An ASC Consultant With a Past
Records: John E. Maloney's Corporations Owe Companies More Than $200,000
California ASC developer and equipment planner John E. Maloney has a long history of not paying for purchases dating back to at least 1990, records show. In all, Outpatient Surgery found eight judgments totaling more than $200,000 against corporations that Mr. Maloney owns, according to documents provided by the Orange County Recorder's office (see box below).

Searches of the public records show county court judgments against Mr. Maloney's corporations for failure to pay for surgical equipment and surgical supplies from such companies as Hill Rom, Berchtold, Datascope, Steris and others. Surgery centers obtained judgments against Maloney corporations, too. In one case, a Wisconsin surgery center was forced to pursue him in court for $30,000, a debt it finally collected some four years later. In another case, a Phoenix orthopod who was building a surgery center obtained a judgment for $12,653 that is still unsatisfied.

Asked about the outstanding judgments, Mr. Maloney, contacted at his Fullerton, Calif., office, indicated that he could not provide evidence that any were satisfied. He said he intends to pay the debts, possibly by refinancing his house. "This doesn't affect my ability to do good. I am a stand-up guy. I have done everything I can to turn this whole situation around," says Mr. Maloney.

The cases involving the two surgery centers may offer a window into what occurred. In 1992, a group organized under the moniker Baycare Surgery Center in Green Bay, Wis., engaged Mr. Maloney's corporation to develop its center, purchase equipment and do some of the casework, says Jeff Mason, now CEO of Baycare Clinics. According to legal documents, in 1993 Mr. Maloney asked for and received $30,009 from Baycare to make a down payment on a medical gas delivery system. The balance was to be paid by Baycare upon installation of the system. Baycare paid the balance but then learned that Mr. Maloney's corporation had never forwarded the down payment to the gas delivery company. The gas delivery company sued, Baycare ended up paying another $30,000 to the gas delivery company and ultimately obtained a judgment against Mr. Maloney's corporation for the lost sum plus the legal costs. "We paid him, but he did not pay his supplier, and so they came after us," says Mr. Mason. According to a letter from Mr. Mason, Mr. Maloney finally satisfied the debt in 1997, whereupon he asked for permission to take prospective clients through the center. "I would hate to see anyone else get into that situation," says Mr. Mason. "If a center is going to work with (a contractor about whom it has questions), put safeguards into place. Pay all your subcontractors directly and use a lien-release system."

Phoenix orthopod Anthony T. Yeung, MD, tells a similar story. In the process of building a surgery center, he says he placed Mr. Maloney's corporation on retainer as an equipment planner at the recommendation of an architect. He says he also paid the company $10,000 to purchase four used hospital gurneys. "He cashed the check but never delivered. When I tried to contact him to ask for it back, I couldn't reach him," says Dr. Yeung. He says he ended up buying the gurneys as well as the remainder of the equipment he needed through another equipment planner. He sued Mr. Maloney's corporation and obtained a judgment for $12,653, but it has not been paid, says Dr. Yeung.

In the ASC consulting business since 1979, Mr. Maloney and his corporations also both have a long history of tax issues; a document search reveals a string of tax liens from the state of California. Current active tax liens from the state of California totaled more than $30,000 when filed, according to a spokesperson (the agency may not divulge whether the debtor is participating in a payment plan). Mr. Maloney says his tax issues are personal and irrelevant to the outpatient surgery industry.

Mr. Maloney said the actions stemmed from business problems. "The bottom fell out," he says, adding that only recently has business begun to turn around.

He says he no longer buys equipment through his corporation but instead issues purchase orders on the surgery facility's letterhead. This prevents any of the kinds of problems that have occurred in the past, he asserts. His credit rating may also interfere with his purchasing equipment directly. Experian, a credit rating company, classifies one of his corporations under "serious risk warning" and another under "caution."

- Outpatient Surgery staff

Adding Urology Services
Is Brachytherapy Right for Your ASC?
Brachytherapy isn't just for hospitals anymore. Now that Medicare has added the prostate cancer treatment procedure to the ASC list, ambulatory centers hosting urology cases may want to consider offering this prostate surgery alternative. Brachytherapy is popular with patients and reimbursed well by Medicare, says Cincinnati urologist Gary Michael Kirsh, MD. While brachytherapy has been done on an outpatient basis in hospitals for years, it was only added to the ASC Medicare list last July. It has a group nine CPT code ($1,339 before wage index adjustment).

The treatment involves injecting about 100 radioactive seeds into the prostate gland. The implants give off radiation at a low dose rate over several weeks or months.

Dr. Kirsh estimates you'll need $100,000 to $130,000 worth of equipment to start from scratch, but if you already have some of the necessary ultrasound equipment, the costs could be less than half that.

"Brachytherapy is ideally suited for the ASC setting," says Dr. Kirsh. "Although it's a complex procedure, it's very safe and effective."

The procedure has become increasingly popular over the last five years. The number of urologists performing brachytherapy has increased from 16 percent in 1997 to 51 percent in 2001 to 56 percent in 2003, according to statistics from the American Urological Association.

So how do decide if it's worth the investment? Dr. Kirsh says your volumes must project to at least 100 annual cases. Analyze the local competition, because Dr. Kirsh says there's not an abundance of cases to go around. "If there is another surgery center in your town that is already offering the procedure, chances are you won't be able to get enough cases to make it worthwhile."

- Kristin Royer

JCAHO Sentinel Event Statistics Update
The 10 most frequently reported sentinel events* to JCAHO are:

Patient suicide - 374
Operative/post-operative complication - 315
Wrong-site surgery - 300
Medication error - 282
Delay in treatment - 161
Patient death or injury in restraints - 112
Patient fall - 110
Assault, rape or homicide - 84
Transfusion error - 69
Perinatal death/loss of function - 67

Of the 2,455 events, 65 percent occurred in general hospitals; 13 percent in psychiatric hospitals; 5 percent in behavioral health care facilities; 5 percent in psychiatric units in general hospitals; and 4 percent in emergency departments. Of the 2,570 patients affected, 1,935, or 75 percent, died.

* From January 1995, when JCAHO's sentinel event database was implemented, to January 2004, when the database was updated.

Inside The Numbers
ASCs in Illinois

• 92 Number of ASCs in Illinois
• 261 Number of ORs in Illinois
• 40 Number of GI endoscopy rooms in Illinois
• 69% Percentage of revenues from third-party insurers
• 5% Percentage of revenues from private-pay patients
• 22% Percentage of revenues from Medicare
• 2% Percentage of revenues from Medicaid
• 24% Percentage of expenditures on medical supplies
• 18% Percentage of expenditures on medical staff
• 4% Percentage of expenditures on medical equipment
• 74,297 Hours of surgery room prep time
• 175,222 Hours of surgery time
• 61,063 Hours of surgery room clean-up time
• 22,666 Number of surgeries performed on children (0-18)
• 240,143 Number of surgeries performed on adults (19 )

Source: State Summary of Ambulatory Surgical Treatment Profiles for Year 2002, Illinois Center for Health Statistics

A New Look for Johns Hopkins
In a Clean Cut from Its Past, Hopkins Opens Cosmetic Surgery Center
What does it tell you when Johns Hopkins, an esteemed medical institution renowned for pioneering treatment of life-threatening illnesses, opens a cosmetic surgery center devoted to Botox and breast augmentation?

"It tells me that surgeons who used to make a living doing socially redeeming surgery such as reconstructive work have to branch out into a less laudable part of medicine such as cosmetic surgery in order to make a living," says Scott L. Spear, MD, president-elect of the 5,000-member American Society of Plastic Surgeons (ASPS) and chief of plastic surgery at Georgetown University Hospital. "It tells me that plastic surgeons who work at Johns Hopkins felt they were at a competitive disadvantage to other surgeons within the community. And it tells me that this is what hospitals have to do in order to retain their good surgeons."

Johns Hopkins Medical Institutions, for more than a dozen years ranked the nation's best hospital by U.S. News & World Report, about a year ago opened the Johns Hopkins Cosmetic Surgery Center at Green Spring Station in the affluent Baltimore

suburb of Lutherville, Md., 10 miles south of the hospital complex. "You put the Johns Hopkins name in a convenient, attractive, non-intimidating place," says Dr. Spear, "and people say, 'This is nice.'"

In recent years, outpatient cosmetic surgery centers have sprung up at other prestigious teaching hospitals around the country, including Duke, Vanderbilt, Beth Israel-Deaconess in Boston, the Mayo Clinic in Scottsdale, Ariz., and the University of Pennsylvania in Philadelphia. Dr. Spear calls this symptomatic of the shift in healthcare economics and a testament to the growing popularity of alternate-site surgery centers. But, he adds, "if (major nonprofit and teaching hospitals) didn't have to go there, they wouldn't go there."

The Johns Hopkins Cosmetic Surgery Center offers one-stop treatment for virtually every kind of cosmetic procedure, says cosmetic dermatologist Patrick S. J. McElgunn, MD, the director of the Cosmetic Surgery Center.

- Brian Hegarty

Statewide Moratorium
ASC Ban Likely to Hit South Carolina
South Carolina might become the first state to ban ASC construction. A moratorium included in the state health plan would halt for at least one year and perhaps two new ASCs' being built and the 53 existing ones' expanding, says Albert Whiteside, the director of the state Department of Health and Environmental Control's (DHEC) planning division. The moratorium would come in the form of a provision slated to be included in a draft of the 2004 state health plan, which was expected to be introduced to the state Health Planning Committee June 3.

In its current form, the moratorium would apply to all ASCs, but it's not outside the scope of the DHEC's authority to apply the moratorium only to physician-owned centers and exempt hospital-owned or joint-ventured facilities, says Lynn Bailey, a Columbia, S.C.-based healthcare economist who is advising the South Carolina Ambulatory Surgery Center Association (SCASCA). "It does, at this point, affect everybody," says Ms. Bailey. "But they could restrict by ownership type."

South Carolina's proposed ban is the latest in the movement to curb the growth of alternate-site surgical facilities, following the federal government's one-year moratorium on surgical hospitals and intensified scrutiny of physician-owned surgical facilities nationwide.

Since 2001, the state health plan has mandated that, before a new ASC could be approved, all existing ASCs in a county had to be licensed and operating for one year to determine the utilization levels for those ASCs, says South Carolina Hospital Association Vice President Jim Walker. "So this shouldn't come as a total surprise to anyone. The DHEC has already noted it would be looking closely at [ASCs]," says Mr. Walker.

The state health plan will then be made available for public comment and subsequently presented to the DHEC for approval, which would be effective immediately, in September. State law requires that the health plan be updated at least every two years, so the ban could last that long before it is potentially removed.

The SCASCA might hiring a lobbyist, says Jo-Ann Pinel, RN, CPN(C), the director of nursing at Palmetto Surgery Center in Columbia, S.C., and a SCASCA officer. "I now truly believe," says Ms. Pinel, "that this is the first step in an attack on the viability of ASCs."

- Stephanie Wasek