How to Add Services That IncreaseProfitability

How to Add Services That Increase Profitability

Robert J. Zasa, MSHHA, FACMPE

An ambulatory surgery center (ASC) is an active and living organization. It is not just a bricks and mortar building or an established corporation. Factors within the ASC and its environment are changing all the time:

• Physician partners retire or relocate, and new surgeons come in

• New technologies emerge that make new ambulatory services possible

• Local demographics change or shift, presenting new opportunities

• Competitors emerge and new services are added by existing ones

• As the reimbursement game alters the winners and losers, there are incentives to change your mix of services

While ASC managers find themselves in a state of constant change, they must also reassess ASC profitability on a routine basis. They need to consider reassessing the mix of services offered. What one offered three, two or even just one year ago may no longer provide the best return on investment.

Managers need to consider what's-hot-right-now services, such as orthopedics, foot surgery, urology and mobile lithotripsy cases, hand surgery, vein programs, snoring cessation and contiguous extra programs such as 72-hour beds (with a specialty hospital designation) and women's diagnostics (breast, pulmonary, PAP, bone density, ultrasound).

ASC managers must consider all of these services because they can build the ASC business and enhance profits. An ASC manager must prioritize his or her best and most profitable services for the service area because most ASCs can't afford to add any more than one or two new services a year. The trick is to recognize the options and then sort them out according to the particular needs and situation in the market.

In ongoing assessments of ASC services, there are five questions that always provide a manager with important answers.

Who do you serve?

The first answer must be: The physicians. While patients are important, not one will come to an ASC without a physician's referral. And how often will a patient be in the care of ASC nurses, perhaps three hours once every two to five years?

The ones who return to the ASC every week are the surgeons. This is the target where a manager must first turn for ideas about new services to offer. The services at the ASC should complement the surgeons' specialties and help the surgeons to build their practices.

If the ASC is strong in ophthalmology, consider adding a YAG Laser, PRK or other equipment for cosmetic eye and occupational injury procedures. If the ASC is strong in GI, add or promote colorectal surgeons for colonoscopy and colon-cancer screening with offering to help promote colon cancer evaluations. If the ASC is strong in urology, one should consider adding a dock for a mobile lithotripsy unit, incontinence and impotence procedures and equipment to diagnosis these types of problems. These are examples of strengthening the areas where the ASC is strong to keep a prominent share of the market.

Just because the ASC is strong in certain areas, one cannot suggest that a manager ignore other new options to grow the business. Once the manager has examined the existing surgeons' needs, they should look at patient demographics within a 20-minute radius of the ASC. What is the age, gender, activity level and health orientation of the patient population? At the same time, look at the physician population serving that population and competition for servicing them. Who is caring for patient groups that aren't already coming to the ASC, and how could the ASC attract those physicians to do cases at the ASC?

What do they need?

Go to the surgeons and ask what they need. Make suggestions about services the ASC is considering adding. Get their input even if the service doesn't support their specialty; they may have good ideas to add, or point you toward someone who has tried to offer these services.

When thinking about surgeons or physicians the ASC would like to attract, consider contiguous services that would make life easier for doctors and their patients. Perhaps a women's diagnostics center would appeal to the general surgeons and GYNs in the area, plus build referrals for surgeries at your ASC.

Consider patients' lifestyles in the service area. Several types of demographics could support orthopedics -- active young adults, baby boomers, the aging population. If the ASC already has orthopedics and wants to attract more cases, consider offering physical therapy, massage therapy, or a sports medicine clinic. A large senior population might be served by audiometry or low vision services from the ophthalmologists.

Who else offers this service?

Look at who else might be offering similar services in the community. What is the hospital offering for outpatients, and how are these services priced? Most ASCs can undercut the hospital's fees. If the services are offered in the area, find out how demand has been. If a competitor is strong in this, the ASC can compete by offering more convenience or a discounted fee. If a competitor is weak, is it because of poor service, lack of convenient hours, high cost, or simply because not enough people are interested in the service?

Reimbursement is a fact of life and should be considered when selecting new services. Within these services, which procedures will be reimbursed, and what is the reimbursement level? Take a look at Medicare codes and pay heed to newly added ones.

How will you provide the service?

Here's where the manager needs to sit down and write a business plan for the service. Make sure the following points are addressed:

• Space. Can you offer the service within the current building, or is extra space needed? How will the extra space be carved out? If there is a need to lease extra space, is it available adjacent to the ASC? What will it cost?

• Equipment. Will more need to be purchased to provide the new service? If so, what is the cost, and how soon can it be delivered?

• Staff. Can the new service be offered with your current staff? Will the staff need special training? Will the ASC need extra staff? If so, is this personnel available, and at what cost?

• The deal. How will it be structured for the surgeons? What if there's expensive instrumentation to purchase? Perhaps the physician can buy it, and the ASC will lease it for one year, helping to share the risk. Be sure to consider Safe Harbor and Medicare regulations. At the same time, the new service is more likely to succeed if the physicians have some kind of vested interest.

• Potential for procedures. How many procedures can the ASC expect to perform? Will these come from the existing base of surgeons, or will the manager need to bring in new surgeons? Is this service self-referred by patients?

• Revenue per procedure. How much can the ASC charge and is this charge vulnerable to discounts by competitors? Will any third party reimburse for it, and how much? Make sure the ASC can generate enough revenue to pay for costs and to increase ASC profitability.

• Special concerns. If it's a cosmetic or elective service, will the ASC need to offer patient financing? What about patient education or any complex informed consent process? Who will conduct these, and at what cost? Will this patient group need special hours or services (transportation, child care) that is not already provided?

How will you promote/support it?

When management introduces a new service, one cannot just rely on physicians to promote it through referrals. Most of the advertising burden falls on the ASC, from alerting physicians and their staffs, to "driving through" patients from the other end.

Management can work out creative arrangements with physicians, such as underwriting promotions of patient evaluations, or offering free evaluations. Perhaps doctors can be provided with a letter (to send on their letterhead) informing patients of the new service, or management can write an article for the doctors' practice newsletter or local newspaper.

There is nothing wrong with going directly to patients with news releases and articles, talks at health clubs or before special interest groups or local broadcast interviews. If the patient must be referred for the new service, make sure to connect it with the ASC and the physician(s)' name. If management is trying to draw in other doctors, make a strong point to consumers and then make sure the physician offices are already informed about the new service.

In the ever-changing world of the ASC, the challenge is to manage the services, strategy and economics to your benefit. This means understanding the competition, technology, changes in the physician-specialty mix, trends with payers and the government, and then taking control within your local area.

When management blends the big picture (what's possible) with the target audiences with a 20-minute radius of the ASC (how to actuate), management can create opportunities and profits for the ASC. It is a vital and continual process that must be revisited often to keep the ASC profitable.

Robert J. Zasa MSHHA, FACMPE, is a principal in Woodrum/Ambulatory Systems Development, LLC, ambulatory business developers who consult, own and manage ASCs.