Six years ago, when I was looking at opening an ASC, I saw plenty of physicians running single-specialty centers. The successful ones were mostly ophthalmologists, plastic surgeons and gastroenterologists with high volumes. But I'm a spine surgeon, and I wanted a place where I could work independently and perform minimally invasive spine procedures. It has not been easy, and I've learned many lessons along the way to building a thriving single-specialty spine center - the Arizona Institute for Minimally Invasive Spine Care. Here's how I did it.
School of hard knocks
I earned my business acumen - and my desire for independence - through some tough experiences.
Fifteen years ago, I left a large orthopedic group in which there was little room for individual achievement and conformity to the group was the norm. I was ready to strike out on my own. So I bought an office building with a developer tenant of the building; that turned out to be a less-than satisfying experience and only solidified my desire to be the general or controlling partner of any business endeavor I'm involved in.
Not long after, I was asked to sit on the board of directors of a regional bank. In this position, I learned how to evaluate risks relating to people who applied for loans; it helped me evaluate myself later in terms of whether I was financially ready to open my own ASC.
I had also been the part owner of an outpatient surgical facility in the early 1990s. It was a very successful investment and gave me access to solid numbers regarding average cost per procedure and average reimbursement and profit per procedure. Based on other orthopedics procedures, especially arthroscopic and hand and foot procedures, I knew that you could turn a profit if you're a skilled surgeon who doesn't overuse resources when global fees are in place.
Drawn to minimally invasive
Parallel to this was my move professionally toward more minimally invasive procedures. I wasn't too convinced of the efficacy of traditional back surgery because of the morbidity. This was intensified after my mother became disabled because of spine surgery. She was a 90-pound woman with a central disk herniation; the surgeon removed too much bone. I thought there had to be a better way, and I truly believed minimally invasive surgery was it.
I started with chymopapain, the only extensively validated minimally invasive procedure at the time. Many surgeons later backed off using the enzyme because of allergic reactions and a case report of transverse myelitis. The procedure was eventually killed by two things: the legal profession, and the indiscriminate training of thousands of physicians who oversimplified the procedure by injecting the enzyme indiscriminately for back pain.
I next investigated APLD (automated percutaneous lumbar decompression), laser disc decompression, then AMD (arthroscopic microdiscectomy), which for the first time enabled me to visualize disc pathology. Endoscopic spine surgery hasn't been well accepted because it's so difficult to do: The patient stays awake, and many surgeons do not want the stress of operating on a conscious patient while dealing with the learning curve. Once I got through that, I had continued success, just from the referrals from patients and their physicians amazed by the surgical results.
I saw that interventional pain management, though it was temporary and could not resolve the patho-anatomy, was an integral part of spine surgery. I found I could also determine the pain generators with diagnostic and therapeutic injection techniques, then correlate it with the patho-anatomy that could be visualized and treated by endoscopic surgical intervention, which gave more lasting results than pain management procedures.
Based on this, I developed the Yeung Endoscopic Spine System (YESS), an evolution of AMD, in 1996; it was approved by the FDA in 1998.
Mapping it out
I knew exactly what I wanted in a spine ASC:
- Financial independence. I had full ownership of the office building, and Arizona did not have a Certificate of Need requirement, so I was well on my way. I put up about $1 million to renovate the building to turn it into a state-licensed, Medicare-approved ASC.
- Patient care, not cost management. I was frustrated with the major focus on cost management of managed care and local medical politics that did not look kindly on change and new technology. They were accustomed to traditional spine surgeons who operated only for deformity, instability or nerve deficit, and I wanted to do with spines what was analogous to arthroscoping an arthritic knee and finding a degenerative meniscus tear that I could debride for improvement before a total-knee replacement was needed. I found this useful for patients with unresolved back pain and sciatica unresolved by traditional surgical treatment. I was able to find painful annular tears and bulging, impending disc herniations in the prodromal stage - and prevent them from becoming full-blown herniations in my patients. (I resolve pain in about 90 percent of my patients with discogenic pain and annular tears.)
- Close-knit network. I believe the best way to help patients is with a multi-disciplinary clinic and facility with psychology, rehab, pain management, minimally invasive spine surgery and traditional surgery. When I realized that was not always feasible in a single entity, the next best thing was networking with good physicians in complementary specialties.
- Hand-picked employees. I wanted a facility with a stable crew to fulfill the goals of a cost-effective surgical facility. I have an X-ray tech I trained and three RNs; I learned very quickly to be very strict with them in the beginning, so I could determine whether they would be loyal to me and my vision and want to stay. I try to tailor their positions to their skills. When it comes to letting other surgeons use the center, I'm very careful. I personally trained the one or two who use it now. My son, a fellowship-trained spine surgeon, is also in practice with me. I found the right staff, and I'm determined to treat them right to keep them. The whole office has gone to an annual meeting of a spine organization, with extra days off, all expenses paid; we regularly hold office parties for holidays and birthdays; and if we do well profit-wise, I give bonuses.
Galvanizing the plan
Before I moved ahead, though, I had to develop the business plan. With the help of a consultant, I came up with this outline:
- Medicare won't reimburse for spine surgery in the outpatient setting and managed care was difficult to work worth, so I looked elsewhere for reimbursement. I asked my patients how large their hospital bills for my procedures were and from that was able to estimate what insurance companies were reimbursing for the hospital setting.
- I contracted with one large insurer, negotiated a global fee and cooperated with the company to track the cost-effectiveness of my endoscopic procedures.
- Doing that let me determine that I needed to perform a minimum of 10 spine procedures or 30 orthopedic surgical procedures a month to simply pay my expenses. Anything more would be profit.
- I also didn't have to contract with any other third-party payers, and I was out-of-network for many patients. While it looks bad on paper, it was better for me, because I found that most patients who sought minimally invasive spine surgery were willing to pay more out-of-pocket, and insurance companies will try to decrease payments as you become more dependent on them.
- I also needed to target self-pay patients (many are busy professionals) who are well-informed about their surgical options. They'll soon find that I can also treat their condition effectively and with minimal morbidity to increase quality of life. Many of the people I treat are in pain and can't function or play golf or participate in a hobby, and they're willing to pay to feel better.
- My position as a pioneer in minimally invasive endoscopic spine surgery also helped. The company I contracted with to develop the YESS system gave me my equipment, and I saved tens of thousands there. All I had to buy was OR equipment, and I was able to work out many discounts with many vendors because I would be using my ASC to teach other surgeons; just last month, spine surgeons from Yale, the Cleveland Clinic and Japan came to observe.
My monthly surgical case volumes quickly grew from 10 to 40. I ended up maintaining the loan for the renovation for about three years for investment purposes, but after the one year, I could have paid it off. With intervention pain procedures, monthly volumes average about 100 cases.
The key has been proper patient selection, which leads to patient satisfaction. You see, I can do a minimally invasive procedure to diagnose then eliminate a patient's discogenic pain, possibly preventing herniation a year later. Not treating spines preventively is like waiting for a Mercedes to stop running before you do any maintenance work.
I select patients based on the usual health criteria and whether they have tried treatments more conservative than surgery. Some patients are just too high-risk. But most important is my ability to find the source of their pain. There are some conditions so severe that there's very little chance I can help them, and I'm increasingly able to recognize that.
My patient-satisfaction rates are extremely high, consistently over 91 percent since we opened. An even greater testament to the high level of patient satisfaction: When I started, many patients did not have insurance coverage for their surgery, and hospitals would not let me operate unless coverage was approved. I had the freedom to treat patients independent of insurance companies and third-party payers with discounted or free care. Quite often, such satisfied patients referred paying friends and relatives.
Professionally, I found that independence let me grow much faster without dealing with medical politics. I had a procedure that worked, and my volume was high enough with indemnity-insurance and cash-paying patients that I did not need managed care contracts to be profitable, which means I didn't have to deeply discount my services with managed care to keep volume up.
If you're committed to your vision, you can succeed. You don't have to be the smartest person in the world when running a business, but you do need to work hard, be ethical and treat people well.