According to information from Ambulatory Surgical Center of America (ASCOA), 50 percent to 60 percent of all ambulatory surgery centers (ASCs) nationwide either lose money or only break even. These centers fall on hard times, never reaching full profitability and recent times show that turnarounds have been a key aspect of today’s industry. While there are various reasons for a company to fail, including poor case volume, AR management and back-office efficiencies, ASC turnarounds should not be seen as a detriment, but rather a huge success that brings hope and beneficial growth. The following turnaround stories will offer real-life examples highlighting the steps to improvement that have worked for others.
Pinnacle Surgery Center, By Chris Bishop
One of the pleasures of skiing in Utah this winter was watching different skiers use different strategies in how they tackled the slopes. Some skiers shred the mountain in an attempt to reach the bottom as quickly as possible, while others enjoy a slow, meandering path, seemingly touching most of the trail.
When I first reviewed the situation at Pinnacle Surgery Center, I saw a beautiful physical plant that could rival many day spas. However, behind this striking facade, this venture was deteriorating quickly, with capital calls and a $600,000 line of credit that had been used for operational shortfalls. We had to pursue the “shred-the-slopes” strategy to ensure this venture was turned around as quickly and efficient as possible.
Fortunately, the surgeon leaders, including orthopedic surgeon Steve Ripple, MD, recognized that they needed assistance in reaching their financial goals, while stopping the bleeding. They asked Ambulatory Surgical Centers of America (ASCOA) to join them in becoming the operating partner and remove this management challenge from their shoulders. “For two years our surgery center had struggled administratively and financially,” Ripple says. “Within four months of partnering with ASCOA, their management skills and our staff’s hard work allowed the center’s cash flow to turn positive.”
Laurie Hendrix, senior vice president of operations, moved quickly to cancel our poor managed-care contracts and start over out-of-network, which increased our revenue per case by 91 percent. By compressing the surgery schedule and closing at least one room on lower volume days, we reduced staffing costs from 34 percent of revenue to 20.5 percent of revenue in the first three months. Using ASCOA-generated case-costing reports, Hendrix was able to work closely with our MD partners and lower supplies costs from 26 percent to 15 percent of revenue. She also found three C-arms for this four-OR/one procedure room facility when ASCOA arrived. ASCOA was able to leverage its strong vendor relationships and negotiate the return of a lightly used C-arm to the original manufacturer, saving thousands in equipment costs.
In the first 12 months, we redeemed four bad partners, while adding a new pain surgeon and urology surgeon who were eager to shift their entire outpatient practice to the facility. All of these tactics resulted in substantial positive cash flow in year one. We were able to use this resulting cash flow to bring our nearly $800,000 AP current, while also paying down $1.4 million in short- and long-term debt.
The 24 surgeon partners at Pinnacle Surgery Center were open to this “shred-the-slopes” strategy in order to save our center. Working harder and achieving little progress emotionally exhausted our surgeon partners prior to the arrival of ASCOA. Our eagerness to adopt the ASCOA model, even when it required us to change longstanding office schedules and practices, allowed our facility to become the financially solid and profitable center that it is today. Now that the heavy lifting of the turnaround is complete and daily operations are in the highly capable hands of administrator Sue Nance, our partners are looking forward to a profitable 2010.
Chris Bishop is vice president of acquisitions and development at Pinnacle Surgery Center.