Six ASC Profitability Killers to Avoid

Plan strategically as a team to prepare for market changes and to weed out losses that are weakening your center’s financial health.

Yes, it’s true the ASC industry is growing at an astonishing pace. But it’s also true that succeeding in this crowded space leaves little room for error. Not being aware of sneaky profitability killers in the mix could leave your center in a hole you simply can’t get out of. This runs the gamut from staffing challenges to low reimbursement and high-cost supplies to major profit-killing legislation that’s in play.

These are the challenges facing ambulatory surgery today, according to ASC leadership executive John J. Goehle, MBA, CASC, CPA, chief operating officer of Ambulatory Healthcare Strategies, a provider of administrative, oversight and consulting services specifically for ASCs and office-based surgery practices in Rochester, N.Y. Mr. Goehle is a vocal advocate for outpatient care on the regulatory front and talks about ASC issues that matter in “The ASC Podcast with John Goehle”.

Profit perspective

Given the many competing factors pushing and pulling ASC business success, Outpatient Surgery Magazine asked Mr. Goehle for his take on where ASC leaders should focus their efforts to stay in the black. “Teams need to be looking ahead strategically with the right data to plan accordingly, then they need to develop short-term, medium-term and long-term goals and objectives that are shared throughout the organization.” The rub? Leaders often get caught up in day-to-day crises and don’t set time aside to plan for changes that could influence their business model.

The first step to mitigate profitability killers in any ASC is to get owners, administrators, physicians and frontline staff together to start looking ahead. Once this happens, Mr. Goehle suggests focusing collective efforts to address changes on the horizon that could mean profit or loss for a center. To that end, here are six of the biggies.

1. Not monitoring regulatory changes

ASC leaders must keep on top of potential reimbursement shifts. Mr. Goehle does this by attending conferences, consistently reading articles, and joining and actively monitoring communications from state and national ASC organizations such as the Ambulatory Surgery Center Association (ASCA) to anticipate changes that are being discussed among legislators. There are two major regulatory changes on his radar:

• Legislation to eliminate facility fees. In Mr. Goehle’s own state of New York as well as Texas, legislation has been proposed to eliminate ASC facility fees — which means a patient won’t be required to pay their portion for care at your center, even if they have a high-deductible plan. Add up these lost fees for every patient and you quickly see the potential for devastating financial losses. “State associations and the ASCA are pushing back hard on this legislation. To my knowledge, no states have actually been able to implement legislation to ban these fees, but ASC leaders have to keep up with these trends, fight back against them, and of course plan accordingly,” says Mr. Goehle.

• CMS moving cataract cases to office-based surgeries. There is quite a bit of talk about cataract surgery moving out of the ASC and into office-based surgical (OBS) practices, notes Mr. Goehle.

This is because CMS conducted a successful test to incentivize OBS cataract surgeries and analyze safety and outcomes, which showed promising findings. As a result, Medicare reimbursement may favor cataracts performed in office-based settings that historically cost less compared to the same procedure in a surgery center.

“Teams need to be looking ahead strategically with the right data to plan accordingly, then they need to develop short-term, medium-term and long-term goals and objectives.”
John J. Goehle, MBA, CASC, CPA

“Since cataract surgeries are one of the most performed procedures in an ASC, leaders have to be prepared for this,” Mr. Goehle advises. He suggests single-specialty ASCs that only perform cataract surgeries start considering options to either convert to an OBS practice or become multispecialty by starting to identify who might want to work in their center and how they would accomplish such a change. For centers that are already multispecialty and perform cataract surgery, now is a good time to explore different specialties.

2. Not looking to add new services

Luckily, other shifts are happening as facilities look to capture high-dollar reimbursement for procedures such as total joint replacement and cardiac procedures. This is creating ripples across the ASC landscape. For example, a busy orthopedic surgery center looking to capture the total joint market might focus less on lower reimbursable cases like arthroscopic surgery. This in turn could create new opportunities for arthroscopic surgeons to get picked up by other centers, including centers focused on cataract surgeries but looking to expand in a realistic way and diversify their offerings and subsequent profit planning. Mr. Goehle cautions that these procedure shifts can be costly and require significant planning.

“Over the years I’ve seen leaders come up with wonderful ideas, but they don’t always do a lot of research or planning to approach things like physician recruitment and capital purchases in a smart way,” he says. “Say a center wants to bring on arthroscopy. Well, maybe some investigation could lead to the surgeon they recruit bringing their equipment with them at a significant savings.” In other words, get creative when looking to add new services.

3. Not focusing on staffing trends

STAYING POWER Strong leadership, a positive outlook, solid training and opportunities to be mentored all help with retention.

Many ASCs have been experiencing relatively high turnover rates. One cause for this is a tremendous boom in job opportunity. “A nurse could leave your ASC, apply for five different positions and easily get five job offers. This reality requires a shift in how employers foster loyalty,” says Mr. Goehle.

It’s not only about hanging onto the people you have on staff. ASC leaders also must find a way to avoid hiring the wrong person when they need extra help. As Andrea Venezio, CEO of Sapphire Health Group, a recruiting search firm in Lewisville, Texas, serving ASCs and surgical hospitals, puts it: “Hiring the wrong person will cost you three times that person’s annual salary. In other words, if you hire a new employee for $150,000, it will cost a company $450,000 if that person doesn’t work out.” Ms. Venezio breaks it down like this: Most employees — and companies, for that matter — find out that the job isn’t a fit within the first six months. If they hire an employee in February, and that person lasts six months in the job, the facility is going to need to start searching for another employee by August.

“That means your company will have to spend additional expenses you didn’t anticipate by posting your job online or hiring an external recruiter like me,” says Ms. Venezio. “Plus, while you’re looking for a new person, you may have to pay an interim person a lot more than $150K to take the job until the role is filled or add additional responsibilities to your current employees and compensate them accordingly. Furthermore, you may not be able to find a person you can hire for the same $150K salary, so it may cost you $200K the second time around.” Finally, Ms. Venezio points out that once you do hire a new person, you’ll need to retrain that person and go through the same “adjustment process” all over again, which costs additional time and could lead to diminished customer service or loss of clients, depending on how much time you need to spend with the new employee.

The constant staffing pressures of the highly competitive ASC space require facilities to start by making sure the basics are in order — leadership is strong, toxicity is strictly forbidden and a premium is placed on staff receiving good training and equally strong mentoring.

Also take a closer look at staffing strategies that can refocus skilled tasks to save money. One area Mr. Goehle suggests: reorganizing functions. Organizations should identify functions that can be performed by employees that cost less. For example, can orderlies help clean the facility between cases? Can you use medical assistants to perform tasks that often require a nurse, such as bringing patients to their cars, and providing food or beverages?

4. Failing to train in-house

Traditionally, ASCs have sought to hire very experienced nurses and techs. However, as shortages of such staff have increased, many ASCs are starting to hire less experienced staff who are sometimes just out of school. These employees usually cost less, and while they require additional training and mentoring, there are often advantages to training them “your way.” However, facilities must balance the cost to train these less-experienced staff against their lower cost.

To control training costs, look to training and bootcamps for administrators and business office managers to provide deep knowledge of the job and the way things are done in an outpatient setting. The same goes infection control courses for clinical staff. Mr. Goehle notes that there are a variety of free or very inexpensive offerings available. Beyond training, he stresses the importance of mentoring. “Preparing your staff to work confidently in your center requires more than training and then putting them on the floor. It takes solid orientation and ongoing support, which also improves employee satisfaction,” he says.

5. Not reining in supply costs

Supply chain issues have been an increasing concern and will not end anytime soon. But a proactive stance on costs and smart purchasing by administrators and nurse managers can help. “Purchasers should be constantly looking for alternatives and working with multiple distributors, not just the ones they have always used,” stresses Mr. Goehle. Another measure to control supply cost is to take advantage of GPO (group purchasing organization) pricing and maintain ongoing contact to assure they always get the best price. “Purchasers have to be strategic, working with their contacts to identify possible future supply chain issues and stocking up strategically to assure supply levels are appropriate,” says Mr. Goehle. This means purchasers need the most current information about upcoming cases and changes to case mix, new doctors, procedures and new specialties. “Not having that information could result in last-minute purchasing that will likely cost more,” he says.

Often ASC leaders don’t take the time to really scrutinize their financial data. This should involve reviewing financial statements for negative and positive trends in expenses, ensuring that accounting systems provide useful trending reports, and analyzing those reports for the causes of unfavorable fluctuations.

Researching and implementing solutions is a critical function for all leaders, Mr. Goehle notes. “Clinical leaders control a significant portion of the expenses in an ASC, so they should have access to financial information and be consulted as the organization identifies problem areas,” he says.

6. Not targeting low-hanging fruit

When navigating profitability issues, Mr. Goehle suggests taking advantage of savings opportunities that don’t require a ton of effort and can really add up [See ‘Simple Savings’ above].

Ultimately, the best way to prevent profitability killers is to remain vigilant, spot problems early and focus on the big picture. “Understanding the ways to save money is important, but if you don’t know what the numbers are or what they mean, your governing body won’t be able to point out problems or offer solutions,” says Mr. Goehle. OSM