs. Once fixed costs are covered, additional cases drive profitability. If you need 12 cases per week to cover fixed costs, and you perform an average of 20 cases, cases 13 to 20 will produce all of the profit of the ASC.”

Figure 3. Center For Sight is an ASC in Sarasota, Fla.

Inviting Surgeons to Use Your ASC

When you own an ASC, you can benefit by adding facility-related reimbursements generated by outside surgeons. “However, I would caution owners to avoid cost overruns. It works to your advantage if surgeons are conservative in their use of viscoelastics and careful when handling delicate instruments. It might be best to have outside surgeons bring their own instrument trays, or at least their own diamond blades,” says Dr. Aker.

“Surgeons should be willing to work with your equipment, especially big-ticket items, such as scopes, phaco units, as well as your preferred intraocular lenses. They should observe your efficiencies and adopt them. This can be encouraged by getting them to buy into the concept of surgical efficiency through scheduled brainstorming meetings. Although they don't share in the ownership side of the ASC, their time is valuable. As a consequence, they certainly benefit from surgical efficiency,” adds Dr. Aker.

Staffing Needs

According to Hurley, for a one-surgeon ASC, you'll need, at a minimum, one preoperative nurse, one OR nurse, one surgical tech and a recovery room nurse. You'll need two business staff members, including at least one to work on insurance verifications and billing and one to schedule and admit patients. “Increases in staff support for added patients aren't exponential,” she adds. “And when you increase efficiency, procedures and ORs, you have to increase staff which increases staff costs.”

Dr. Aker, who performs about 60-plus cataract cases per week, relies on 40 full-time administrative employees, drivers and technicians. About 10 nurses work part-time, saving on payroll and healthcare costs.

“We can tolerate a large number of staff members because our overall efficiency is so good,” says Dr. Aker. “If you have an ASC that runs all day long, with full-time nurses sitting idle when cases aren't there, it's not an efficient model.”

Longevity of key staff personnel is critical. “Hire nice people and train them to be good,” says Dr. Aker. “You can train someone to be good, but you can't make them nice. Nice people work well together and enjoy showing compassion and kindness to your surgical patients. Our experience is that they stay long-term because of the pleasant work environment they played a part in establishing.”

Dawes notes that staffing is often the largest cost component of each case in an ASC. “Cross-train your nursing staff for pre- and postop as well as circulating,” he advises. “Cross train surgical scrubs and instrument technicians. Track staff cost per case by surgeon and maintain the minimum staff as safely possible.”

Creating a Productive Environment

Mays encourages efficiency with cash incentives. “All of our incentives are based on collections, not benchmarks,” he says. “We look at cash flow. How much did we bill this month and how much did we collect? Everybody in our ASC is equally important when it comes to bonuses.”

Dr. Aker emphasizes highly personalized care. “The patient experience is what this is all about. After surgery, we want our patients to say, ‘Wow! This was the best medical experience I've ever had in my life,' concludes Dr. Aker.

“That's what motivated my wife and I to build our own ASC. We wanted to control every aspect of our patients' surgical experience. We wanted to hand-pick our own nurses and other surgical team members. We want patients to feel so safe and cared for during their visits, that they are reluctant to re-enter the harsher world outside.”

In the end, after meeting regulatory standards, partnering with like-minded surgeons and hiring competent staff members, an ASC is capable of functioning at optimal efficiency and is positioned for long-term success, Dr. Aker says.

“The ASC saves you so much in terms of travel, avoiding slow turnover at the hospital, minimizing unwanted surprises in your daily surgical schedule and providing the surgical team and equipment you want,” he says, “It's the only way to go in the future.” ◊

Reference

1. Cutler Peck CM, Brubaker J, Clouser S, Danford C, Edelhauser HE, Mamalis N. Toxic anterior segment syndrome: common causes. J Cataract Refract Surg. 2010 Jul;36(7):1073-1080.