In today’s mature ASC environment, revenue growth is difficult to achieve. Until the last few years, new entrants into the ASC market experienced significant growth and a favorable level of competition for physicians and cases. Now, growth is decelerating, with the growth in the number of ASCs and cases per ASC slowing. This dynamic has caused an increased focus on the expense side of the profit equation in the ASC industry. Measuring ASC performance against internal and external comparable benchmarks has become a critical tool for achieving efficiency as ASC operators focus on making their current caseloads more profitable.
In a mature industry — one in a state of equilibrium with an absence of significant growth — businesses tend to behave in a fairly standard manner. ASCs are no different. ASCs are reacting predictably to the normal market-maturation process, in which earnings may remain stable, but growth prospects and expectations decrease significantly. In this changing business environment, we have witnessed ASC managers change their focus from growth to operations, innovation, and maintenance. This significant systematic effort within the ASC industry has required a shift in resources and managerial skill, with emphasis to innovation and efficiency.
Benchmarking is but one component of organizational improvement. Benchmarking is not a one-time, quick fix. It is a process, a continual process of monitoring and adjusting. The process is commonly described in three steps – identify, track and change. If you can identify or measure a metric, you can track it. If you can track it, you can change it.
Developing and implementing a benchmarking plan for your ASC has the benefits of improving operational efficiency and maximizing performance, both clinically and financially, which will lead to a more profitable and valuable ASC.
The first step in benchmarking is fairly obvious – identifying where in the organization improvement may be made. Fortunately for ASCs, many areas of focus can be easily identified. For example, on the revenue side, comparing net revenue per case by specialty to national and regional benchmarks is critical to understanding an ASC’s performance, even though an ASC may not have the ability or market leverage to improve contracts. On the expense side, the major cost components are readily identifiable and are typically variable in nature (versus fixed – such as facility rent). Staffing expenses and medical supplies usually take center stage. While improving revenue can be a difficult proposition, making expenses more efficient can have a meaningful and dramatic affect on bottom-line performance.
One benchmarking method is to develop internal benchmarks which can be analyzed as a series over time. For example, staffing costs per case can be measured from quarter to quarter, or year to year. If the cost remains flat or decreases, this can be seen as improvement, while an increase in costs may be seen as inefficiency or a warning sign. The benefits of internally benchmarking include consistency of data collection and comparison, as well as ease of measurement of quantifiable goals. Lacking understanding of how the indicator or statistic compares to an industry average presents challenges, however.
For example, if staffing costs increase dramatically for the industry due to macro or regional issues, judging an internal benchmark will not tell the whole story. A second benchmarking methodology which can be used in conjunction with internal benchmarking is to benchmark against comparable peers. The benefits include a more objective measurement of performance, as well as the ability to determine if increases or decreases in performance are industry-wide factors. The challenges include finding quality data to benchmark against, and consistently calculating the same statistics internally to create an "apples to apples" comparison.
There are useful publications in the ASC space to assist independent ASC operators in comparing key statistics. These include the VMG Intellimarker and Salary Benchmark Survey data published by the ASC Association. Great care should be applied to the proper calculation and application of these statistics to ensure a meaningful comparison.