While ASCs have cemented their place in the healthcare continuum, closures are an inevitable part of any business cycle even surgery centers are not immune to experiencing. Yet, until a center turns the lock on its door for the final time, most centers can be turned around.
Here, Westchester, Ill.-based Regent Surgical Health CEO Chris Bishop discussed four warning signs that a surgery center could be headed for closure and addressed how to solve them:
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1. Declining surgical case volume. "Surgical case volumes are the lifeblood of a surgery center. If there are no cases, there's nothing to manage." Mr. Bishop said. "Declining case volume is the first characteristic that a center is headed toward negative performance."
Center administrators should be alarmed when a surgeon is canceling block times, decreasing their existing block times or leaving portions of their block time open, Mr. Bishop said. While declining volumes put centers in an undesirable position, the immediate effects can be dealt with handily.
"You will find as case volumes decline, we require our centers to also appropriately scale their labor? The worst thing you can do is finish cases at 10:30 a.m. but have staff sitting around until 5 p.m.," Mr. Bishop said. "Prudent staff management is essential while rebuilding your case volumes.
For example, Regent has a surgery center in Alaska where caseloads drop drastically during hunting / fishing season. To accommodate the surgeons and the lack of volume, the center employs Lean Principles and compresses the schedule to close 1-2 days per week until those outdoor seasons end and the surgeons return to full time patient care.
2. Declining cash-collection trends. Centers need to closely monitor their collections trends. If a center averaging between $400,000 and $600,000 a month for several years drops to $300,000 a month, an administrator must delve into the rationale behind that, Mr. Bishop said.
"You could have a scenario whereby your case volume is consistent but average collections are down, leading you to explore a possible revenue cycle issue," Mr. Bishop said. Administrators should explore key areas like:
- Is case volume declining?
- Could there be a revenue cycle issue?
- Did you have a change in business office personnel?
- Did you outsource to a new revenue cycle company or should you?
3. Using a vendor as a short-term lender. Through its turnaround work, Regent has seen a lot of centers rely on their vendors as short-term lenders in the event of a bailout. "While vendors are great partners to surgery centers … it's a bad short-term solution because centers will find themselves $600,000, $800,000 in debt and then the vendors stop shipping because they're past due," Mr. Bishop said. Mr. Bishop urged administrators to keep a keen eye on accounts payable, using a two-year trend cycle, to ensure there are no deviations or abnormalities.
4. Putting off required maintenance and upkeep. ASCs that are failing are more likely to push off maintenance and upkeep-related projects instead of tackling them as they occur.
"There's constant maintenance required, and maintenance requires capital investment," Mr. Bishop said. "What happens at a financially strained surgery center that might be headed toward a closure, is they end up deferring all those noncritical maintenance requirements. [For example], a center has a stain on the ceiling tile, but there's not water rushing into the waiting area. [While] it's not dangerous yet, if [administrators] continue to ignore it, eventually it will become a serious issue."
Putting off maintenance isn't good for patient care or physician satisfaction, and it's necessary for centers to remain accredited and safe for patient care.
The right side of history
ASCs are becoming quintessential cogs in the healthcare machine. From payers requiring low-acuity procedures to take place in outpatient settings, to advanced technology and training allowing more complex procedures to migrate from inpatient settings, ASCs are "on the right side of the cost and quality equation," Mr. Bishop said.
"We're the low cost, high quality location for outpatient surgery, therefore you need to pay particular attention to how do we help our struggling surgery center brethren survive and really identify trends that maybe if they catch them early, they can reverse," Mr. Bishop said.
Centers can fix budding issues by partnering with ASC management firms. Firms, like Regent Surgical Health and others, invest in a struggling center with a swat team of business experts that can help with ASC turnarounds.
"Often times, you find these standalone surgery centers don't have the people resources to help them dig out of it," Mr. Bishop said. "So what's the prescription for a center that's not performing well? It's reaching out to ASC management companies that can bring those people & capital resources to aid a center in reaching its fullest potential. Working in this industry for 20+ years, I feel a calling to ensure our industry thrives, one ASC at a time."