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How to Survive the First 6 Months
Tips from a veteran on how to make it over the hump.
Pamela Ertel
Publish Date: October 10, 2007   |  Tags:   Facility Construction and Design

Five years ago, when HealthSouth hired me to set up the freestanding, multispecialty Exeter Surgery Center in Reading, Pennsylvania, I thought my 26 years of OR nursing experience would see me through the task. Although the fact that we now perform over 5,000 outpatient cases a year attests to our success, I did not know back then if we would make it through those first few months of operation. Starting up an ASC was undoubtedly the greatest challenge of my professional career. Here are some of the most important lessons I learned.

Safety First
To attract good surgeons, they must feel 100 percent confident that your "safety net"-your ability to care for patients when something goes wrong-is strong. For this reason, and because you must demonstrate competence in this area before you can receive occupancy status and provide patient care (see Figure on page 106), it is essential to concentrate your early efforts on patient safety.

There are two sets of safety regulations that you need to know inside-out from the very beginning. Together, they regulate every aspect of the ASC-from firewalls to medical records. The first set is your state department of health regulations for ASCs, which you can obtain simply by calling your state department of health. These regulations cover the clinical aspect of patient safety, but they vary dramatically from state to state and are very stringent here in Pennsylvania. For example, Pennsylvania requires numerous inspections during the initial phases of operation, whereas other states like West Virginia do not. The second key regulation is the American Institute of Architects (AIA)/American Society for Healthcare Engineering (ASHE) Guidelines for Design and Construction of Hospital and Health Care Facilities. These guidelines cover the environmental and physical aspects of safety and address such things as patient privacy and fire safety. You can obtain copies of these guidelines at the associations' web sites (AIA: writeOutLink("http://www.aia.org/",0) ASHE: writeOutLink("",0)).

A deep understanding of both documents is essential not only because you must demonstrate compliance, but because this knowledge will help you convince physicians of your readiness to provide safe, quality patient care. For the first three months of our operation, I spent nearly all of my time outlining the major requirements of these regulations with our physicians and explaining exactly how we intended to meet each one. This took a lot of effort but was well worth it, as it helped address surgeons' common concerns and build their confidence in our facility. Many surgeons, for example, were concerned about our ability to treat and transfer patients to the ER during emergencies. Many were particularly concerned about treating pediatric patients in the ASC for this reason. The Pennsylvania state regulations actually helped me address these concerns, because they require all RNs to be certified annually in advanced cardiac and pediatric life support, and they require us to have a complete crash cart at hand in every OR. Many of our surgeons were also comforted by the state requirement that an anesthesiologist must be in the facility while surgery is underway.

Importantly, I found the guidance and support of my architect invaluable during this time, as some aspects of the regulations are open to interpretation. The AIA/ASHE guidelines, for example, require the ASC to separate geriatric and pediatric patients to maintain patient privacy and comfort during recovery. We assumed a curtain between patient beds would suffice, but our state inspector later informed us that we needed solid walls separating these two patient groups. This was a great concern to us, as construction was already complete. Fortunately, my architect successfully challenged the inspector's interpretation, and we were able to proceed with our original plan.

Persistence Pays
Securing insurance contracts is the greatest challenge for any start-up ASC. Unfortunately, there is no magic solution because factors beyond your control can play a lead role in the contractual decision. Nevertheless, you must constantly be at the ready so you can recognize and seize opportunities as they arise.

To maximize your chances for success, take time early on to define the major insurers that feed into your territory and identify the decision-makers at these firms. That is, find out who negotiates contracts, and find out if you need to go through someone else, such as a medical director, to reach this person. Next, do your best to estimate procedure costs based on standard costs in your area, which you can obtain through consultants and/or FASA. As a member of HealthSouth, we were able to share cost information with other HealthSouth facilities in Pennsylvania. I also recommend using a CPT analysis tool that takes into account all direct and indirect costs to track your exact procedure costs as you go. The more you know about your costs, the greater your leverage at the negotiating table in the years ahead.

We used our cost information to combat the reimbursement policy of one of our major insurers, which tends to include anesthesia in its facility fee-thereby leaving it up to us to pay the anesthesiologist. Before signing a contract with this insurer, we worked to obtain higher facility fees for our most common CPT groups (such as ACL procedures) so we could cover both fees and still turn a profit. With this "carve-out" approach, we nearly doubled our ACL reimbursement. Admittedly, the fact that the local hospitals refused to work with this insurer gave us leverage at the negotiating table that we may not have had otherwise.

Finally, stay in constant contact with your target insurers even if you're not initially successful. Keep them abreast of the procedures and services you offer, as well as your cost and quality advantages. Even if you cannot make headway right away, local politics and other circumstances are bound to change, and you may suddenly find yourself in the driver's seat provided you are prepared and visible. When waiting it out like this, I recommend helping your willing customers fight these insurers for coverage of services at your facility. Here at HealthSouth Exeter, we ask these patients for copies of their insurance policies so we can determine if they are covered for out-of-network services. If they are, we call the insurer and try to negotiate a deal. Unfortunately, patients seem less willing to mount such challenges since the September 11 terrorist attacks, but we look forward to returning to normalcy soon.

All Systems Go
Before performing surgery, stock your supplies, get your computer systems in place, and be sure you are capitalized to see your facility through the first few months. Three months before we performed any surgery, I hired an orthopedic technician to serve as our 'purchasing agent,' and she was instrumental in determining what specialty items we needed to stock. Based on her suggestions, we then surveyed our physicians for their preferences and purchased only those items preferred by the majority. Each time we purchased an item, we added it to our physician preference cards in our computer system. This data-loading process took three months and involved five people, and I cannot stress enough the importance of getting this done before you open your doors. It is the only way we were able to track and manage inventory efficiently. Purchasing mistakes can cost a facility a lot of money. I also recommend joining a buying group so you can negotiate the best possible prices on your most common and most expensive supplies.

Although we took these measures when we started up our operation five years ago, we did make one mistake that caused us to spend close to $500,000 in supplies and salaries before we received any income. We mistakenly waited until we were ready to send out bills before hiring a trained coder. As a result, we performed surgery for three months without receiving a single payment or reimbursement. We also created an ineffective coding system that had to be revised once this staffer came on board. Remember, too, that Medicare fraud is one of the worst predicaments that can befall an ASC, and ignorance is no excuse. I recommend hiring a trained coder at least one month before you start performing surgery.

Educate from the Start
Like many ASC surgeons, our surgeons are limited partners who receive a distribution when the center is successful. Although this can motivate physicians to perform surgery at the ASC, it can also be a double-edged sword. Some surgeons fear their primary care physicians will refer patients elsewhere if they show loyalty to a for-profit ASC, and competitive hospitals may reinforce this concept. From the very beginning, combat the paradigm that 'for-profit' means 'anti-quality'.

To develop and maintain an image as a quality healthcare provider and to recruit new surgeons, I visited prospective surgeons weekly, and continue to do so. During these meetings, I inform the surgeons about our great turnover time and convenience, estimated and real volume, and outcomes. Now that we have five years of experience, I also present our patient satisfaction surveys. We hire an independent firm to perform these surveys, which consistently show a 96 percent or higher patient satisfaction rate. I recommend maintaining good relations with the local hospital, as this can help nip competitive infighting in the bud. From the beginning, I have used our local hospital's laboratory and pathology services, and we have transfer agreements in place.

Finally, we enforce the newest provision of the Safe Harbor law, which governs physicians' involvement in for-profit ventures. This provision, known as the one-third rule, stipulates that our physicians must bring one-third of their Medicare patients to our ASC to qualify as a limited partner. If a physician does not adhere to this rule, we buy back his or her share at fair market value. We believe that physician loyalty based on a solid foundation of excellence must be part of any ASC's formula for success.

I wish I could have avoided a few of these oversights, but I am glad for the experience. I know this ASC like it is my own home-I even know where the generator is and how it works! As such, I am confident that I can handle any new challenge that may come along.