Brien Fausone, administrator of Michigan Endoscopy Center in Farmington Hills, shares four ways ASCs can cut costs and improve profits.
1. Renegotiate your real estate lease. According to Mr. Fausone, renegotiating a real estate lease in a down economy can produce significant savings. His ASC was three-quarters of the way through their 10-year lease, and property values in the surrounding area had plummeted. To determine a reasonable property value in his neighborhood, he called a local broker and asked for price comparisons on similar office space based on square footage. "I got a ton of data back, and I started looking at it and realized we could save 10-20 percent," he says.
Armed with that crucial information, he met with his landlord and and asked for 3,000 square feet of additional building space, as well as a lease renegotiation. "I said, 'I'm going to break my lease and move if you don't renegotiate a better lease,'" he says. "I got somebody's attention because we got another contiguous 3,000 feet that I needed to expand my waiting room, and then I renegotiated the square footage rate." Through presenting the landlord with appraisals of similar land — and threatening to move, thereby removing the landlord's biggest building tenant — Mr. Fausone was able to add 3,000 square feet and produce a lower overall rental rate.
2. Cut supply costs through occasional big changes and regular re-negotiations. In order to make sure your vendor is providing supplies at a competitive price, your ASC should re-negotiate supply costs annually. Mr. Fausone manages to lower supply prices on a yearly basis by collecting price information and then pitting vendors against each other. "I'll go to [a new vendor and] say, 'Here's my pricing. Can you beat it?' and they'll come back and say, 'We can beat it by this much,' and then you can use that information to present to your current vendor," he says. While this might not produce major price cuts — most companies will probably try to undercut each other only slightly to ensure they don't lose money — you can save 3-5 percent every year.
If your ASC is planning to change products entirely, you may have more leverage to negotiate a significant discount, Mr. Fausone says. Note that this can only be accomplished for significant changes, not every year like regular re-negotiations. "You're only going to do it once, and then the next year you're going to do the nickel-and-dime thing," he says. If your center is planning to change from one type of product to another, use that transition to get significant cost savings. Vendors will likely provide savings because you're providing them with valuable business.
3. Benchmark staff salaries. Many ASC administrators agree you should benchmark staff salaries for two reasons: one, to ensure you're not paying too much and two, to make sure your salaries are competitive enough to keep your staff in the ASC. "We try to benchmark with the local hospital in terms of staffing," Mr. Fausone says. "It's hard to get that kind of information, but when we do, [we use it]. All our nurses have come from the hospital setting and I don't want them going back the other way, so I have to keep it competitive."
He says benchmarking staff salaries to ensure competitiveness may not save money, but it will ensure you don't have to replace valuable staff members every few years if they decide the hospital is a more profitable employer.
4. Keep an eye on reimbursement and coding changes. Make sure your ASC is up-to-date on reimbursement changes that could benefit or hurt your facility. Mr. Fausone's ASC is currently preparing to adjust to the addition of the -PT modifier for free screenings, which will allow screenings that result in polyp removal to still be paid by Medicare. "People have screening benefits, and during their screening we find polyps and remove them," Mr. Fauson says. "Then they yell at me, saying, 'I came in for a screening and you coded it for polyps.' Once we take the polyps out, it changes the diagnosis because it's based on the discharge diagnosis, not the admitting diagnosis."
This confusion for patients often means collecting payment is more difficult. Fortunately for GI/endoscopy-driven centers, Medicare's addition of the -PT modifier means screenings that result in polyp removal will still be paid for. By keeping an eye on such changes, your center can make sure to explain changes to patients and prepare for increased or decreased reimbursement.
Read more on how to operate a financially profitable ASC:
-10 ASC Best Practices From 10 ASC Physicians
-4 Core Things ASCs Should Benchmark
-5 Steps Large ASCs Can Take to Reduce Costs, Improve Efficiency
1. Renegotiate your real estate lease. According to Mr. Fausone, renegotiating a real estate lease in a down economy can produce significant savings. His ASC was three-quarters of the way through their 10-year lease, and property values in the surrounding area had plummeted. To determine a reasonable property value in his neighborhood, he called a local broker and asked for price comparisons on similar office space based on square footage. "I got a ton of data back, and I started looking at it and realized we could save 10-20 percent," he says.
Armed with that crucial information, he met with his landlord and and asked for 3,000 square feet of additional building space, as well as a lease renegotiation. "I said, 'I'm going to break my lease and move if you don't renegotiate a better lease,'" he says. "I got somebody's attention because we got another contiguous 3,000 feet that I needed to expand my waiting room, and then I renegotiated the square footage rate." Through presenting the landlord with appraisals of similar land — and threatening to move, thereby removing the landlord's biggest building tenant — Mr. Fausone was able to add 3,000 square feet and produce a lower overall rental rate.
2. Cut supply costs through occasional big changes and regular re-negotiations. In order to make sure your vendor is providing supplies at a competitive price, your ASC should re-negotiate supply costs annually. Mr. Fausone manages to lower supply prices on a yearly basis by collecting price information and then pitting vendors against each other. "I'll go to [a new vendor and] say, 'Here's my pricing. Can you beat it?' and they'll come back and say, 'We can beat it by this much,' and then you can use that information to present to your current vendor," he says. While this might not produce major price cuts — most companies will probably try to undercut each other only slightly to ensure they don't lose money — you can save 3-5 percent every year.
If your ASC is planning to change products entirely, you may have more leverage to negotiate a significant discount, Mr. Fausone says. Note that this can only be accomplished for significant changes, not every year like regular re-negotiations. "You're only going to do it once, and then the next year you're going to do the nickel-and-dime thing," he says. If your center is planning to change from one type of product to another, use that transition to get significant cost savings. Vendors will likely provide savings because you're providing them with valuable business.
3. Benchmark staff salaries. Many ASC administrators agree you should benchmark staff salaries for two reasons: one, to ensure you're not paying too much and two, to make sure your salaries are competitive enough to keep your staff in the ASC. "We try to benchmark with the local hospital in terms of staffing," Mr. Fausone says. "It's hard to get that kind of information, but when we do, [we use it]. All our nurses have come from the hospital setting and I don't want them going back the other way, so I have to keep it competitive."
He says benchmarking staff salaries to ensure competitiveness may not save money, but it will ensure you don't have to replace valuable staff members every few years if they decide the hospital is a more profitable employer.
4. Keep an eye on reimbursement and coding changes. Make sure your ASC is up-to-date on reimbursement changes that could benefit or hurt your facility. Mr. Fausone's ASC is currently preparing to adjust to the addition of the -PT modifier for free screenings, which will allow screenings that result in polyp removal to still be paid by Medicare. "People have screening benefits, and during their screening we find polyps and remove them," Mr. Fauson says. "Then they yell at me, saying, 'I came in for a screening and you coded it for polyps.' Once we take the polyps out, it changes the diagnosis because it's based on the discharge diagnosis, not the admitting diagnosis."
This confusion for patients often means collecting payment is more difficult. Fortunately for GI/endoscopy-driven centers, Medicare's addition of the -PT modifier means screenings that result in polyp removal will still be paid for. By keeping an eye on such changes, your center can make sure to explain changes to patients and prepare for increased or decreased reimbursement.
Read more on how to operate a financially profitable ASC:
-10 ASC Best Practices From 10 ASC Physicians
-4 Core Things ASCs Should Benchmark
-5 Steps Large ASCs Can Take to Reduce Costs, Improve Efficiency