Q&A with Industry Experts

Q&A with Industry Experts

We asked the experts about some key issues a physician group may run into when designing, developing and constructing a new ASC or specialty hospital. Here’s what they had to say. 

What is the best way to determine how your state’s certificate of need (CON) laws will impact your ability to construct an ASC or surgical hospital? 

Most states have Web sites pertaining to their CON laws, so do your research upfront and get the facts. There are also numerous CON consultants and attorneys well-versed in this process — you will undoubtedly need one if you qualify under the state’s CON regulations. 
— Peggy Zampetti, 
RN, senior vice president of facility development, Titan Health Corporation 

Hire a CON consultant who has a successful track record in that state. Attend a CON hearing in your state to get a pulse on the CON board’s feelings toward specialty hospitals. You will learn a priceless lesson on how to structure your CON to stack your odds of getting an approval vote. Many times a CON can harbor high opposition to a specialty hospital coming in. Some CON panels are very hospital-protective, and others are more open minded to allowing the free market to run its course. 
— Sam W. Burnette, 
AIA, senior designer/ principal, Earl Swensson Associates 

Simply contact your state health department and ask them to help you. Describe your situation and most likely they will direct you to the appropriate person. Some states have personnel specializing in the CON process with others specializing in the facility requirement process; other states have personnel who process both. Therefore you may need to talk with several people to get the whole story. Each state’s CON process is specific so if you live in Illinois and have a friend who went through the process in New York, don’t expect your experiences to be similar. CON requirements aren’t secret and most state health departments are happy to help acquire the needed information. That being said, the CON process in many states is unfortunately very political and engaging an attorney with specific knowledge of your state’s situation could help you avoid some potential pitfalls. The CON process can take a lot of time, as well as money, so make sure you complete it correctly the first time. 
— John A. Marasco, 
AIA, NCARB, Marasco and Associates, Inc. 

What is your best advice on evaluating your financing options? 

Determining the best way to finance your ASC can be a tricky process. One key to making sure your center receives appropriate financing is to minimize lender concerns by thoroughly profiling your project up front. Your profile should include various key risk items, including the following: 

• Specialty mix: What type of cases will be performed at the center? Are you spreading your risk over more than one specialty? 
• The number of investor and non-investor physicians participating in the center: Lenders want to see a solid base of physician investors committed to the center’s long-term success. 
• Restrictive covenants (non-competes): Lenders want to see that the physicians are committed to performing their cases at your ASC vs. someone else’s. 
• Payer contracting: Are you considering an out of network strategy? This can be a risky approach since lenders know that you will see rate compression in the future. 
• Management team: How experienced is the management team? Have they successfully developed ASCs in the past? 
• Size: Lenders want to ensure that the facility has been sized properly. Be prepared to defend your size decisions and the center’s anticipated future capacity. 
  — Boyd Faust, CPA, chief financial officer, Titan Health Corporation 

Shop around. Don’t just rely on your local bank. I can virtually guarantee that with a little competition you can do much better than their initial offering. In addition to your local banks there are several national lenders that specialize in financing medical facilities as well as equipment. They understand the nuances of the business and can be quite competitive if given the chance. This certainly holds true for financing surgical hospitals, which can be tricky at best. Most local banks have no idea what to do with this type of business and may miss the target completely. This is not to say that your local bank can’t or won’t make you an excellent deal, in fact I have seen local banks beat national players time and time again. I am however recommending you present your deal to several local, as well as national, lenders and let them compete for your business. A little competition and negotiation will most likely net you a much better deal. 
— John A. Marasco, 
AIA, NCARB, Marasco and Associates, Inc. 

What is your best advice on evaluating your real estate options? 

There are benefits and drawbacks to both renting and owning. Owning provides investment opportunities and future capitalization possibilities, while renting is easier to capitalize at the start of a project. Carefully analyze your options before deciding which is right for your center. 

Wait to determine the size of your ASC until you’ve performed the necessary analyses to determine your center’s case volume, specialty mix, and number of physicians. Base the facility size on provable future case load. Carefully consider location. It’s important that your center be easy for both your patients and surgeons to access. If your surgeons find the center’s location inconvenient, then they won’t perform their cases there, and that will ultimately affect the center’s volume and revenue. 
— David Thoene, 
vice president of business development, Titan Health Corporation 

Compare and then choose. Clients always ask me, ‘Should we own or rent?’ ‘Should we build new or use an existing building?’ ‘Should we work with a developer or develop the project ourselves?’ The answer to all of these questions is, ‘maybe.’ The reality is that there are many different options and parameters placed on every project. You will be spending or signing on the line for a substantial amount of money and should take the time to explore your options upfront. We typically prepare financial outcome studies on six to 10 different options well before the project actually starts the design process. This allows our clients to have all the information needed to make educated decisions that will best fit their needs before the project starts spending big money. There is no one direction that fits all projects, so find the direction that fits yours. 
— John A. Marasco, 
AIA, NCARB, Marasco and Associates, Inc. 

What are your five best pieces of advice on capital equipment planning, evaluation, and purchasing? 

1. Interview more than one equipment planning consultant during the design phase of the project. 

2. Retain an equipment-planning consultant during the design phase of the project. 

3. Instruct the equipment planning consultant to research reconditioned item options for all major equipment items (sterilizers, OR lights, etc.) for cost comparison to new item options. 

4. Provide actual cut sheets (including spatial requirements, electrical/ mechanical/plumbing system requirements, etc.) of all equipment items to the A/E (architectural/engineering) team during the design phase of the project. 

5. Instruct the A/E team to indicate in the design documents (i.e. drawings and specifications) that the general contractor is to be responsible for coordinating the installation of all equipment. 
— William R. Massingill, 
AIA, NCARB, chief executive officer, Polkinghorn Group Architects, Inc. 

1. Do your homework on demographics and available market share. Do your homework on physician volumes and capacity. Do they want to work aggressively five days a week or do they just want ownership and will practice there one day a week? Look at your overall funding. 

2. Look at your hours of operation. Will longer or multiple shifts be involved to maximize the use of your facility? As much as an owner would like to work the softer hours of 7 a.m. to 1 p.m., three days a week, for example, you might have to run the facility five days a week and half a day on Saturdays to make it profitable the first couple of years to meet the projected payback period. 

3. Don’t close your vendor options. To get competitive pricing, keep your vender options open. If you allow yourself to become captive to one of the major equipment suppliers too early, you’ve lost your leverage on the best pricing. 

4. Look at systems or software upgrades and service contracts carefully. These can be as important as the first costs. Where are the service/ repair technicians located? What is the response time to service calls? 

5. Look at technology changes, and don’t assume the status quo processes and equipment will be current in two to three years. For example, recent trends with high speed CT scans, MIS (minimally invasive surgeries) vs. conventional surgeries, etc. Also, we’re seeing a lot of very forward thinking consolidation of imaging being combined in a surgical arena. 
— Sam W. Burnette, 
AIA, senior designer/principal, Earl Swensson Associates 

What is your best advice on how to conduct proper space determination and planning to avoid over-building or under-building an ASC or surgical hospital? 

Due diligence is always a key term. This entails getting a thorough handle on your market through strategic planning, which includes good demographics of the type of volumes and trends in the industry and population growth you can anticipate from a business standpoint coming to your facility. 

You have to be very aware with what your competition has and what your competition may be doing in tandem with your planning efforts. I have seen this go awry in housing and in retail when a lot of speculative development is taking place and the new developers either aren’t aware or are not taking seriously what their counterparts are doing in the same region. 

Use careful strategic planning and utilization studies to get the most mileage out of each OR (operating room) or procedure room (PR) that will be in the new facility. Anticipated volume. Be able to flex up and down between peak days or peak periods of procedures. This is based on the average length of procedures and the turnaround time for that room, which will translate into the number of rooms needed to accommodate the projected number of annual procedures. 
— Sam W. Burnette, 
AIA, senior designer/principal, Earl Swensson Associates 

Always base your center’s space determination on your proforma. Knowing your budget, caseload, and specialties will help you avoid the pitfalls of over- and under-building. Design for efficient use of space. Don’t overbuild or you’ll live with it for the life of the lease. Size matters so plan carefully on the front end. 
— Peggy Zampetti, 
RN, senior vice president of facility development, Titan Health Corporation 

From its experience on previous projects, the A/E team should present to the client some recommendations for appropriate room sizes for particular spaces (ORs, PRs or treatment rooms, pre-op or recovery spaces, waiting rooms, etc.) as a preliminary part of the design phase of the project, then should listen carefully to the client’s needs and adjust any of those ‘starting point’ spatial assumptions accordingly. In outpatient-oriented or surgery-oriented facilities in particular, codeminimum spatial requirements often aren’t adequate from an operational standpoint. For instance, multi-specialty ORs often need to be larger than the code minimum square footage requirements, and recovery bed quantities often need to be higher than code minimum requirements in order to handle shorter per case OR usage times. 
— William R. Massingill, 
AIA, NCARB, chief executive officer, Polkinghorn Group Architects, Inc. 

Keep in mind that although real estate development represents a large total dollar amount, by the time you amortize those costs over 20 to 30 years, it actually represents only 10 percent to 15 percent of your total annual operational overhead costs. Annual staffing and supply costs well outpace annual real estate development costs. Therefore, don’t make the mistake of trimming real estate overhead costs at the expense of operational efficiency. If your facility is too small to make your staff optimally efficient, you may actually be increasing overhead costs when compared to an optimally designed facility. In other words, too little space can actually be a detriment on your profitability than too much space. The key is to have an experienced (experience is someone who has designed 100+ not 10+ ASCs and/or surgical hospitals) architect develop a space program based on the intended use (accommodating 1,000 orthopedic cases is very different than 1,000 ophthalmic cases) of the ASC. 
— John A. Marasco, 
AIA, NCARB, Marasco and Associates, Inc. 

What is your best advice on design aesthetics/decorating for an outpatient facility? 

What we like to do is design for an upscale look that doesn’t compromise the maintenance and cleanability of a facility — both inside and out. Put an emphasis on natural light and warmer lighting choices than the traditional fluorescent lighting. We want the facility to be marketable, but appropriately budgeted to meet the owner’s desired payback. 
— Sam W. Burnette, 
AIA, senior designer/principal, Earl Swensson Associates 

Many patients connect the cost of their procedure to how nice the facility looks. All of us in the industry know there is absolutely no correlation between cost and facility aesthetics, but we have to deal with the patient’s perception. The reality is that many patients look down on a facility that is ‘too nice’ assuming they are paying more for being there. Keep in mind the level of acceptable aesthetic changes depending on where you are. For example, a facility in Manhattan, Kansas should not have as high an aesthetic feel as a like facility in Manhattan, New York — same name, very different demographics. We recommend to our clients they build a facility that looks professional, clean, and friendly but is somewhere between their patients’ living rooms and their surgeons’ living rooms — aesthetically speaking that is. 
— John A. Marasco, 
AIA, NCARB, Marasco and Associates, Inc. 

Similar to the selection process for the A/E team, the interior designer for an ASC-type project should be experienced in the healthcare arena while also having experience in other types of medical and commercial (and even hospitality or high-end residential) projects. Since outpatient facilities are often developed to be different from large scale acute care hospital environments from a patient experience standpoint, then the interior design of such a project should be in tune with patient and visitor experiences from a non-institutional perspective while at the same time being code-compliant in terms of product selection, and durable from a long term daily use standpoint. In order to insure that the interior design of a project is fully coordinated with the architectural design of that project, the interior designer should be retained as a part of the A/E team instead of as an independent consultant. 
— William R. Massingill, 
AIA, NCARB, chief executive officer, Polkinghorn Group Architects, Inc.

What is your best advice for the specific needs in designing by specialty? 

You need to look at each physician specialty and their specific sub-specialty — not just their general specialty. Although both are orthopedic surgeons, a hand surgeon and a total joint surgeon have very different ASC and surgical hospital needs. Therefore, it is imperative you look at each surgeon’s sub-specialty not just their general specialty. Once we have defined the sub-specialties that will be included in the ASC, we can look specifically at their individual space needs. We do this by completing a detailed timeline of the projected preparation, surgery, turnover and recovery (PACU, Phase II, and extended stay) of a typical patient. This, along with the projected volumes for each sub-specialty, allows us to determine exactly how many preparation stations, ORs, PACU recovery stations, Phase II recovery stations, and patient rooms will be needed to handle the intended volume plus a predetermined growth percentage. Once we have this core information, we then define the necessary ancillary support space based on our experience. Keep in mind that any space determination program must also meet your state health department’s requirements for certification and licensure, and ultimately you may have to include required spaces, even though the need is not present. 
— John A. Marasco, 
AIA, NCARB, Marasco and Associates, Inc. 

During the design phase of a project, the A/E team should request that the client identify some nurse-level folks familiar with the practices of — and particular needs of — the physicians who’ll be occupying the project. Nurse-level input during the design phase will help the A/E team insure that the particulars of a facility (medical gas locations, nurse oriented OR layouts, proximity of bedside provisions in pre-op and recovery to nurse station, etc.) allow for efficient daily operations.
— William R. Massingill, 
AIA, NCARB, chief executive officer, Polkinghorn Group Architects, Inc. 

Surround yourself with industry experts and physician and nursing champions. Industry experts: architects and design team, equipment planning consultant, an IT and technology systems consultant, and hopefully experts in construction management (pre-construction services). You want people on the team who share a goal in the success of this facility, and can bring into the equation what is necessary for good functional planning — that’s not just empire building for their particular environment. A champion will understand the cost and the reality. 
— Sam W. Burnette, 
AIA, senior designer/principal, Earl Swensson Associates