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Editor's Page
The Unkindest Cuts
Dan O'Connor
Publish Date: October 10, 2007

One by one, she called the 11 staffers into her office to deliver the grim news: You're fired. The two words nobody wants to say or hear.

"Monday, April 23. It's kind of like having a baby. A day I'll never forget," says Christine Therrien, RN, the administrator of the Short Hills Surgery Center in Millburn, N.J.; at 24,000 square feet, it's one of the nation's largest ASCs. "To watch single mothers who have to feed their children and people who love this place lose their jobs was awful. I cried all day long. I cried with every single person."

Ms. Therrien was forced to trim 11 names from the payroll because she inherited an ASC that had been suffering from excessive excess from the day it opened in February 2005. With six major ORs, two minor ORs, 24 beds (including four private rooms) and 76 employees (including three full-time housekeepers), it was overbuilt and overstaffed, Public Enemy Nos. 1 and 1A in the outpatient surgery business.

Once you've overbuilt, there's not much you can do other than shutter a couple of ORs, as Short Hills did. "Building big is a cost that you'll never stop paying for," writes Scott Becker, JD, CPA, in "9 Mistakes That Can Sink Your Surgical Facility" on page 24. "It starts with added construction costs and continues with extra costs in equipping, debt service and utilities."

The cure for overstaffing is cold and cruel: showing good people the door. "Yes, welcome to my hell," says Ms. Therrien.

The ASC is averaging about 500 cases a month, healthy numbers for a four-OR facility perhaps, but not enough to sustain an eight-OR facility.

"Some people were literally sitting around watching TV all day because this is such a well-run center that there was nothing for them to do," says Ms. Therrien. "Morale was low, both for those people with nothing to do and for those people who were working hard."

The ironic thing is that the center had been doing well in spite of its size and bloated payroll, distributing as much as $800,000 to its more than 70 physician-partners in some months. This was due in large part to average collections of $5,600 per case at the ASC, which operates on an entirely out-of-network basis, says Ms. Therrien. Stranger still is that 2006 salaries were 23 percent of net revenue, well in line with national benchmarks.

"The layoffs didn't come about because of money or what people did or didn't do, but because we were overstaffed for the number of cases we had," she says.

This is the fifth surgery center Ms. Therrien has managed. It's by far her biggest, busiest and most profitable. "It's also the first time in my career that I've had to do something like this," she says.