Today's SurgiCenter - How to Avoid Overbuilding or Underbuilding

How to Avoid Overbuilding or Underbuilding

By Sam Burnette, AIA

When James Kildare, the CEO of Multispecialty Surgery Associates, proposes that the surgeons in his 15-member practice construct an ambulatory surgery center (ASC), every partner reacts with enthusiasm. Unfortunately, their enthusiasm is based on 15 different visions of the ideal surgery center. But Dr. Kildare quickly discovers that his partners are unanimous on one point: Each wants a surgical suite reserved for his or her exclusive use. Now, he faces the daunting task of developing a plan for the center that satisfies all of his partners and still meets the group’s requirements for sound financial performance.

The problem Dr. Kildare faces is all too common. He and his partners want to build an ASC that offers state-of-the-art suites and equipment, ease of scheduling for them, and ease of access for their patients. Oh, and one more thing; it needs to be a profitable investment for their practice. How do they reconcile all of their goals?

The key is to build a center that’s exactly the right size. Overbuilding creates high up-front costs that ASC investors may then fail to recoup when the center operates at much less than full capacity. Under-building results in lost cases and revenues, as patients and surgeons will go elsewhere if they can’t schedule a procedure at the ASC within a reasonable amount of time.

To avoid overbuilding and under-building, careful up-front planning is essential. Here are some of the key elements of the planning process.

The “If you build it, they will come” strategy may have worked for Kevin Costner in the movie “Field of Dreams,” but it’s not a strategy that works in real life. If you’re investing in an ASC, invest the time and money to complete a careful analysis of market needs up front.

Before you make any decisions regarding the center’s size, layout, equipment and any specialty procedure rooms, you should have a good idea of the number and types of procedures you can expect to attract, and how much reimbursement you can reasonably expect to collect for each procedure. A good analysis of market and space needs will consider your center’s potential market share as well as how population growth trends may affect your patient volume over the next five to 10 years.

The analysis should translate the number of procedures you anticipate into a projected number of surgical suites needed, considering the average amount of time each procedure will require, the “turnaround time” for each suite between procedures, and other scheduling issues.

Finally, your analysis should consider potential reimbursement, based on your ability to negotiate favorable contracts with local preferred provider networks, insurers and employers, and construction cost estimates, staffing costs and other operating costs. At this point, a financial professional can help you determine the feasibility of constructing centers of various sizes.

Approaching potential payers before you construct your center to discuss contracting arrangements and potential reimbursement is a good way to answer an important question — whether providers in your area will pay enough per procedure to justify the cost of constructing and operating the center.

Think about your programming assumptions. The development of a space allocation program is an essential step in planning your center, because it is often the step that determines whether a center will be overbuilt, under-built or the right size. The space allocation program is based on the number and type of cases to be performed at the center, whether you anticipate low or high turnover of surgical suites, and the length of time patients need to remain in the recovery area. For example, an orthopedic surgery procedure might take 30 minutes, while the recovery process may extend up to six hours.

Review your assumptions carefully to make sure they are reasonable. Assuming shorter procedure times and a more rapid turnaround of suites than your staff can actually support may result in a center that has too few suites. Allowing too much time for procedures and turnaround could result in a center with too many suites. A professional planner can help you establishing realistic assumptions, based on your center’s unique staff and caseload.

Build what you can sustain, but design for expansion. A good feasibility study will identify current and future market needs. In a common scenario, a center needs four surgical suites now to support project patient volumes, but will need two additional suites within 10 years. The solution is a flexible design that allows investors to construct four suites now and add two more suites when the center’s caseload increases. This conservative strategy positions the center to accommodate more procedures in the future without saddling investors with an unsustainable debt load now.

A key element of a plan that supports future expansion is core support spaces — including office space, waiting areas, staff lounges and storage — sized to support the center after it expands. Support spaces, typically located in the building’s interior, are costly, difficult and disruptive areas to expand. Sizing these spaces to support a larger center from the beginning is a wise and cost-effective long-term investment.

The design should also ensure the center can continue to operate with minimal inconvenience to patients and physicians when expansion takes place, and that an adequate number of pre-operative and recovery beds will be available when the center expands. Some centers opt to construct the full number of suites they will ultimately place in service, but leave one or more suites as empty “shelled” spaces, to be completed and equipped when volumes justify.

Build well-equipped multi-purpose suites rather than specialty suites. Dedicating surgical suites to a single specialty is a bad idea for two reasons. Single-purpose suites aggravate the turf issues that inevitably arise. If other rooms are operating at capacity, the sight of a frequently empty orthopaedic or ophthalmology suite becomes a constant irritant. Specialty suites also reduce the center’s ability to maximize patient throughput. Oversizing at least one room to handle general as well as specialty cases allows more scheduling flexibility.

Some specialties can be well-supported by portable equipment. For those requiring fixed equipment, over-sizing the room to provide adequate space for other types of procedures allows the center to gain the most usage out of its most expensive space.

Determine the functions you must perform at the center, and those you can outsource without compromising quality or service. Many centers affiliated with hospitals can outsource a number of functions, including central sterile processing, biomedical engineering, billing, and business office services. Any service you can outsource cost effectively reduces your investment in construction, staff and equipment. That may enable a center’s investors to recoup their investment and become profitable more quickly.

When doctors affiliated with one medical center in Tennessee constructed an outpatient surgery center in a medical office building connected with the hospital, they negotiated an up-front agreement with the hospital, which handles their central sterile processing, and billing at competitive market rates. The contract reduced the size by the center by more than 1,000 square feet and enabled them to avoid a significant investment in sterile processing equipment. It was a good arrangement for both parties.

Outsourcing opportunities are also available to freestanding facilities. In some areas, centers can contract with outside services to provide sterile processing.

Design staging and recovery spaces to do double duty. Because recovery times can vary widely depending on the patient and the procedure, one effective strategy to reduce construction costs is to design the pre-operative staging, post-anesthesia recovery and stage two recovery areas to flow together. Centers typically need more staging beds in the morning and more recovery beds in the afternoon. Spaces that can start out as staging and then swing to accommodate recovery can reduce your construction investment while providing ample space throughout the day.

Don’t forget to plan for adequate parking. You’ve planned for the growth of your facility from four to six suites. Have you also provided adequate space for the additional parking needed to accommodate the doctors, staff and patients when those suites are added? If your plan fails to provide adequate parking for everyone, you lose one of the major advantages outpatient centers offer — patient convenience.

Dr. Kildare enlists the aid of Dr. John McIntyre, a well-respected senior surgeon in the Multispecialty Surgical Group, to present the results of the market study, and review the group’s programming assumptions. Even Dr. John Carter, a high-profile surgeon who initially insisted on a private suite with his name on the door, can’t argue with the practice’s plan to construct a center with four suites with the ability to add two suites within 10 years. Dr. Kildare’s next challenge: To tell partner Mark Craig that other partners have unanimously rejected the interior design plan proposed by his wife — pink shag carpeting, bright orange walls and mood lighting.