Management Outsourcing Can Be the Rx for Smoother OutpatientOperations

Management Outsourcing Can Be the Rx for Smoother Outpatient Operations

By Kelly M. Pyrek

Owners and operators of ambulatory surgery centers and specialty surgical hospitals who find themselves spending more time on paperwork and less time on patients increasingly are opting to outsource their facility management. What became the growth industry of the last decade isn't showing any signs of slowing down, especially in a fiercely competitive outpatient marketplace. Adopting a "caring for the caregivers" approach, numerous healthcare management firms are competing for the chance to boost your facility's cost effectiveness and operational efficiency.

"Outsourcing will always be part of how hospitals do business," says Jo Surpin, president of New Jersey-based Strategic Health Alliance, LLC. "Whether it's called outside management, contracted services or outsourcing, as was the buzzword in the late 1990s, there will always be select areas in which it makes a great deal of sense to have someone provide service on your behalf. Hospitals acknowledge they don't have the internal expertise in a certain area and will continue to outsource those areas. If there is no additional value to creating that expertise and if they can secure it as economically as possible, then it makes sense to outsource. Administrators must ask themselves, can someone else do it for the same cost or cheaper? In some cases it may be a little more expensive (to hire a consultant) but you may not incur other expenses, you may save time, and the job may be done better. So cost is not the only factor."

Surpin says the outpatient surgery arena is well suited to management outsourcing by the very nature of the industry.

"Many companies provide management services for outpatient facilities because although ambulatory surgery is very much a part of what hospitals must provide, it's not something they have a great deal of expertise in," Surpin adds. "It's not to say they can't develop that expertise and that often is the approach many will take; they may even stumble along the way and get very good at it. Some hospitals still will desire to partner with someone that can provide those services more effectively. We're seeing an increase in inquiries from physicians; they don't always partner in the best way on their own so having a neutral third party to manage a joint operation between a hospital and a physician creates a positive situation. If either party tried to do it all, the venture might not be as successful."

Improving the highest and best use of resources and personnel has been a cornerstone of the outsourcing philosophy, and it's no different in the healthcare industry. Hiring an outside firm to handle what traditionally has been conducted internally can improve clinical quality as well as sharpen administrative prowess. While some facility administrators are reluctant to surrender control of their businesses, management firms point out that redirecting time, money and energy can enhance productivity, reduce errors and increase the overall bottom line. Outsourcing allows facilities to free up key facility staff so they can focus on developing and fine-tuning skills that are essential to the facility's future success. In an era of managed care, owners and operators of ASCs need all the help they can get.

"I have had an increase in management requests," reports Caryl Serbin, RN, BSN, LHRM, president and CEO of Fort Meyers, Fla.-based Surgery Consultants of America, Inc. Serbin has fielded queries from a wide range of potential clients including physicians, hospitals and joint-venture partners. "There is a great desire to outsource management due to the increasing complexities of running a profitable ASC. With increasing difficulty in maintaining a desirable profit margin, many centers are looking to outsource management. Part of the need is related to increasing difficulty with the managed care markets."

"The ASC/surgical hospital world is definitely increasing its quest for consulting and outsourced services in the facility development realm," states Jack Coale, director of business development for Jacksonville, Fla.-based The Haskell Company. "The complex challenge and time required to put deals together, by physician-led groups who are seeking new free-standing facilities, are more daunting than many physicians anticipate at the outset. This leaves them the choices of doing bad deals, as attrition sets in, or seeking professional assistance." Coale says business is "very brisk."

On the other end of the map, consultant Leigh Anderson, MA, BS, RN, president of Southern California-based AccreditationHQ, offering customized accreditation, certification and licensure solutions, says she sees a definite upswing in outside management of ASCs and attributes it to several factors.

"Because money is tight, insurance companies and managed-care organizations are being frugal with their funds, not wanting to pay good money for services by less than optimal surgery centers. One way they have of judging competency is by the credentials surgery centers have earned. Secondly, consumers are becoming increasingly sophisticated and are not willing to risk 'life and limb' having surgery in a second-rate surgery center. Then, there is the legal profession and their 'nose' for identifying high-risk activities or identifying vulnerable organizations. In addition, Big Brother is becoming interested in what's happening in the burgeoning outpatient sector. Lastly, the 'Big 3' accreditation agencies are discovering there is big money in the accreditation business. For all of these reasons, caregivers -- surgeons and nurses -- are challenged to stay abreast of new standards and implement compliance activities."

Anderson points to an increasingly complex maze of compliance that ASCs must navigate, explaining that sometimes it's just easier to get help -- especially if you're small.

"In my experience small organizations are seeking help from consultants (because of a) lack of manpower. Larger organizations can afford to have an employee dedicated to accreditation, certification or licensure compliance activities. There are currently about 1,000 accreditation, certification and licensure standards/conditions," she says. "Many are complex and require special knowledge for their implementation. Surgeons and nurses are already working 10- and 12-hour days caring for patients. They don't have time nor energy and sometimes the interest to comply with all the paperwork. This leaves a huge need and an opportunity for consultants to help the surgery center community while making a comfortable income."

Serbin points to the obvious advantages of outsourcing, including a potential increase in revenue, greater operational efficiencies and the ability to better meet regulatory and/or accreditation mandates. "Outsource your headaches," she quips. Serbin says that outsourcing drawbacks can include a potential wrong fit, and she advises that facility managers ensure that goals are aligned with those of the management firm. Serbin adds that before considering hiring a consultant, a facility should scrutinize its objectives and deal with any false expectations that may manifest themselves. She also advises checking a company's references.

According to Surpin and Geri Weideman, senior consultant for Strategic Health Alliance, LLC, and co-authors of Outsourcing in Healthcare: The Administrator's Guide, ASC administrators should consider the following questions before they recruit a management firm:

• What is your organization's mission and what does your facility do best?
• Is this an appropriate focus in the current healthcare market?
• What core competencies give you a strategic advantage?
• Which tasks are too critical to entrust to a management firm and which can be outsourced easily?
• Have any services or functions suffered from poor qualitative or financial performance in the past and do they fall below benchmarks?
• Are there contracts or service agreements that expire soon and do they experience significant fluctuations in use?

Surpin and Weideman insist that outsourced service "should become a seamless part of the culture of the organization so that consumers (e.g. patients, insurers and physicians) will not experience a fragmented delivery system."

Serbin says she has many success stories that reflect good matches between facilities and management firms. "I have a center in Mississippi who we took over management and billing. They were upside down and within one year they became profitable and were able to give a good distribution."

It's a common scenario, consultants say, because surgery center owners get so wrapped up in major concerns like malpractice suits, fulfilling OSHA regulations, complying with the ADA, avoiding HIPAA suits and churning out performance improvement studies. "As a consequence, they frequently overlook the nuts and bolts of day-to-day practice, treating their patients with concern and performing good surgery," Anderson reflects.

While ASCs' needs are diverse, some management firms report that many clients want comprehensive packages of services ranging from turnkey to an 'a la carte' approach.

"In my experience, smaller surgery centers are looking for turn-key packages, which are an unfortunate choice," Anderson states. "Little do they know that surveyors have a well-developed sixth sense, meaning they can tell when the 'books have been cooked.' My first choice is to work with an organization, teach them about the intent of the standards/conditions and then help the organization personalized their compliance activities. Many surgery center leaders are unaware that they don't have to comply with every standard and that compliance activities may simply be processes that are used every day. Their staff members simply have to all be on the same page but if they are not, surveyors quickly pick up on weaknesses."

According to Serbin, a good management company should provide an all-inclusive program for managing ASCs with comprehensive, long-term services that permit the ASC to remain current on all critical factors, meet regulatory and accrediting standards and maximize its financial potential. Services should include all or part of the following:

• Review/update policies and procedures
• Oversee purchasing capital equipment
• Oversee medical supply inventory
• Establish/maintain appropriate cost per case
• Establish/maintain appropriate man hours and net revenue-to-salary ratio
• Monitor patient billing and coding practices to maintain compliance and maximize revenue
• Oversee accounts payable
• Negotiate/maintain managed care contracts
• Negotiate/maintain existing contractual agreements for anesthesiology, radiology, pathology, maintenance, etc.
• Establish/maintain staffing schedules and wage structures

Other services include financial, accreditation/licensure, performance improvement and other benchmarking program administration, environment of care, human resources, insurance and marketing.

"More physician-owned, hospital-owned and corporate-owned ASCs are turning to outside management companies in their quest to meet their patient-care goals, remain compliant with regulatory guidelines and maximize their surgery center's potential," Serbin adds. "The goals of all involved parties should be carefully considered before entering into a management agreement. Ideally, successful management arrangements benefit the surgery center, physician owners, joint-venture partners and the management company."

William G. Southwick, president of Nashville, Tenn.-based Surgical Health Partners, LLC, predicts continued growth in the outsourcing industry. "The current upswing should continue as the growth rate of ASCs has been double-digit and more centers means higher likelihood for outside services to be contracted. Most often we see requests for management services due to the fact that developers exist and do a good job but the fear of regulatory hassle and the payback for management services to a physician is of big concern. Again, why not hire someone who is good and pays for himself, and remove yourself from yet another management hassle beyond your immediate practice or the bigger worry of running an acute-care hospital?"

As neutral third parties, consultants are sometimes seen as essential if clients are caught up in outpatient "turf wars." The primary motivation behind seeking management outsourcing can be proactive or reactive.

"We mostly see selection of outside management services by hospital-physician models simply due to the inherent lack of trust each has in the other," Southwick declares.

"Many times if it's physician motivated and the hospital wants to protect its turf to some extent, you will see them looking to the independent consultant for assistance," Surpin says. "It's not so much turnkey in a sense that you turn over the keys at the end of the project and they run it; often it's about partnering as a developer and manager of a facility. You will always have turnkey companies but we don't see as much of that as we do see clients who believe developing an outpatient facility is an important part of their overall strategic objective. As they prepare to compete in the marketplace, they wonder if they should do it themselves or should they partner with an outside group. Some will do it to get the capital and will continue to provide the service component themselves, while others will look for someone to do both."

She continues, "It may be better to partner with the physician, protect the business you have, even if it ends up costing you a little more, as opposed to losing it in its entirety. I see hospitals that want to create a freestanding surgicenter, which often doesn't make financial sense because they are duplicating services, such as operating rooms. The reason you should create a surgicenter is because there is some external force saying that by doing so, you can be more efficient, lower costs, meet the needs of your consumers, create happier doctors and have a more efficient operation. Outsourcing can help administrators reach these goals."