So, you’ve been dreaming about stepping out and opening your own ophthalmic ambulatory surgery center (ASC). By all means, go for it—but go in with realistic expectations and a well-thought-out plan to enhance your chances of success, says Regina Boore, MS, BSN, RN, CASC, principal with Progressive Surgical Solutions, a division of VMG Health.
“I’ve been working with surgeons for 40 years and, to a surgeon, I would say that the only question they ask once they’re operators of their own ASC is, ‘Why didn’t I do it sooner?’” Boore says. “But at the same time, it’s not for the faint of heart. It takes a lot of time, and it costs a lot of money.”
Building an ASC from the ground up is a daunting challenge that’s not for everyone. But the dream of owning an ASC, either alone or with like-minded colleagues, is achievable with careful planning and attention to detail. It would take a book to lay out everything needed to accomplish the goal, but it is possible to provide an overview based on the experience of consultants like Boore, surgeons like Dr. Mark Gallardo—whose journey through the ASC planning and construction process is detailed in “A Surgeon’s Experience Building an ASC, Good and Bad,” p. 8—and other ASC operators who have successfully navigated this process.
What Is a Certificate-of-Need State?
Almost three dozen states have regulations on the books that require healthcare providers, including ophthalmologists, to obtain permission from local and/or state government to add or expand services or facilities. The goals of these certificate-of-need (CON) laws, which were created by the federal government in 1974, were to help control healthcare costs, improve healthcare quality, and improve access to care for low-income families.
CON laws were ultimately found not to work well, and Congress, as well as many states, repealed them during the 1980s. But CON laws remain active in 34 states, despite being criticized for helping existing hospitals, doctors, and other providers fend off competition at the expense of patients and taxpayers, who face higher healthcare costs and fewer options as a result.
“If you are in a rigid CON state, you can add hundreds of thousands of dollars to the cost [of building an ASC] just to get your CON, and in many states like Alabama and others, it’s extremely difficult,” says John Blanck, a partner at Synergy Ventures in Kansas City. “So the first question one should ask [before embarking on a plan to build an ASC] would be, are they in a rigid CON state? If the answer is yes, then that adds a whole new degree of complexity and cost to the process.”
The Importance of Due Diligence
Assuming one’s aim is not to build an ASC in a certificate-of-need state (see “What Is a Certificate-of-Need State”), the first steps of the journey are to assess the “portable” case volume (the number of cases that can be directed to the new ASC), as well as to gauge any threats in the local market, such as health systems that could block the ASC from contracts, availability of anesthesia, or other necessities. The next steps are to formulate a business plan and a pro forma financial statement.
Make no mistake: an ASC is a business, not just a medical facility. A business plan should lay out the structure and function of the ASC. The pro forma statement should estimate the cost to build the ASC as well as its financial viability. This includes the expenses of establishing and operating the facility and projections of income, expenses, profits, and losses for the first three to five years. Some other items typically covered in a pro forma statement include services to be offered and expected patient volume over time.
“I think that’s probably the biggest mistake people make, is they get in their mind, ‘Oh, I’ve got to build my own ASC,’ and yet they don’t realize how much volume it really takes to have a surgery center with enough revenue to pay off all the debt and the operating expenses and generate cash flow,” says John Blanck, former senior vice president of operations for Surgery Partners and a current partner at Synergy Ventures in Kansas City.
Noting that cataracts and YAG capsulotomies make up the majority of cases handled in ophthalmic ASCs, Blanck estimates a patient volume ranging between 2,000 and 6,000 cases per year is enough to support an ASC with one to three operating rooms (ORs). The numbers, though, can vary widely by region, due to local real estate costs and state or federal regulatory requirements.
“There’s no such thing as building a surgery center inexpensively, but obviously, if you’re in downtown San Francisco or New York City it’s going to cost a lot more money to build out a surgery center than if you’re in small market USA,” Blanck says.
“Location has a huge impact,” agrees Boore. “I would say in the current climate, you can figure that the build-out is going to be somewhere between $350 and $450 a square foot” for a 3,500-square-foot to 6,000-square-foot facility. “It’s very state specific,” she adds.
Building an ASC Is a Team Sport
Drafting the pro forma statement can be a complex undertaking. It pays to hire a highly experienced and qualified consultant for help drafting the document and planning the facility. “I would definitely hire a consultant to see whether building an ASC is even viable,” advises Dr. Gallardo, a cataract and glaucoma surgeon with El Paso Eye Surgeons in El Paso, Texas. “My consultant has been extremely useful and helpful, because there’s so much involved in building an ASC. It’s relieved a lot of stress on my end. They’ve been able to help my architects and really just helped us through the entire process.”
Boore notes that an experienced consultant can provide invaluable help not only with the financial planning, but also with hiring and overseeing the wide-ranging array of other experts needed to bring an ASC project to fruition. These include architects, engineers, construction managers, contractors, attorneys, real estate brokers, and others. All these professionals should have specific experience in handling construction of ophthalmic ASCs.
“If you don’t use a really experienced and knowledgeable architect and engineering team, you’re not going to find out what you did improperly until you’re on your final survey, which of course is the worst time to find out,” Boore says, explaining that not all state departments of health require plan review prior to construction.
“We literally have had clients come to us and say, ‘Oh, this guy did a great job on my house. I know he doesn’t really have healthcare experience, but I’ve worked with him before. I’m comfortable with him.’ And I’m just like, ‘You’ve got to be kidding.’”
For those who choose familiarity over experience, horror stories abound. “A classic example involves an owner who had to spend $175,000 more to redo an AC system that was not done correctly by an inexperienced subcontractor,” adds Albert Castillo, CEO of the San Antonio Eye Center.
Castillo says he was “selective” when it came to choosing members of his construction team, particularly the subcontractors. “You want to make sure that you have reliable subcontractors that are familiar with ASCs because we’re running med gas, and we’re running oxygen, and we’re running vacuums, and dual-function electrical systems that are very intricate and have to work with the generators.”
Experience is also important in securing the litany of licenses, certifications, and accreditations required to operate ophthalmic ASCs, Castillo says. These include CMS certifications for treatment of Medicare and Medicaid patients; accreditations by the Joint Commission, Quad A, and/or the Accreditation Association for Ambulatory Health Care (AAAHC); and business licenses.
“[Working] with people who regularly interface with these state and federal agencies goes a long way to paving the way,” Boore agrees.
Hiring Staff: The Earlier the Better
Hiring an ASC administrator, preferably one with ophthalmic clinical care experience, at least four to six months before the surgical center’s planned opening is also a good idea to help control costs until patient volumes and revenues begin ramping up with private payer accreditations, says Blanck.
“Making sure you hire a good administrator that’s going to be able to hire and retain great staff is critical,” he says. “The most important part of a surgery center is clinical and making sure that procedures are done safely, effectively, and efficiently. And for a smaller surgery center, or unless you’re opening a center that’s going to do 10,000 cases right out of the gate, having somebody there as your full-time nurse and administrator is essential.”
Syndication: Buy Your Way Into ASC Ownership
Going it alone isn’t the only way to own an ophthalmic ASC. For ophthalmologists without the finances or patient volume, those with a more conservative bent, or even those who just don’t want the responsibilities that come with full ASC ownership, there is another option: syndication. In syndication, a company like AmSurg or Surgery Partners buys the land, builds the ASC, and then invites surgeons to buy into the facility as part owners.
“They might have a limit on how many shares you can own or buy, but it is shared risk,” says Albert Castillo, CEO of the San Antonio Eye Center. “A lot of the risk is on the company that built the ASC and is operating it, and as an owner you get to share in the profits or the losses.” Depending on the number of part owners, stakes in an ASC can range from as little as 3 percent to 8 percent or even higher.
The return on investment (ROI) can still be considerable for a surgeon in syndication. For example, a surgeon might acquire 30 percent of an existing center for $1 million and benefit almost immediately from distributions made in the next quarter at less risk than buying the ASC outright. Another advantage to acquiring an ownership stake is faster access to new technology.
“If you’re the only one paying for that new phaco machine or that new femtosecond laser, you may not buy it,” says John Blanck of Synergy Ventures. “But if you’ve got five other ophthalmologists that all like that piece of equipment, you’re in essence splitting the cost six ways. That’s another huge advantage.“ Participating surgeons can also benefit from intangibles like greater camaraderie and increased cross-referrals.
The surgery center principals also win when a new physician buys in, Blanck says. “If you’re that surgery center and somebody with a thousand cases is going to add $500,000 to your bottom line, then you would likely want them to join your center, and you’re going to want to diversify your personal financial portfolio and sell down.”
He advises surgeons with an eye on syndication to look for single-specialty or multispecialty ASCs that already offer their specialty and see if they can get “a piece of the pie.”
“They can’t sell you shares based on your volume, but you can say, ‘Look, I’m going to bring a thousand cases, I want 30% of the center,’” he says, noting that some surgeons will still insist on keeping all the equity in the ASC to themselves—to their detriment.
“Pigs get fat and hogs get slaughtered,” he says. “If you bring on a doctor who’s bringing in an extra half-million dollars, you can sell 20 percent of the center and still take home more money.”
As for the downsides of syndication, part-owners do lose a degree of autonomy by working under the bylaws and procedures of the ASC, which generally prohibit member surgeons from owning shares in other ASCs.
“You don’t totally control your destiny like you would if you owned your own center, because you can’t make all the decisions yourself,” Blanck says. “You’ve got to make sure that you can live with the terms and provisions of the operating agreement. That operating agreement protects the surgery center as well as the surgeons.”
Pride of Ownership
Building and operating an ASC is a time-consuming, complex project with many moving parts. But, as the saying goes, the right planning and teamwork can make the dream work.
“It’s an unbelievably rewarding thing to do,” says Boore. “Not only is it just taking on a tangible, bricks-and-mortar project that is involved and complicated and has a beginning, middle, and end. There’s also a real sense of accomplishment when you get to the end. I think it’s very personally, professionally and financially one of the most rewarding things an ophthalmologist can do, and I’ve seen it work out that way hundreds of times with the right circumstances, forethought and planning going into it.” ■
