Seven months later, the ASC is on the upswing and very profitable, the vendors are paid and current, the loan was re-financed and the center will pay dividends in Spring 2009.
How did the facility achieve such a drastic turnaround?
According to all involved, it was truly a team effort. Management, physicians and staff worked together to make the necessary changes to make the center successful. Below is the story of the Surgical Center for Excellence and how it was turned from a struggling facility into a profitable one.
Numerous challenges from the start
The Surgical Center for Excellence started off as the idea of three ENT physicians who were looking to offer better quality of care and see more patients in their area. The ASC opened after difficulties with state regulatory issues, but there was no opportunity to recruit new physicians outside of the ones already working at the center or to bring in more cases.
In Aug. 2008, Woodrum/ASD performed an analysis of the surgery center and identified 30 areas in need of improvement to fix the center. With this list, the ASC and Woodrum/ASD identified the most critical problem areas and prioritized fixing those first, says Daniel Daube, MD, FACS, a physician at the Surgical Center for Excellence. In addition, Mr. Zasa says an important step was defining a structure and a chain of command so that everyone at the center could understand how they were going to run “the offense.” With the plan and leadership structure in place, the management and physician team could install the “offense” and follow a plan for the ASC’s turnaround.
The five main areas that had the biggest effect on the ASC’s operations and turnaround were the following:
- improved business office systems (billing, coding and collection procedures);
- implementation of a new fee schedule;
- renegotiation of managed care contracts;
- retraining staff and addressing operating room turnover time; and
- developing staff incentives and bonuses.
- After addressing problems in these areas, the center saw drastic improvement. These changes set the stage for the ability of the center to recruit new physicians and gain physician confidence.
Areas of improvement
Here are some of the major changes the ASC underwent in these areas that helped to make this a successful turnaround.
1. Accounting (payors, contracts, etc.). As is the case with many struggling centers, the business office at the Surgical Center for Excellence was not running at maximum efficiency, according to Mr. Zasa. To overcome this challenge, Woodrum/ASD made these four significant changes:
- New policies and procedures for collection. The ASC instituted pre-op collection procedures, which encouraged patients to pay their balance before the procedure was performed.
- Integration of managed care contracts into the management information system. By putting their managed care contracts into the system, the ASC determined its receivables and work the aged A/R properly.
- Collections based on aging. By followingup on old accounts and denied claims from the insurance companies, the ASC brought in more revenue.
- Accrual accounting. The facility started using a monthly accrual accounting system with a professional healthcare accounting firm. By using this system, staff members were able to keep better track of A/R and match their revenues.
Dr. Daube admits that the ASC had entered into some “horrible” contracts with payors. “Most doctors don’t know contracts,” he says, which is why it was critical for this ASC to use the services of an outside company that was able to negotiate new contracts and renegotiate old ones was profitable.
Having a business staff who understood specific areas of business was also beneficial, according to Dr. Daube. “Some [centers] have managers who do it all,” he says. “Having one person head up each area was helpful to us.”
Bart Walker, JD, an attorney with McGuire- Woods, worked with the ASC prior to and during its turnaround. He says that the ASC’s success was due to “good fundamental business advice.” Mr. Walker says that Dr. Daube should be credited for his tenacity in keeping the facility up and running. “[Mr. Zasa] took it that extra mile, and I think that [the turnaround] is tremendous,” he says.
2. Recruiting and case mix. One of the areas Dr. Daube says the ASC struggled with was recruiting new surgeons. The physicians had tried to recruit on their own, but efforts were not successful. “It was better to release control [of recruiting] to an objective group,” he says.
With the new management system in place and showing results, Mr. Zasa says that his group focused on the local community rather than surrounding areas. From there, they made two very subtle, bufour significant changes:
- Limited specialties. As this is a small ASC, they chose specialties that would do best in this type of environment: orthopedics, pain management, ENT, general surgery and endoscopy. By concentrating on five areas and doing these five areas well, the ASC was able to become more efficient and bring in just those specific types of cases, allowing the ASC to excel in its space.
- Boutique atmosphere. To become an appealing alternative to the larger hospitals, the ASC redeveloped itself and created a boutique atmosphere, creating a high-end, exclusive feel to the ASC. Rather than recruiting a large group of physician-investors due to the limited size, the facility has a select group of 8-10 investors who carry the surgery center and can focus on its needs. This boutique approach results in more personalized service to the physician, the patient and their families.
By taking this approach, the Surgical Center for Excellence was able to increase its caseload by 25-30 percent. Additionally, bringing in cases that are profitable from a reimbursement standpoint is important in improving revenue. Michael Gilmore, MD, an orthopedic surgeon at the center, said that once these improvements were made, physicians felt better about bringing their cases to the center.
3. Physician confidence. As a result of all of the hard work improving accounting and recruiting cases, the physicians at the Surgical Center for Excellence regained confidence in their facility and its operations. Mr. Zasa notes that getting physicians on-board with the new plan was essential in making it work as they are essential in running the ASC.
Dr. Daube says, “[Mr. Zasa] was excited [about the project], so that got me excited.” Once excite- Case Study: Successful Joint-Venture Turnaround By Renée Tomcanin 28 visit www.beckersasc.comment grew, the proposed changes were adapted with the backing of everyone on staff, making for a smooth transition from old policies to new ones.
The physicians began to see positive results as a result of the new systems and policies in place. Dr Gilmore credits the team atmosphere to the success, noting that “a surgical center is more than just cases.” He mentions the importance of having the business, financial, management and clinical sides of the business working together. “If one person does well, the others will want to do well,” he says. “No one person wants to be the weak link.”
In addition, Mr. Zasa notes that there was an alignment of incentives among the physicians, staff, anesthesiologists and management.
Results
Within five months, the ASC was in the black and generating strong returns. According to Mr. Zasa, the facility was able to consolidate its loans, clean up its payables and make all bills current, and now it is stabilized and able to pay dividends going forward.
“I knew this center could be a winner, but its success amazes me and my staff,” says Mr. Zasa.”It is such a pleasure working with this group and having it succeed together as a team.”
In addition, Dr. Gilmore feels that the surgery center will continue to maintain its standards of patient care and expertise. He says that physicians are attempting to “be as efficient as they can be with the [new] framework” and trying to “keep the volume high and the overhead low and under control.”
Dr. Daube has some advice for ASCs who find themselves in a similar situation as the one faced by the Surgical Center for Excellence. “My biggest mistake was not finding a corporate partner sooner,” he says. He also notes that today it can be hard to run a center “on your own.”
Dr. Daube also warns against complacency once a center is improving. He warns ASCs not to let go of good management even when things are running smoothly. “Don’t take that step,” he says, noting that it is very easy for operations to fall back into old habits if a center tries to handle too much on its own. “
It’s not an investment in the business,” Mr. Walker says. “It’s an investment in the key physicians and owners and their commitment and vision. You can’t teach that.”
Contact Renée Tomcanin at renee@beckersasc.com.