April 20, 2023

Industry Trends Facility Construction and Design

By: Outpatient Surgery Editors

Published: 4/19/2023

Share:

THIS WEEK'S ARTICLES

ASC Renovations Require Partners With Relevant Experience

Look Before You Leap

Growth in ASCs Will Only Continue to Evolve This Year - Sponsored Content

The Many Moving Parts of Adding a Service Line

Strong Partnership Leads to Successful ASC Expansion

 

ASC Renovations Require Partners With Relevant Experience

When preparing to update or expand your center don’t go it alone.

BD PartnerHELPING HANDS Pristine new ORs like this usually result after help from carefully selected outside partners who have relevant experience with ASCs.

Throughout more than 25 years of working closely with ASCs, Joan Dentler, founder and president of Austin, Texas-based consulting firm Avanza Healthcare Strategies, has witnessed numerous facilities experience bad outcomes after renovations and expansions because they opted against accessing outside help from experts with relevant experience. She regularly advises leaders preparing to embark on such projects that contracting with partners who haven’t previously operated in the unique world of ASC projects is a bad idea.

“A lack of direct ASC experience can cause major delays and costly reworks,” says Ms. Dentler. Once a project gets too far down the road to fix mistakes or omissions that should have been noticed and rectified earlier in the process, she says, a poorly functioning and unnecessarily costly facility can result. “An ASC that is too large or poorly designed can experience financial and operational burdens that will last as long as the building does and dramatically influence profitability,” she says.

Facility leaders considering renovations or expansions should specifically contract with partners that have previously designed and built successful ASCs in the state in which they operate, says Ms. Dentler. Those who have only worked on hospital or medical office projects won’t possess a full understanding of the local regulatory requirements that are unique to ASCs, she stresses.

Ms. Dentler has seen some ASCs contract with residential architects who had no knowledge of the mandatory life safety requirements that should have been followed during construction. She is aware of ASC owners whose spouses selected their ASCs’ furniture and fixtures, resulting in carpeting and dried flower arrangements in the pre-op and PACU areas. “I could go on, but I will spare your readers the many ‘don’ts’ we have seen,” she says.

“Work with ASC experts when it comes to facility design, expansion or renovation,” she advises. “You won’t regret it.”

Look Before You Leap

Don’t pull the trigger on a new service line without crunching the numbers first.

BD equipmentPRE-OP FINANCE Before investing in equipment and supplies like these, make sure your volume and reimbursement will ensure profitability.

Expanding your surgery center to accommodate a new service line is an enticing idea, especially when the new line can both better serve the local community and be profitable for the facility. Those who have done so, however, advise you make some cold calculations by doing the math beforehand to better ensure that both patient safety and profitability are achievable.

Joe Zasa, JD, founder and managing partner of ASD Management, a Dallas-based surgery center management, development and consulting firm, and author of the book “Developing and Managing Surgery Centers,” says growth-focused centers need to honestly examine how capable they would be at handling a new line safely and efficiently.

“The best way to avoid mistakes is to measure twice and cut once,” says Mr. Zasa. “Go through a dry run of how these procedures are really going to work, and make sure you understand the true cost of doing them. Determine your expected reimbursement minus your variable costs — medical supplies, drugs, implants, transcription — to come up with a gross margin. If you need to add staff, that also needs to be factored into the equation.”

Mr. Zasa adds that centers should closely examine the nature of reimbursements for a new line to make sure that payments from private insurers and Medicare will actually cover projected costs and expenses.

Mr. Zasa says ASD’s partner centers make some key calculations to determine the financial viability of adding a line, such as performing a sensitivity analysis, which accounts for inflation, increased labor costs and unknown variables. “Figure out how many of these cases you think you’re going to do, and discount it by 30%,” he says. “The remaining 70% is your expected volume. Next, determine what you’ll be reimbursed: the number of cases times the reimbursement. Then determine your startup costs — we usually amortize them over five years. Finally, figure out your variable costs to learn what you’d actually make per case.”

Doing financial projections like these upfront can save your center major fiscal headaches down the road, preventing situations where you and your staff and surgeons are working harder than ever while your bottom line actually suffers.

Growth in ASCs Will Only Continue to Evolve This Year
Sponsored Content

Renovations of outpatient facilities will offer new opportunities to add surgical procedures.

BDBD

The ambulatory surgery market continues to grow, despite economic and business challenges that may limit the growth but not stop it from happening in the coming year and beyond. In a recent Whitepaper, “Evolving Your Ambulatory Surgery Center Business,” sponsored by BD and based on a recent survey and published online by Outpatient Surgery Magazine, the responses indicate a willingness to take steps in the direction of adding new specialties and preparing existing facilities for expansion and renovation.

In fact, survey respondents indicated that the biggest change they anticipate for 2023 will be the expansion of surgical services with about one-third planning on making that move. The move to expand and diversify is a big one to consider, but a certain segment of the ambulatory market is willing to take on the risks and challenges and commit to the growth of their businesses in the next 12 months.

It is important to note where areas of growth may occur in ASCs in the coming 12 months, and that can be largely dependent on specialties already served, the location and the facility’s size. However, the survey revealed several specialties that are being added or being considered. For those respondents who are planning or contemplating adding specific specialties or procedures to their facility’s business, the top specialties that are signaling some growth include Neurosurgery/Spine, Orthopedics and Ophthalmology, with interest demonstrated also in expanding General Surgery, ENT and Cardiology.

Looking even further forward regarding adding any specialties, according to the Whitepaper, “The survey revealed consistency in preferences. In fact, the forecast for the next two to three years looks similar to plans for growth in the next 12 months as respondents shared the specialties that they plan to grow.” Additionally, the overall growth is not only limited to adding new specialties as other respondents indicated that they would continue to grow their existing service lines as well.

Careful planning is required to take on new specialties and, in fact, to make the decision to go ahead with a renovation and an expansion at the facility. The questions that should be asked are: What is involved in adding a specialty? What equipment and staff is required? An open discussion with the entire team and all of the stakeholders involved will help lay the groundwork for the potential new specialties as challenges and options are uncovered.

What does it take to consider a major renovation? The first step is to do an assessment of your local market and potential market. If the population can support growth in select specialties, it makes sense to invest in a plan to add those and retrofit or renovate your current space. Choosing the right partner for this process is key as ASC leaders have learned.

In fact, strategies to renovate and add specialties in an ASC is an ongoing process. It will look different for every unique location and team, but partnering with a dedicated industry partner can make all the difference. Among other important decisions, dealing with major equipment and capital expenditures when expanding requires a collaborative relationship with industry partners. According to Administrator Ray Slawski, Michigan Outpatient Surgical Solutions, LLC, “BD has helped me through some avoidable pitfalls… and went above and beyond during my initial orders that made a significant difference in my capital expenses.” Partnering with the right industry partner for the entire process to embrace growth can make all the difference to spell success.

Note: For a copy of the BD Whitepaper, “Evolving Your Ambulatory Surgery center Business, click here.

Note: For more information go to BD.

The Many Moving Parts of Adding a Service Line

It can bring more patients but can also create problems if it’s unprofitable for your center or your surgeons.

Thinking of adding a new service line? Move carefully and strategically, advises Sean Rambo, a 20-year veteran of the ASC industry who is president and cofounder of Compass Surgical Partners, a full-service ASC management and equity partner in Raleigh, N.C. Here are a few things he says should be on your radar.

Is everyone bought in? “First and foremost, have an honest conversation with your existing partners and board members,” says Mr. Rambo. “What specialties do we want to target that would complement our base book of business well?”

Do you have a critical mass of surgeons to work the specialty? This is important in terms of determining whether any major capital expense would be worth the investment. “You wouldn’t necessarily add orthopedics as a specialty for one physician who was at retirement age, for example,” says Mr. Rambo. “On the flip side, if you have a group of four or eight physicians of any specialty, it begins to make sense. Size up your equipment needs, perform your return on investment (ROI) analysis over two, three, four years, and look at what your breakeven would be.”

Is it worth it for the incoming surgeons? “What is their buy-in, and what does their ROI look like?” says Mr. Rambo. “Does this make sense for them relative to building their own center or partnering with somebody else?”

Is it worth it for your current surgeon partners? “If you bring in a new specialty line, what is their investment?” says Mr. Rambo. “What does their ROI on a diluted, per-share basis look like?”

Do you have the right surgeon partners? “A common pitfall is really not understanding the practice of the new specialty you’re bringing on,” says Mr. Rambo. “Perform an honest assessment of it in your practice.” For example, one of Mr. Rambo’s multispecialty ASC partners was recently looking to add urology. “Everyone got excited when they broke down their case volume and the number of doctors and thought it could be done at the surgery center,” he says. “Upon a deeper look, they found that 25% of the new business would be lithotripsy, and two of the six doctors they were looking to add own a litho company and the hospital pays them a per-click fee. At a surgery center, that would be unprofitable.”

Do reimbursements add up? “Take a hard look at your commercial payer contracts to make sure you have appropriate reimbursement and carve-outs for the new service line,” says Mr. Rambo. “For example, if you’re adding total joints to an existing orthopedic center, make sure your commercial payer contracts are priced appropriately for the total knee codes and total hip codes.”

Is it safe for patients? “Yes, the codes may be on the Medicare approved ASC list, but what are the comorbidities?” says Mr. Rambo. “What’s the comfort level of the physicians to bring those cases to the center?”

Can your center handle the extra work? Mr. Rambo warns against adding too many specialties too quickly. “You simply lose the efficiency, and different specialties schedule differently,” he says. “If you schedule too many too fast, and a lot of your nurses aren’t trained in certain specialties, it just bogs the efficiency down.”

Can you grow what you already do? Mr. Rambo calls growing volume in an existing specialty the “low-hanging fruit” for ASC expansion, and says growth-minded administrators should always be looking for new physicians who fit well with their existing caseload. Growing an existing specialty minimizes new equipment costs and requires little or no changes to your policies and procedures, he says. “If you grow with your existing partners and existing specialties, that’s the easiest, fastest way to constantly create growth,” he says.

Strong Partnership Leads to Successful ASC Expansion

St. Cloud Surgical Center relied on a trusted partner to not only expand its ORs and SPD, but also clear regulatory hurdles.

After the multispecialty St. Cloud (Minn.) Surgical Center successfully completed a 13-month expansion project, its administrator and CEO Darci Nagorski says it was worth the effort despite the many challenges that had to be overcome. Among those challenges: work began during the depths of the pandemic, and one of the facility’s ORs had to go dark for nearly the entire duration of the project.

The expansion added 7,500 square feet of space, which enabled the facility to more than double its case volume and provide staff with an expansive new cafeteria. It also tripled the size of the ASC’s sterile processing department (SPD), enabling it to accommodate another washer and sterilizer to boost instrument throughput, while adding new ergonomically friendly workstations for reprocessing staff.

St. Cloud’s old SPD, meanwhile, was converted to two 650-square-foot ORs that dwarf the facility’s older 430-square-foot ORs, expanding the types of procedures the ASC can safely and comfortably perform. When the building opened more than 35 years ago, says Ms. Nagorski, its small ORs focused on procedures like ENT and ophthalmic surgeries and colonoscopies that required very little equipment. “Over the past decade, we’ve started performing more spine and orthopedic cases, both of which require trays of complex instrumentation and the latest in surgical technologies,” she says. St. Cloud now has sufficient OR space to host procedures that require robots, multiple staff members and a variety of other equipment.

Ms. Nagorski says the overall success of the project came down to the outside partnerships it formed. “Our team of contractors, especially the fabulous project manager who led our effort, walked us through every step of the process and was meticulous about the infection control mitigation needed when construction was occurring right next to the ORs where our surgeons were still working,” she says. “The professionalism of the subcontractors our partner brought in was remarkable. There were many instances where they walked past our patients to respect their privacy and interacted with our staff. I received multiple compliments on just how easy it was to work with them.”

Ms. Nagorski says that establishing the right partnership helped her avoid problems other leaders have encountered during renovations. “Due to the regulation surrounding the expansion, our contractor worked very closely with the state department of health and didn’t hesitate to ask the agency all the right questions,” she says, adding that it’s important for administrators to admit to themselves that “sometimes you just don’t know what you don’t know.”

The renovation ultimately accomplished the center’s goals. “We needed a better workflow for our team, and we achieved that with all the updates,” she says. OSM

Related Articles