ASCs have 20 or fewer employees SourceFederated Ambulatory Surgery Associationmeans that surgery centers do not en sliding scale measures The reason isthat a center must employ a core group ofstaff in ID: 889972
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1 Woodrum/Ambulatory Systemse received num
Woodrum/Ambulatory Systemse received numerous responsesregarding a quote in a recent edi-tion of this newsletter. The state-ment generated interesting questions andresponses. Aparaphrase of the quote is:Staffing costs should be 20% of net revenue or lower. If not, it is an As the author of this statement, the respons-es were surprising since there is at best avague recollection of the quote and the inter-view. In fact, I had to research back issues ofscenario reminded me of the Jimmy Buffetsong, I Heard I was in Town. Interestingly,raphy, I do not necessarily agree with myers. In this instance, the problem may be thatproper context. Nevertheless, the responsesare appreciated since it provides a good basiscosts in ambulatory surgery centers. The Inherent DilemmaStaffing costs are the first or secon
2 d highestexpenditure in a surgery center
d highestexpenditure in a surgery center and effectiveeffective administration. The challenge isthat staffing is not a variable cost in the tra-ditional sense whereby the more patients atthe center, the more staff are hired. Rather,the ASC industry consists of generally smallhere are many misconceptions aboutambulatory surgery centers and thebest ways to run them. To help youbetter understand ambulatory surgery centers, here is a list of thirty-three thingsthat you should know about surgery disagree with an item, please email sbecker@mcguirewoods.com.1. CMS Proposed New Rates DecreaseThe new proposedMedicare rates for surgery centers are gener-ally very negative. They essentially set reim-price paid for the same surgical proceduresrates, if made final, will take full effect in2008. Under the propose
3 d rates, of the top20 procedures perform
d rates, of the top20 procedures performed in surgery centers,17 will suffer a decrease in reimbursement.For many procedures, the decreases will besignificant. For example, reimbursement formany gastroenterology and pain manage- ASCs have 20 or fewer employees. Source:Federated Ambulatory Surgery Association.means that surgery centers do not en sliding scale measures. The reason isthat a center must employ a core group ofstaff in order to operate. As an example, asurgery center will have relatively thesame number of staff to perform 100 casesper month. This creates a measurementdilemma because staffing costs are fixedadditional cases. Thus, there is no slidingscale or easy measure that states for eachadditional case, staffing should be x. Thefact remains that staffing is a quasi-vari-able cost.
4 Acore staff is required to oper-ate a ce
Acore staff is required to oper-ate a center regardless of the number ofcases, but a variable element is introducedume each month. Using the previousexample, a surgery center may have 11.0month. Therefore, in this example,not play a significant part in staffingoptions until the center reaches 200 or moreWith this dichotomy between fixed andeffectively measure and control this cost?We suggest that:Staffing costs are measured based on the relative size of the ambulatorysurgery center as determined by its relative to its case mix, market conditions and reimbursement.This means that surgery centers should be1.The number of cases performed per year.2.The type of cases performed by specialty, or the case mix.3.The market conditions in terms of 4.The amount of reimbursement on the cases performed by each sp
5 ecialty. As discussed previously, there
ecialty. As discussed previously, there are fewper year. These centers (less than 2,400annual cases) should be grouped togetherand compared against one another sincedifferent than the largermulti-specialty surgeryhave higher staffing costmonth since there are fewSecond, and perhaps more importantly, centersformed. Aplastic surgeryferent ratios than anendoscopy center. Thus,Third, the common meas-the market conditions areregistered nurse in San Francisco will besignificantly different than the wage to theThe annual FASASalary Survey is a goodtool to assess the relative impact of thissince it is sorted by region. Finally, payer reimbursement also radicallycases, the reimbursement per case is typi-cally higher. This will skew the ratios andmust be factored into the analysis.Dicing Key Measurement Tools
6 Once the surgery center is categorized w
Once the surgery center is categorized withkey measurement tools to assess staffing. agreed upon definition of staffing costsmust be determined in order to best ana-lyze the data. We suggest hours worked atthe surgery center for the period (exclusiveof bonuses, paid time off and vacations) isbest for operational measures such asstaffing hours per patient and staffing costment and measured separately using easilyfound benchmarks that are beyond theAdditionally, businessoffice staff must be included in the measurealong with administrative staff. The fol-lowing are key measures along with some1.Staffing as Percentage of Net Revenue - divided by the net revenue. Again, this should be interpreted based on the type mix. For a large multi-specialty center, a (i.e.,endoscopy) this number is typically lower.
7 2.Staffing Cost Per Patient the total
2.Staffing Cost Per Patient the total staffing cost divided by the number of patients. This is a good measure, but must be interpreted properly. Again, the appropriate benchmark. Market salary conditions are also important. For a 8 visit www.beckersasc.comI Heard I Was In Town Measuring ASC Staffing Costscontinued from page 1For the benefit of the reader, we see benefits running between 23-25% of payroll exclusive of bonuses. 3.Staffing Hours Per Patient this is one revenue anomalies and measures productivity. Again, it is a per-patient measure and this necessitates that the data be interpreted based on the type of same volume). Again for a multi-specialty center, 10.0 to 11.5 hours worked per patient is reasonable. It is important to measure staffing costs toefficiently. Since staffing is not
8 a staticmeasure and is a mix of fixed a
a staticmeasure and is a mix of fixed and variableassess a center. However, in order to obtainmeaningful benchmark data, the surgerycenter must be measured against similarcenters with the same or similar number ofcases, payer mix, type of cases, and surgicalspecialties within its region. Once complete,there are several ratio measures that can beused to assess the staffing performance. Data measurement and benchmarking pro-that an effective manager uses. On siteoperations cannot be replaced. Effectivewhere to look. The best managers areaware that each center is unique andshould not be operated off a spreadsheet.Notwithstanding, the most effective man-agers use the staffing data as a valuableoperations and drive efficiencies at theirsurgery centers. Woodrum/Ambulatory Systems Development,a national am
9 bulatory surgery center manage-He is a m
bulatory surgery center manage-He is a member of the Virginia State Bar andspeaks frequently on the topic of ambulatorysurgery center development and management.He has published numerous articles related toambulatory care and can be reached in theDallas, Texas office at (214) 369-2996. 9 visit www.beckersasc.com SUBSCRIBE NOW JUST $225 FOR TWO YEARS CALL858-565-9921 all, or mail this coupon, today . 7916 Convoy Court, San Diego, CA92111ES! Start my subscription to ASC Review:1 Year $1992 Years $225 Offer good for new subscribers in the contiguous U.S. BeckersASCReview is published bi-monthly by ASC Communications,Inc. Becker's ASC Review provides practical information relatingto ASCs for administrators, physician owners, surgeons, and thebusiness managers and investors in ASCs. For more information
10 regarding the ASC Review or to advertise
regarding the ASC Review or to advertise in the ASC Review,please contact KenFreeland or Michelle Freeland at 858.565.9921.ASCCommunications, Inc. All Rights Reserved. 10 visit www.beckersasc.comf a surgery center is supposed to be a for-profit venture, why are so many in thered? Over the past twenty-plus yearsLuke Lambert, who is president ofAmbulatory Surgery Centers of America,or ASCOA, has started and/or turnedaround dozens of ASCs. Lambert sees fivedistinct areas in which centers can improveto put the center in the black. Yet one aspectTurning a center around requires the com-mitment of the owners and staff to makewill trip. Change is critical if youre engi-neering the turnaround, so people have toment, here are the five top problemsLack of cases equals low revenueStruggling centers usually don
11 t haveenough cases or the proper mix of
t haveenough cases or the proper mix of cases.sion of their practice. Often new ownersneed to be recruited to a center to provideimproved stability. Sometimes peopleCosts are too high, or worse,Most centers in need of a turnaround havecosts that are too high. Lambert likes to seesuccessful centers with 19 percent of theannual budget in staff costs. We have seencenters where the percentage is 50 per-full-time volume, you should adjust staffaccordingly, says Lambert. Instead of full-time staff, a center can rely on part-timestaff, which provides flexibility andreduces cost.each procedure, andWe had one situa-knee arthroscopy forcompared prefer-ence cards, thedoing the procedurestuff. He cut $900out right away.Too much debt leads to poor Most centers that arein trouble have too much debt and ke
12 epborrowing to stay afloat. Even a healt
epborrowing to stay afloat. Even a healthyrowing, says Lambert. Most lenders wantto see a debt coverage ratio of 1.3 or better.centers can negotiate better interest rates,which could save hundreds of thousandsBad contracts lead to unprofitabilityunderstanding the cost and reimbursementimplications. You have to know that thethe procedure itself, says Lambert. Itreceives a contract from a major insurancelose your shirt. Lambert recommends thateach contract be negotiated individually.Collections are weakAt ASCOAcenters, Lambert expects to are in trouble collect in about 90 days,profitability.He emphasizes the need for a strongprocess, a collection culture and hiringcollections. You need someone who getseveryone can get a paycheck, he says. Atone ASCOAcenter, the billing personbegan calling befo
13 re the payment due date,the call of the
re the payment due date,the call of the centers billing person.When it comes to turning around a center,ence at turning centers around. Adevelop-er with ownership brings expertise, experi-center around. * John Harris is the Founder of a5 Group, Inc. a consulting, marketing and public relations firm. He can be reached at 312-706-2529. Luke Lambert is the CEO of Ambulatory SurgicalCenters of America. He can be reached at 781-871-3311. Five Signs Youre In Need Of OutsideIntervention: ASCOAs PerspectiveBy John Harris and Luke Lambert* 12 visit www.beckersasc.com 1.Can you expand the types of procedures the ASC is performing?2.Can you recruit additional 3.Is there a local hospital that might buy into the venture?4. Should you replace the adminis-trator or director of nursing?5. Can you close the center
14 one to two or more days per week to redu
one to two or more days per week to reduce staff costs?6. Do certain physicians want to add more capital?7. Can you pay down center debt to reduce monthly debt cost?8. Can you start to make small 9. Can you standardize purchasing to reduce supply costs?10. Can you buy bigger cost items 11. Can you bring in a management turning around ASCs?12. Can physicians who are owners utilize the center more?13. Can you renegotiate managed care contracts?14. Can you use a benchmarking tool 15. Can you do better on reimburse-16. Can you buy used equipment and17. Can you buyout non-safe harbor 18. Are there specific procedures that are causing you great financial problems are you 19. Can you add spine and lower disk procedure surgeries?20. Can you add green light laser or lithotripsy procedures?21. Can you renegot
15 iate loan terms 22. Can an expert help y
iate loan terms 22. Can an expert help you better assess your largest costs and methods to reduce them?23. Can you improve your billing and 24. Is there a specific nurse or 25. Is the anesthesia group helping 26.Can the center negotiate its rent? Is it paying too much?For information on turning around ASCs,or at sbecker@mcguirewoods.com. An ASC In Need of Drastic Improvement 26 Questions You Should AskBy Scott Becker 1.Nothing, NOTHING falls through the cracks. Our business manager looks to bill tons of stuff that was unbilled, not properly 2.We analyze every case with implants, etc., so that we dont end up owing thousands of dollars for things like spinal cord stimulators that we will never be reimbursed for.3.We relentlessly collect tons of deductibles and copays at the front 4.We are cutting dow
16 n our expenses on everything from intern
n our expenses on everything from internet, 5.Our case load is up thanks to pain guys, ENT guys and working closely with surgeons.6.Great collection efforts from the team.7.We have ridden ourselves of some less productive employees.8.We relentlessly track down money owed to us by surgeons and others. 9.We have decreased the monthly debt load.Increase case load + improved collections + renegotiating contracts +1000% increase in efficiency of our business office + relentless efforts on thecourting of surgeons + decreased monthly debt load after new loan =hopefully sustainable improvements. * These are the editors comments and not the authors comments. By Robert Welti, M.D. Santa Barbara Surgical Center help grow the business. Your greatest strengthcan be your greatest weakness, he says. Themore
17 sustainable.Encouraging productive phys
sustainable.Encouraging productive physicians to Mallon says it is not uncommon for a group ofphysicians to leave and start a new center. Toprevent this, he recommends that centers andphysicians agree to long term agreements withlarge financial commitments. You need tohave that commitment and buy-in from Controlling costs begins with knowing handle on costs of staff, supplies and equip-ment. He routinely sees centers that are opencases, leaving employees idle between proce-dures, which drains the center financially. Purchasing can be a problem; Mallon encour-around. He also says used equipment not onlypercent less than new equipment.Mallon stresses that while centers are strongclinically, they often are not run like businesses.And if they arent, theyre probably not makingmoney, like the center tha
18 t was doing $6,000procedure. It takes co
t was doing $6,000procedure. It takes commitment on the part ofand staff to turn a center around and keep itofitable. And if it is profitable, not only willpatients be healthier, but the center will live* John Harris is the Founder of a5 Group, Inc. a consulting, marketingand public relations firm. He can be reached at 312-706-2529. TomMallon is the CEO of Regent Surgical Health. He can be reached at visit www.beckersasc.com To advertise inASC Review, please contact So how do you get staff buy-in? Explain your staffing policies and be pre-pared to discuss the impact of those policieson the staff. Have alternate employmenttion, as their hours will likely be reducedters start up.ble for health benefits. What are the mini-mum hours required by your insurer? Is theemployee cross-trained? If so, to w
19 hatareas? If not, are they agreeable to
hatareas? If not, are they agreeable to work inother areas?Can you assign two employees to one posi-tion in a job-sharing scenario? Are per diemSuggest that employees work in more thanIs your work environment a positiveDo people like being there? Are they treatedwell? Remember, you bring a fresh perspec-to create a place where people want to work.Seek input from the previous managers andthe entire staff for a 90-day evaluation peri-of your coaxing. Talk with those who stay,Ask your doctors for referrals. strong work ethic, and the ASC mindset, asnot all clinical staff can adapt easily to theweek to reduce operating costs and fill theschedule. Staff will be swamped when thecenter is open, and, as always, ASC nursesneed to make pre-op and post-op calls. Ifthey are working long hours on Tuesday, thecent
20 er is closed on Wednesday, and youhave a
er is closed on Wednesday, and youhave a long day on Thursday, who willspread the responsibility throughout theentire staff.much like overseeing a start-up center.Verify all information appearing on theorientation and training in all requiredareas, like OSHAand fire safety. Eachnew policies and procedures. volume of cases, especially if you areawaiting insurance contracts. You willwork will be hard and the hours may belong. Staff will stick with you if they seethat you are truly working with their bestinterests in mind. When a nurse you want-ed to keep leaves to work elsewhere,returns as a per diem, then turns down afull-time offer from a competitor becauseshe likes working in your center, then you 18 visit www.beckersasc.com 77 West Wacker, Ste. 4100sbecker@mcguirewoods.comPRSRT STDUS PostagePAIDMerr