OASC | BUSINESS

Is it Time to Add Another OR?

Five experts share the brick-and-mortar foundations of this complex decision.

By Erin Murphy, Contributing Editor

Are your ORs booked to capacity? Could you increase volume in your ASC if only you had more space? Would your surgeons like to switch between two ORs, rather than working in one?

There are several reasons that partners expand their ASCs, just as there are several reasons they decide against it. Here, five experienced decision makers share how growth, finances and physical factors have impacted their own expansion plans.

Crunching the Numbers

How much will it cost to add an OR, and will the investment pay off? These are the most important questions for shareholders to ask when considering adding an OR, according to Maureen Waddle, MBA, Partner and Senior Consultant at BSM Consulting. Ms. Waddle helps clients who are contemplating expansion perform a financial impact analysis.

“I evaluate the cost versus the potential revenue. If the current surgeons have pent-up demand — they’re asking for more OR days or patients are waiting more than 6 weeks for surgery — then I can calculate the actual numbers showing that a new OR will add income,” she states.

Whether that future income will exceed the cost of expansion depends on the individual facility, Ms. Waddle says. She estimates that a majority of her clients choose to renovate, which involves loss of revenue during construction. Others decide to lease or build a larger facility. State certificate of need requirements can also influence the expansion decision. (Figure 1)

Figure 1. Incremental Income Analysis: ASC Adding One OR
Source: Maureen Waddle, MBA

Efficient Operation

Another key part of this evaluation is to take a hard look at how efficiently the ASC uses its current number of ORs. “The ASC may be operating inefficiently, and it’s much less expensive to increase efficiency than to add an OR,” says Ms. Waddle.

To gauge efficiency, she includes benchmarking exercises in her financial analysis. “I take a facility’s average number of cases per day, average wait time to schedule surgery and turnover rate and compare them to benchmarking data offered by OOSS,” she says. “Sometimes, I can show how increasing efficiency will enable the ASC to meet demand without adding an OR, and we can estimate when expansion may become necessary in the future. This is especially helpful for practice-tied, single-OR ASCs for which adding an OR presents major regulatory hurdles.”

Ms. Waddle offers an example in which four ophthalmic surgeons (all partners) using an ASC 4 days per week add an OR. “Even with an aggressive 10% case volume growth every year for 5 years, cumulative positive cash flow takes 3 years, and they don’t achieve a full return on their investment in 5 years,” she says. “Instead of adding an OR, this center would be better off meeting demand by operating 5 days per week (1 more day per month per surgeon) and incurring only some added staffing costs.” (Figure 2)

Benchmarking data also allow Ms. Waddle to estimate the staffing changes that a new OR will require. “If an ASC goes from one OR to two, that doesn’t mean the OR staff is doubled. I compare the staff’s hours per case, revenue per full time employee (FTE) and income per FTE against OOSS benchmarks. In many cases, going from one to two ORs requires only 50% more staff for additional pre-op and post-op time, circulation and turnover.”

Operating in Two Rooms

“Contrary to conventional wisdom and pressures from surgeons, going from room to room with one surgeon isn’t always the most logical or efficient plan,” suggests Robert B. Nelson, PA-C, Executive Director at Island Eye Surgicenter in Carle Place, N.Y., who has been involved in expansion projects at several ASCs. “Our fastest and most efficient surgeons can use two rooms, but we have to choose those surgeons wisely.”

Mr. Nelson points out that many surgeons like the convenience of working two ORs, but unless a surgeon works quickly, the added staffing costs and possible lost OR productivity reduce revenues. Here’s why.

“Most cataract surgeons say that surgery takes 8 minutes, but they actually spend 15 to 20 minutes per procedure. With 15 cases booked in two rooms, staff prep and drape in less than 5 minutes, and then wait around for 10 to 15 minutes while the surgeon is in the other room. But when two surgeons occupy those two ORs, each surgeon performs 15 cases with the same staff — double the volume. With an additional staff member dedicated to room turnover, surgeons’ downtime between cases can be just 2 or 3 minutes.”

Even previously reluctant surgeons at Mr. Nelson’s ASC now support this approach because it minimizes inconvenience and increases overall case volume, helping the bottom line.

Stephanie Harvey, CEO of Independent Surgery Center in Chippewa Falls, Wisc., was considering adding an OR to the 4-year-old ASC to allow surgeons to alternate between two rooms. Her financial analysis showed the addition wasn’t feasible.

“Running two ORs simultaneously requires more staff and twice the equipment, and it creates twice the opportunities for citations,” she says. “We may do it in the future if our volume increases to justify the investment, but it isn’t a solution for us right now.”

Expanding the Facility

When you know that your ASC has the surgical volume to expand, the facility’s physical considerations take center stage. It may or may not be possible and financially feasible to add space. When partners at Ms. Harvey’s ASC considered adding an OR, they realized that expanding the existing building was a complicated option.

“By adding an OR, we would also need to increase pre-op and post-op space, boost the administrative and storage areas, and rearrange the center’s entire layout and flow,” she explains. “When it’s time for us to expand, we’ll either build new or be forced to shut down while we renovate. In retrospect, I wish we had built the ASC with expansion in mind.”

Ahad Mahootchi, MD, owner of The Eye Clinic of Florida in Zephyrhills, did exactly that, largely based on discussions with ASC owners who wished they’d anticipated the need to expand.

“I spent one and a half years planning the ASC, talking to people about what they’d done right and wrong. When it came to the facility, people complained about space most often. So I built a facility that’s easy to expand, has plenty of storage and houses a separate laundry facility outside.”

Dr. Mahootchi started with two ORs using a modular design that will facilitate adding three more without having to close down during construction. The waiting room, pre-op and post-op areas are already large enough for five ORs.

Three years after opening his doors, he has no regrets. “The cost was higher initially, but adding on later will cost less,” he says. “Future growth will be relatively easy.”

Building a New Location

Albert Castillo, Director of Business and Financial Development for San Antonio Eye Center, has seen his clinic and ASC go from four physicians to 13. Currently, the ASC can handle about 35 procedures per day, 4 days per week, in a single OR. With space getting tight, shareholders have looked into expanding the building, a converted historic house.

“An older facility like ours is grandfathered in with earlier CMS life safety codes. Adding on means modifying the entire facility to the most current codes,” explains Mr. Castillo. “In short, to add a second OR, we would need to renovate the entire building, and the cost would be three to four times that of building a new facility. Currently, we’re planning to keep our facility and considering building a second location.”

For shareholders who don’t want to operate two locations, building or moving to a new facility is another option. At Island Eye Surgicenter, three ORs are operating at 95% capacity, handling 14,000 cases per year. The center has 40 surgeons on staff, 14 of whom are partners. More surgeons want to join the staff, but there isn’t enough space, and building an addition would impact the clinical operation and sacrifice much-needed parking.

“That’s a missed opportunity,” Mr. Nelson points out. “So we made a decision to build a larger facility a quarter mile away. We’re going from three ORs to six, from 9,400 square feet to about 26,000. We hope to start construction in a few months.”

Despite the leap in size, Mr. Nelson isn’t hiring staff just yet. “We’re well staffed today, and we will add staff gradually in the future as we go through a ramp-up period adding capacity from three to six ORs.”

Asked what advice he would offer other facilities’ administrators and shareholders considering expansion, Mr. Nelson keeps it simple. “Look at the cost and current utilization patterns. If the risk is balanced by the opportunity to grow case volume and increase revenues, then partners usually will support expansion.” ■