Ambulatory surgery centers must constantly battle against economic tides, coupled with lower reimbursement rates and more competition from hospitals recruiting surgeons. Despite the introduction of significant financial obstacles to the industry, however, surgery centers can remain profitable. Two professionals in the field — Blayne Rush, MHP, MBA, and Sandy Berreth, RN, MS, CASC — offer their advice for staying above water fiscally.
Mr. Rush is the president of Ambulatory Alliances, a investment banking firm based in Dallas that focuses on surgery center brokerage and physician recruitment. Ms. Berreth is the administrator of Brainerd Lakes Surgery Center in Baxter, Minn., a multispecialty ASC that performs general surgery, gynecology, orthopedics, ophthalmology, facial plastics, ENT, urology, podiatry and pain management, and she's a surveyor for AAAHC.
"All administrators must have the bottom line as a primary concern. As tough choices may need to be made, it is important to use all resources available — physician partners, medical directors and staff. No one should make these decisions alone," Ms. Berreth says.
Here are 10 tips for staying profitable in tough economic times.
1. Break costs down to the pennies. The path to becoming and staying profitable starts with a mindset change, Mr. Rush says. Many surgery center officials do not realize they should be counting the smallest costs, since seemingly insignificant savings add up quickly. He recommends going through every cost and every dollar spent to figure out where profits can be extracted.
"It's not just big-ticket items," Mr. Rush says. "Pennies add up to dollars and add up to thousands of dollars over time. People don't break it down to the ridiculous, all the way down to the pennies. You add that over time and you find 10 of those and you end up saving $20,000 a year."
For example, many supply costs can be trimmed if the surgery center purchases less expensive versions of supplies. Even physicians who are accustomed to using a specific supply type or brand are usually happy to switch to a more cost-effective alternative if shown the exact cost savings of making the change.
"In the world of ambulatory surgery, pennies saved can change your cash flow amounts," Ms. Berreth said. "Look for them in everyday situations. Find the pennies.”
2. Provide additional training for administrators. Many surgery center administrators have strong clinical skills and a strong understanding of physician relationships but lack strong financial skills, Mr. Rush says.
If this is the case, do whatever it takes to help the administrator pursue supplemental training. Often, another center employee will have a strong financial background and can help the administrator analyze the center's financials and identify opportunities for cost savings.
At one of Mr. Rush's centers, a physician's office manager was tasked with managing finances. The surgery center "bought" the office manager's time; they paid him for one day each week to come in and be the expense czar.
"You look at the talent you have surrounding you," he says. "Find someone that has what you don't have and figure out how you can get that person to come work with you. You don't need much time, and they are the expert."
3. Re-negotiate all contracts. Until proven otherwise, all contracts should be considered negotiable, Mr. Rush says. Don't wait for contracts to expire first. If you have a vendor contract set to expire in 18 months, you can already begin talks to try and establish better rates.
"You can still [often] re-negotiate with third-party payors and that needs to start right now," he says. If a center works with vendors with quicker payment terms, negotiate to shorten the time frame so you are not stuck paying out before you receive payment from the third-party payor.
He also encourages ASC executives to think outside of payor and vendor contracts. For instance, some utility companies are open to negotiating better electricity rates for reducing energy usage. There are also demand response companies that pay you to better manage your usage or use a generator every once in a while if the grid is too high.
Phone contracts can also be renegotiated, even if the original contract is ongoing. "People think, 'I negotiated it five years ago' and don't think of it again," Mr. Rush says. "You need to be looking at all of that. What can you negotiate?"
4. Do not let clinical staff perform non-clinical duties. Many smaller surgery centers get into the habit of allowing registered nurses to perform clerical duties to fill time during the day and to put off hiring other administrative employees. However, this actually costs centers significant money, Ms. Berreth says.
"Let's say a RN is hanging around, done with surgeries for the day," she says. "Instead of going home — and because data needs to be entered into the software system — often the RN will do the data entry to maximize her time at work. However, I'm now paying a nurse at $38 an hour when the task should be completed by a non-clinical person for $12 to $17. The RN needs to go home, and the non-clinical person needs to complete the task."
The problem continues when volume expands and the center has to hire a non-clinical employee anyway, yet nurses and other clinical staff still perform non-clinical duties.
"You have to put a stop to that," Ms. Berreth advises.
5. Document medications carefully. Throwing out expired medications wastes money and can contribute to the ever-growing prescription drug shortage. Mr. Rush suggests surgery centers create prescription drug programs to monitor use and keep track of the current inventory so the center can order just enough to meet the facility's needs.
"Some things you can't do that with, but there's a lot you can do that with," he says. "If you manage your schedule and know what cases are coming up, you can manage supplies better than have that stuff expire."
6. Condense the schedule. Administrators can almost always find additional space for more surgical cases by shifting around the schedule, Mr. Rush says. Surgery center administrators should also get creative with scheduling to save as much money as possible.
For instance, Mr. Rush worked with an ASC that often had gaps in afternoons with no cases scheduled. By reorganizing cases, the administrator found the center could be closed down every Thursday.
"It wasn't that hard to close one day a week," he says. "No one was really upset about it, and it saves a few thousand dollars. A financially-savvy or cost-conscious administrator should be looking at that kind of stuff. It doesn't always dawn on them that that's an option."
7. Ask surgeons how your ASC can improve. Physicians and surgeons have some of the best input for improving a surgery center and saving money, but often these individuals are not consulted.
"Early on, you should go in and visit with surgeons," Mr. Rush says. "Ask them what you can do differently that will allow them to bring more cases or feel more comfortable bringing more cases? They will tell you a lot."
Listen to what surgeons have to say and implement changes based on their suggestions. A physician may be taking cases elsewhere because of small issue that has never been discussed. Making physicians more comfortable will increase your case load and thus your revenue stream.
8. Cater to surgeons' desires. To be profitable as an ASC, administrators must keep physicians satisfied so they will continue to bring cases to the facility. Ms. Berreth has three types of customers, she says. Her most important customers are the physicians, then her surgery center staff members and then the patients.
"If I take care of the first customer, the surgeon, they will bring patients," she says. "If I take care of the second customer, the staff, they will give great care. The third customer, the patient, already has the physician they want; and it is my job to keep the physicians and staff doing great things and then the patients will say great things about the surgery center."
Ms. Berreth says her experience has also shown her that physicians will be happiest and most loyal to a surgery center if they are given three particular perks — extra time, a quality staff and great food.
"If you can, give your surgeons back an hour of time each day," she says. "It may end up being time they use to do clinical records, but it's time they don't have if they practice in a hospital operating room."
Keeping the surgery center staff at their most efficient and productive helps surgeons work better, and stocking the break room with good food can provide a perk that larger organizations often overlook.
9. Find other revenue streams. It may not always seem obvious that surgery centers can make money in ways other than performing surgical procedures, but Mr. Rush says he works with many centers who have found ways to supplement revenue.
For instance, pain chain centers have to frequently send out urine for analysis. "Why not create a lab and be part of that?" he says.
If a surgery center is struggling financially but as extra space, they could consider adding gastroenterology as a specialty. "Go out and recruit three GI docs," he says. "They will buy the equipment and lease it back to the surgery center. They get the equipment they want, the center caters to them and everyone is happy."
10. Implement a direct-to-patient marketing program. Mr. Rush sees direct-to-patient marketing as the future of creating sustainable ASC profits. Surgery centers that find their own patients can boost profits without waiting on referrals. But often centers think they can't afford to add a marketing budget. An easy solution can be to partner up with a close but non-competing surgery center.
"Say there are multiple, independent surgery centers in a certain geography that don't necessarily serve the same exact markets and are close, but far enough away they don’t have a lot of the same patients," he says. "Partner with some of these surgery centers to create a direct-to-patient marketing program."
Several centers combining can form a new entity for branding and then publicize the joint venture. While some competition will exist, it will be much friendlier than trying to partner with a surgery center that serves the same patient base.
More Articles on Improving Profits:
10 Good Ideas to Grow Single-Specialty Surgery Center Case Volume
5 Tips to Maintain Success at Surgery Centers
10 Steps to Modernize Surgery Centers With Interior Design
Mr. Rush is the president of Ambulatory Alliances, a investment banking firm based in Dallas that focuses on surgery center brokerage and physician recruitment. Ms. Berreth is the administrator of Brainerd Lakes Surgery Center in Baxter, Minn., a multispecialty ASC that performs general surgery, gynecology, orthopedics, ophthalmology, facial plastics, ENT, urology, podiatry and pain management, and she's a surveyor for AAAHC.
"All administrators must have the bottom line as a primary concern. As tough choices may need to be made, it is important to use all resources available — physician partners, medical directors and staff. No one should make these decisions alone," Ms. Berreth says.
Here are 10 tips for staying profitable in tough economic times.
1. Break costs down to the pennies. The path to becoming and staying profitable starts with a mindset change, Mr. Rush says. Many surgery center officials do not realize they should be counting the smallest costs, since seemingly insignificant savings add up quickly. He recommends going through every cost and every dollar spent to figure out where profits can be extracted.
"It's not just big-ticket items," Mr. Rush says. "Pennies add up to dollars and add up to thousands of dollars over time. People don't break it down to the ridiculous, all the way down to the pennies. You add that over time and you find 10 of those and you end up saving $20,000 a year."
For example, many supply costs can be trimmed if the surgery center purchases less expensive versions of supplies. Even physicians who are accustomed to using a specific supply type or brand are usually happy to switch to a more cost-effective alternative if shown the exact cost savings of making the change.
"In the world of ambulatory surgery, pennies saved can change your cash flow amounts," Ms. Berreth said. "Look for them in everyday situations. Find the pennies.”
2. Provide additional training for administrators. Many surgery center administrators have strong clinical skills and a strong understanding of physician relationships but lack strong financial skills, Mr. Rush says.
If this is the case, do whatever it takes to help the administrator pursue supplemental training. Often, another center employee will have a strong financial background and can help the administrator analyze the center's financials and identify opportunities for cost savings.
At one of Mr. Rush's centers, a physician's office manager was tasked with managing finances. The surgery center "bought" the office manager's time; they paid him for one day each week to come in and be the expense czar.
"You look at the talent you have surrounding you," he says. "Find someone that has what you don't have and figure out how you can get that person to come work with you. You don't need much time, and they are the expert."
3. Re-negotiate all contracts. Until proven otherwise, all contracts should be considered negotiable, Mr. Rush says. Don't wait for contracts to expire first. If you have a vendor contract set to expire in 18 months, you can already begin talks to try and establish better rates.
"You can still [often] re-negotiate with third-party payors and that needs to start right now," he says. If a center works with vendors with quicker payment terms, negotiate to shorten the time frame so you are not stuck paying out before you receive payment from the third-party payor.
He also encourages ASC executives to think outside of payor and vendor contracts. For instance, some utility companies are open to negotiating better electricity rates for reducing energy usage. There are also demand response companies that pay you to better manage your usage or use a generator every once in a while if the grid is too high.
Phone contracts can also be renegotiated, even if the original contract is ongoing. "People think, 'I negotiated it five years ago' and don't think of it again," Mr. Rush says. "You need to be looking at all of that. What can you negotiate?"
4. Do not let clinical staff perform non-clinical duties. Many smaller surgery centers get into the habit of allowing registered nurses to perform clerical duties to fill time during the day and to put off hiring other administrative employees. However, this actually costs centers significant money, Ms. Berreth says.
"Let's say a RN is hanging around, done with surgeries for the day," she says. "Instead of going home — and because data needs to be entered into the software system — often the RN will do the data entry to maximize her time at work. However, I'm now paying a nurse at $38 an hour when the task should be completed by a non-clinical person for $12 to $17. The RN needs to go home, and the non-clinical person needs to complete the task."
The problem continues when volume expands and the center has to hire a non-clinical employee anyway, yet nurses and other clinical staff still perform non-clinical duties.
"You have to put a stop to that," Ms. Berreth advises.
5. Document medications carefully. Throwing out expired medications wastes money and can contribute to the ever-growing prescription drug shortage. Mr. Rush suggests surgery centers create prescription drug programs to monitor use and keep track of the current inventory so the center can order just enough to meet the facility's needs.
"Some things you can't do that with, but there's a lot you can do that with," he says. "If you manage your schedule and know what cases are coming up, you can manage supplies better than have that stuff expire."
6. Condense the schedule. Administrators can almost always find additional space for more surgical cases by shifting around the schedule, Mr. Rush says. Surgery center administrators should also get creative with scheduling to save as much money as possible.
For instance, Mr. Rush worked with an ASC that often had gaps in afternoons with no cases scheduled. By reorganizing cases, the administrator found the center could be closed down every Thursday.
"It wasn't that hard to close one day a week," he says. "No one was really upset about it, and it saves a few thousand dollars. A financially-savvy or cost-conscious administrator should be looking at that kind of stuff. It doesn't always dawn on them that that's an option."
7. Ask surgeons how your ASC can improve. Physicians and surgeons have some of the best input for improving a surgery center and saving money, but often these individuals are not consulted.
"Early on, you should go in and visit with surgeons," Mr. Rush says. "Ask them what you can do differently that will allow them to bring more cases or feel more comfortable bringing more cases? They will tell you a lot."
Listen to what surgeons have to say and implement changes based on their suggestions. A physician may be taking cases elsewhere because of small issue that has never been discussed. Making physicians more comfortable will increase your case load and thus your revenue stream.
8. Cater to surgeons' desires. To be profitable as an ASC, administrators must keep physicians satisfied so they will continue to bring cases to the facility. Ms. Berreth has three types of customers, she says. Her most important customers are the physicians, then her surgery center staff members and then the patients.
"If I take care of the first customer, the surgeon, they will bring patients," she says. "If I take care of the second customer, the staff, they will give great care. The third customer, the patient, already has the physician they want; and it is my job to keep the physicians and staff doing great things and then the patients will say great things about the surgery center."
Ms. Berreth says her experience has also shown her that physicians will be happiest and most loyal to a surgery center if they are given three particular perks — extra time, a quality staff and great food.
"If you can, give your surgeons back an hour of time each day," she says. "It may end up being time they use to do clinical records, but it's time they don't have if they practice in a hospital operating room."
Keeping the surgery center staff at their most efficient and productive helps surgeons work better, and stocking the break room with good food can provide a perk that larger organizations often overlook.
9. Find other revenue streams. It may not always seem obvious that surgery centers can make money in ways other than performing surgical procedures, but Mr. Rush says he works with many centers who have found ways to supplement revenue.
For instance, pain chain centers have to frequently send out urine for analysis. "Why not create a lab and be part of that?" he says.
If a surgery center is struggling financially but as extra space, they could consider adding gastroenterology as a specialty. "Go out and recruit three GI docs," he says. "They will buy the equipment and lease it back to the surgery center. They get the equipment they want, the center caters to them and everyone is happy."
10. Implement a direct-to-patient marketing program. Mr. Rush sees direct-to-patient marketing as the future of creating sustainable ASC profits. Surgery centers that find their own patients can boost profits without waiting on referrals. But often centers think they can't afford to add a marketing budget. An easy solution can be to partner up with a close but non-competing surgery center.
"Say there are multiple, independent surgery centers in a certain geography that don't necessarily serve the same exact markets and are close, but far enough away they don’t have a lot of the same patients," he says. "Partner with some of these surgery centers to create a direct-to-patient marketing program."
Several centers combining can form a new entity for branding and then publicize the joint venture. While some competition will exist, it will be much friendlier than trying to partner with a surgery center that serves the same patient base.
More Articles on Improving Profits:
10 Good Ideas to Grow Single-Specialty Surgery Center Case Volume
5 Tips to Maintain Success at Surgery Centers
10 Steps to Modernize Surgery Centers With Interior Design