Owners/operators of outpatient healthcare facilities face a perfect storm of operational and fiscal challenges coinciding with the current credit crunch and decreased reimbursement.
Hiring a management company is one step toward streamlining your business and relying on expert counsel in tough times, says Tom Mallon, CEO of Regent Surgical Health. “This is the time to control costs, first and foremost,” he says. “We do the legwork for our partners by researching, and providing facts and recommendations to help them make better decisions for the business. We track labor utilization weekly, if necessary, to ensure maximum staffing efficiency, which is our largest cost by a factor of three.”
Jon Vick, president of ASCs Inc., reports that his ASC clients need management services that address staffing, case costing, coding, payor contracting, managing accounts payable and receivable, and billing and collections. “If performed properly, these services alone can double profits, with additional benefits coming from recruitment of new partners and new cases,” Vick says.
Bob Zasa, principal of Woodrum/ASD, reminds owners/operators that management services should be able to create revenue by growing the business, demonstrating to banks a good growth line for the business. “It’s not just about containing costs,” Zasa cautions, however. “Containing costs are a given and must be an everyday business practice inculcated into the psyche of all employees by the management team. Given the credit crunch, adding new services, doctors, and pricing strategy are even more important. The management company must be particularly strong in these areas, given such a tight economic market.”
Paramount to today’s facilities is optimizing reimbursement and controlling costs, agrees Bob Estes, vice president of operations at Pinnacle III. “Optimizing reimbursement requires assertive, thorough negotiations with third-party payors and subsequent diligence with coding, billing and collections for care provided,” Estes says. “Controlling costs effectively requires constantly focusing upon inventory management, appropriate staffing for volume and identifying new opportunities for expansion of services.”
Access to financing is key, according to Brian Levinson, vice president of marketing at Nueterra, as is hiring a management partner with the experience not only to develop an outpatient facility, but also to grow a facility throughout its life cycle. “That includes the ability to recruit new investors, manage a successful resyndication, or convert a facility to a surgical or community hospital,” Levinson says. “It is also critical for owners to have the support of a team that is experienced with negotiating good payor contracts.”
John Smalley, principal of Healthcare Venture Professionals, says a good management company will address the clinical and business sides of ASC operations. “From a clinical perspective, this entails open and ongoing communication with physician owners and utilizers, with special emphasis on clinical benchmarks/outcomes, patient satisfaction and enhancement of the scope and quality of clinical services offered,” Smalley notes. “From a business perspective, revenue growth, expense monitoring and cash flow improvements remain more important than ever. Key activities emphasize A/R collections, control of staffing and supplies costs, and identification of opportunities to expand ASC services and to improve reimbursement rates from non-governmental payors.”
Management companies are hearing a common chorus of challenges from their client facilities these days, with many concerns focused on revenue-stream protection.
“Most of our clients are seeking a corporate partner that can help them recruit new doctors as partners and add a significant number of new cases that generate high revenues to boost profitability,” Vick reports.
Mallon notes, “It’s no surprise in today’s economy that the most frequent challenge our partners are encountering is growth in profitability. To minimize the general cost of care, we strive to streamline all processes.”
“While several challenges face our industry, such as the proliferation of ASCs, dilution of volume and inflation of costs, universally the erosion of reimbursement is the most common challenge facing our ASC partners and clients,” Estes says.
Smalley says his clients are experiencing the same pressures commonplace to most healthcare providers and other businesses, and desire excellent outcomes and expanded services delivered in a cost-effective fashion. “Given the pressures they’re experiencing, they want the peace of mind in knowing that their ASC investment is in capable hands. They recognize that business success is much more difficult to achieve in today’s environment. They routinely express their appreciation for positive ASC operating results and for the presence of an experienced ASC operator that they personally know and trust.”
Issues relating to third-party payment and cash-flow challenges related to payors delaying payments even in states where clean claim laws exist are common, according to Zasa. “The slowness of payment, requirement to constantly follow up, and appeal claims that should clearly be paid causes our clients extra hours of work in the business office having to re-file claims sometimes three times for arbitrary decisions by the payors. This not only has an impact on cash flow but adds to the labor costs of the ASC. It is a double-whammy economically.”
Besides securing capital, the most common challenge ASCs face is managing through the uncertainty about the impact that healthcare reform will have on physician ownership, Levinson reports. “Physicians still want to be able to invest in surgical facilities so they are looking for management companies that have the experience and flexibility to develop investment opportunities for any regulatory environment. Since Nueterra’s focus for more than a decade has been on creating opportunities for physicians and hospital systems, we have a variety of investment models that will meet the needs of virtually any regulatory environment.
SurgiStrategies asked industry experts, “What is the single best piece of advice you can offer ASC owners/operators?” and here are their answers.
Jon Vick: Partner with an ASC management company that shares your goals and your values, and that can help you achieve your specific objectives. Do this sooner rather than later; with over 30 companies competing to buy ASCs, the market is currently very competitive and the value of your center may be as high now as it will ever be.
Tom Mallon: Don’t lose sight of your focus, and stick to what you do best, so you can offer better and more efficient care at a lower rate than inpatient facilities. We work with our partners to optimize their strengths so we can provide a high quality of care to every patient and financial success to our partners. Also, keep an eye on your future. Keep inviting new physicians into the partnership as older members slow down and retire.
Bob Estes: Choose a management company that demonstrates a depth of resources across all aspects of operational management, and one that is committed to the compliance, delivery of care, fiscal performance, growth and differentiation of the ASC. A company that couples this expertise in operational management with services for coding, billing and collections will best provide your ASC the opportunity for success.
Brian Levinson: Always have a good management partner that can help investors plan for the life of the facility, from development through growth, conversion and an exit strategy if necessary, and that can help investors migrate through the changing regulatory landscape to ensure the continued profitability of the facility. In this challenging economic and regulatory environment, an experienced management company is essential for the long-term success of any facility. Through this partnership, physicians and hospital systems can focus on what they do best, while still realizing the financial benefits of investing in a surgical facility.
John Smalley: Stay focused on providing an excellent product at your ASC — high quality care with great customer service. To do so, remember the basic “blocking and tackling” of ASC operations such as revenue enhancement, expense control and cash flow improvements. Of equal or greater importance, make sure that you’re meeting the needs of your surgeon “customers” and that the ASC is being used to its capacity. ASCs that can achieve these goals will routinely provide an excellent product to their patients and community that will result in a high level of patient satisfaction and a great return on investment.
Bob Zasa: Carefully select a management company that has a record of being a strong operator, not just one that can make money with out of network, high net revenue. Get a team that works and develops the local management group so that robust revenue generation can occur and simultaneously, where the management has experience in making sure the costs are in line and has high accountability to the physician owners.
