In today’s evolving landscape, ophthalmic ambulatory surgery centers (ASCs) find themselves grappling with numerous challenges that threaten their financial viability. As costs rise and profits dwindle, ASC leaders must keep a sharp eye on many factors that contribute to profitability, including revenue cycle optimization, cost containment, and operational streamlining. Effective expense management is necessary to ensure a solid balance sheet in an economic environment where every penny counts.

Although the Covid-19 pandemic is in the rear-view mirror, its economic effect on ophthalmology remains. “The cost of everything has gone up so dramatically, and this has really put pressure on profit margins. Supplies, drugs, labor, energy. Inflation has created a big challenge for every ASC,” says Regina Boore, MS, BSN, RN, CASC, principal with Progressive Surgical Solutions, a Division of VMG Health.

Nancy Stephens, senior consultant at Progressive Surgical Solutions, agrees, estimating that the cost of doing business for ASCs has risen 3 percent to 6 percent on average nationally since the Covid-19 pandemic. “Surgery centers are in a constant struggle, because they generally run lean, and they need to be very efficient. Because of the increase in the cost of goods sold (COGS) and the cost of labor, you can’t afford to make mistakes,” Stephens says.

Improve Revenue Cycle Management 

While cutting costs may be top of mind for most ASC leaders, both consultants argue that improving revenue cycle management, especially receivables, should be a higher priority. Efficient management of accounts receivable is essential for cash flow. It involves prompt billing, diligent follow-up on unpaid claims, and implementing clear payment policies for patients. Reducing the time to collect payments can significantly enhance a facility’s liquidity. 

“I can’t tell you how many times we get called in to [assess an underperforming ASC], and what prompted the surgeon to ask us to come in is, ‘Our labor costs are out of control, and that’s why our bottom line is hurting,’” says Boore. “It’s almost as predictable as the sunrise that we tell them they have a revenue problem, not a staffing problem.”

One easy solution, she says, is to collect copayments at time of service instead of billing the patient. Prior to the pandemic, Stephens says, self-pay was a small percentage of an ASC’s overall amount due. Now, she says, “It’s the leading bucket in some surgery centers if they don’t have best practices in place.” 

Accurate, efficient billing and coding is also an integral component of ensuring that ASCs receive appropriate insurance reimbursement, particularly for supplies such as stents and medications. In many cases, prior authorization is required by commercial payers. “That’s where the challenges are, knowing which commercial carriers are going to be willing to pay for which stents for glaucoma,” says Dan Chambers, CEO of Key-Whitman Eye Center in Dallas.

Chambers says a large percentage of Key-Whitman’s patient base is covered by a Medicare Advantage plan, which generally requires a lengthy prior authorization process. As a result, Key-Whitman dedicates two full-time staff to billing and claims processing. Unlike Key-Whitman, a large ophthalmic clinic with four ASCs throughout the Dallas-Fort Worth region of Texas, many smaller ASCs cannot easily afford to dedicate staff solely to billing and coding. As a result, these facilities should be outsourcing AR responsibilities, says Phil Blair, chief executive officer of Surgery Center Services of America in Phoenix, Arizona. 

“You can pay somebody 4 percent of net collections to manage all that for you and squeeze down AR big time,” Blair says. “But ASCs are one operating room or two OR centers with 10 people. Anything you can do to outsource, whether it’s billing or whatever, you’re going to have a huge cost savings return.”

Stephens says one of her firm’s most sought-after services is training ASC administrators how to use practice management software to help track key financial performance indicators (KPIs) such as cost per case, labor per case, labor ratios, and cost ratios. 

“It isn’t just about EBITDA [earnings before interest, taxes, depreciation, and amortization]. It’s, where are you in relation to your benchmarks? And most of the time we’re training people how to build that dashboard for the first time, and they’ve been in business for 15 years,” she says. “We spend a lot of time investing in the leadership to train them to look at those KPIs.” 

Increase Case Volume and Mix 

Another key driver of profitability is maintaining a high volume and ideal mix of cases. Ensuring a steady stream of patients maximizes facility and staff utilization, spreading fixed costs over a larger number of procedures and enhancing revenue. Balancing high-revenue procedures with less lucrative but necessary ones can optimize the financial performance of the center. For example, cataract surgeries, which are often covered by insurance and have relatively high reimbursement rates, can be offset by other surgeries with lower margins.

Chambers, noting that his facility aims for a profit margin of 20 percent to 25 percent, says Key-Whitman focuses its procedure mix on cataracts surgeries or implantable collamer lens (ICL) procedures and a few other surgeries. They tend to stay away from retina surgeries and certain extensive glaucoma procedures that may require general anesthesia. In part this is because the former procedures are more predictable, require fewer supplies, and are reimbursed more easily than the latter. 

“Probably 95 percent of what we do is cataracts. We do some cornea type work, and we do oculoplastic work, but for the most part, we do cataracts or cataract and stents for glaucoma,” he says, acknowledging that many other ASCs cannot be as selective.

“When you’re talking about ASC profitability, you have to think about utilization,” Stephens says. “You can bang out 30 cataracts in the morning, and you can be highly efficient. But then what are you going to do in the afternoon?” 

Bringing retina or oculoplastic procedures into the ASC can keep staff busy the entire day, she says. “To Dan’s point, there are higher costs of goods sold (COGS) and more variability associated with retina and glaucoma. Surgery centers cannot afford to do cases that they don’t get paid for. That’s just a fact of life,” she says.

Negotiate … and Renegotiate

Effective cost management is a third crucial component of maximizing profitability. It starts with negotiating terms with insurers and suppliers for surgical instruments, medications, and disposables. Bulk purchasing and establishing long-term relationships with suppliers can lead to significant cost savings. Boore has consulted for ASCs that haven’t renegotiated their payer contracts many years—in some cases, more than a decade. Acknowledging that ophthalmology is a Medicare-dependent specialty, she nonetheless pointed out that many seniors are on Medicare Advantage plans, which should be negotiated annually with individual payers.

“If you’re not actively working those payer relations and actually managing your contracts, then you’re missing an opportunity to optimize your revenue,” she says. Blair notes that payer contract negotiations are another aspect that ASCs can secure help with from third-party providers.

“Unless you’re a large surgical group that can handle commercial payer contracting, your staff may not have experience doing those contracts. That can cost you on the bottom line, and you need to lean on third-party resources that do commercial payer contracting,” he says.

The importance of negotiation holds true for inventory supply and equipment arrangements. Stephens says she often comes across ASCs that are paying for preventive maintenance agreements on equipment that hasn’t been in the facility for years.

“It’s kind of like nobody’s minding the store. Thousands of dollars are wasted because no one is looking at their financial statements. Preventive maintenance agreements are a huge cost,” she says. Stephens recommends leveraging group purchasing organizations (GPOs) to help manage costs. 

“You have to put these things out to bid every once in a while, because otherwise the quality of the service can go downhill,” she says. 

Maximize Staff and Operational Efficiency

Streamlining processes from preoperative preparation to postoperative care is essential for enhancing productivity. Efficient scheduling to minimize patient wait time, reduce turnaround times between surgeries, and maximize staffing resources, permits more cases to be handled in a day. This requires meticulous planning and coordination among the surgical team, nurses, and administrative staff. 

“We make sure that patients are dilated right away, which shortens the time of waiting, and we have streamlined our software system for faster entry information, more rapid click-throughs, as opposed to a lot of individual typing,” Chambers says. “It’s not unusual for us to have an average turnaround cycle of less than one hour for cataract surgery from the time the patient hits the front desk to being discharged.” 

Stephens recommends implementing a “minimum case threshold” for opening an OR to help conserve staff and other resources. “For example, if you only have two cataracts this week, move them to the following week and close that room for the day,” she says. 

“A lot of ophthalmologists like to do what we call ‘flip-flopping’ rooms, because in their mind it’s more efficient,” Boore adds. “We work with surgeons who flip two and three rooms, and they push a lot of volume through, but they don’t realize how much that can dilute the profitability per case.” The practice of flip-flopping spreads the same case revenue over multiple teams of staff and rooms, she explains. Sometimes it is justified, but other times it is not. The best way to evaluate the efficacy, she explains, is to analyze the financials and utilization data and then show the surgeons how the surgery center can benefit by modifying their surgical habits.

Conclusion

In a challenging healthcare landscape like today’s, the profitability of an ASC hinges on a multifaceted approach that encompasses effective revenue cycle management, a good combination of case mix and volume, cost management, and efficient operations. Ophthalmic ASCs that prioritize these contributors to profitability will be well-positioned to thrive, not just survive. 

“There was a time when you could be an average player and still make a tidy little sum,” Boore says. “But I think to really be profitable and to be able to share in the kind of distributions that surgeons are looking for, you have to be more on your game than ever.” OASC