Joyce K. (Deno) Thomas, senior vice president operations for Regent Surgical Health, identifies five critical ambulatory surgery center mistakes and describes what physicians and facilities need to do to avoid these scenarios.
1. Physician-owners lacking financial understanding of their ASC investment
Some physician-owners do not pay attention to their ASC business. Once it's running well, they don't develop the skill of reading an income statement or learning how to question the numbers. We are talking about a multi-million dollar investment — you have to learn how to read a financial statement and how all of the pieces and parts fit together! That way you can at least begin to see if something is going awry.
One cannot dismiss the importance of this and expect someone to take care of your money as well as you will. Physicians need to learn how to read the income statement. It is very important to understand the interrelationship of the numbers. Hold back on looking at the very bottom line until you know what is feeding it. That doesn't mean you need to be going to the bank and putting the deposits in but you better be watching those numbers and take the time to understand them.
2. Physician-owners forgetting to prioritize the ASC
Once the ASC is up and running one to two years and the honeymoon is over, frequently the partnership will stop acting cohesively. The physicians start picking on each other and undermining one another by doing things like comparing case revenue or commenting on one physician's caseload or number of low paying patients a physician treats. Eventually they may even suggest kicking out physicians or will want preferential treatment for those physicians they think are producing more for the bottom line. That will rip apart a partnership in a facility incredibly fast.
Your physician partners have to stay good businessmen, level-headed and thinking together as a team rather than as an individual. When you select your board members, who can help control this issue or put a stop to it, you need to critically look at partners who have a good, level head. Look at who is going to be the best [leaders] for the facility because they're good businessmen rather than putting in the most popular physicians or the physicians doing the most cases. This may help to get away from the in-fighting.
You also need to have an administrator who can do reality checks and isn't afraid to step up to the physicians and say things like, "every case that comes here helps contribute to the bottom line and pays the rent;" "When you're on vacation, the rent still goes on;" and, "As long as the cases contribute to the bottom line and we have the capacity, we are going to be a facility that recognizes the value of every person." An administrator needs to be somebody who is your champion and can maintain that level head.
3. Failure to maintain the ASC's appearance
It is critical to maintain your facility in good repair. I have seen many facilities where, for example, the cost of painting would have been $3,000 and the ASC didn't really want to spend $3,000. Patients come in and are looking at it with a different eye. The patient customer go back to their physician — who may not be a partner — and say that while they received great care at the ASC, it's really kind of dirty, there are holes in the walls or the floors weren't polished. Now your non-partner utilizer knows about that and he will take his cases somewhere else.
Keep the facility in good repair so your customers will appreciate the good care and acknowledge it's a great facility. Make sure to set aside money for upkeep. Simulate the patient experience at your ASC: Regularly sit in the lobby in a patient chair just for a minute and listen, look, and see what your ASC looks like from a patient's perspective. Is it cold out there when doors open? Are the chairs beat up? Is the paint chipped? Are there magazines from 10 months ago? Then go back and sit at the nurse's station in pre-op and PACU. Are the curtains dirty? Are the walls beat up? Are the ceiling tiles stained? If you had had a water leak, change out the tiles because that's what the patient is looking at as they lay on their bed.
4. Physician-owners using the ASC as a bank
Although the exception rather than the rule, some physician partners look at the facility as a bank they can go to and make withdrawals whenever they want. This mentality comes from the historical perspective that hospitals have made such great money, and legends about ASCs being wonderful ways to make money, that care is not taken with the finances. Partners start having grandiose thoughts of investing in various 'marketing strategies' like sports boxes at the local arena and chalking it up to advertising. Without balanced oversight to make good, prudent business decisions — the ASC has become a candy jar.
A facility needs to have monthly board meetings and have an outside accountant reviewing its financial statements monthly. At a previous surgery center I worked at, we retained an accountant because I didn't want a physician to ever come and question the veracity of the books. Every month we prepared our financial statements and sent it to the accountant for review, to make recommendations and submit a report to the board. Once a quarter with that same accounting firm, we had them come in to the center. On a quarterly rotational basis they audited the A/R cycle; accounts payable; payroll; and in the fourth quarter they handled our taxes.
As a partnership, if you have decided not to have a management company, retain a good external accounting company and pay for it. It's going to cost you thousands of dollars a year but it's well worth that peace of mind that your books are being watched. If anybody is afraid of an audit or digs their heels in and says you don't need it, then you do it twice because everyone should be willing to have their books open and be transparent.
5. Physicians undermining one another
When an ASC is first opened, the [physician-owners] understand the risk if they as an individual don't make the building work and don't bring their cases. At first the overwhelming loan guarantees resting are on their shoulders and the doctors are afraid of failing. Then, about a year and a half after the grand opening, after they've had some success and distributions, they begin set their focus elsewhere and think about doing a few cases in other places because they're worried about relationships elsewhere.
That little bit of bleeding off of cases and inability to focus on doing as much work as they can in the surgery center causes the revenue to start falling. They lose focus on what they need to do for continued success, begin to think their volume isn't necessary and other physicians are doing cases and that it won't make any difference. But it does make a difference. I have seen facilities that have gone from being on top of the world with great EBITDA but within six months they trash the EBITDA because of lost focus. Volume was there but it was so easy that they forgot the commitment and hard work that got them there.
Learn more about Regent Surgical Health.
Read more insight from the leadership team of Regent Surgical Health:
- Maximizing the ASC Accounts Receivable Process
- Understanding Financials: Your Balance Sheet
- Positioning a Center for Recruiting New Physicians