ASC leaders and hospitals alike are facing major obstacles to profitability as operational costs soar and Medicare and private payer reimbursement rates sink.
Independent ASCs, which make up most of the market, face particular challenges as they struggle to access the economies of scale necessary to ink lucrative payer and supply contracts.
From staffing strategies to payer conversations, 14 ASC leaders joined Becker's to discuss their methods to address this imbalance.
Question: How can ASC leaders balance rising operational costs with stagnant or decreasing reimbursement rates to ensure financial stability?
Editor's note: These responses were edited lightly for clarity and length.
Shakeel Ahmed, MD. Gastroenterologist and CEO of Atlas Surgical Group (St. Louis): By taking strategic steps, ASC leaders can offset the increased operational costs without getting hit by stagnant or decreasing reimbursement rates. For one, they can decrease operational costs by improving workflow efficiency and waste reduction, as well as technology adoption that is price-sensitive. A second way to lower costs is through supplier rate negotiations. Thirdly, offering a multitude of lower-cost yet higher-yield procedures, like GI services or procedures, can help increase the profitability of a practice by increasing revenues and diversifying revenue streams. Advocating for policy changes and negotiating more favorable reimbursement rates with payers can similarly add to your financial wherewithal. ASC leaders should focus on strategies that help to reduce financial stresses and keep the operation viable.
Greg DeConciilis. Administrator of Boston Out-Patient Surgical Suites: Margins continue to run thin as we are dealing with rising operational costs across the board, coupled with stagnant reimbursement rates. It is important, now more than ever, to ensure you are increasing efficiency and reducing waste. These two principles have been the hallmarks of ASC success, and are paramount at this juncture.
In times like this we start with increasing effective communication. Surgeon communication on costs should increase, and exercises such as case costing and benchmarking are key. This can also occur with staff, encouraging them to not open supplies and implants until they are needed, and potentially rewarding staff for cost savings with a bonus pool. Your materials manager personnel should encourage competition amongst vendors and trial new products that achieve cost savings. In regards to decreasing reimbursement, I would argue that hiring a consultant to analyze your contracts and attempt to renegotiate your contracts, if able, can be an effective cost-conscious exercise. It may be costly to perform this analysis and negotiations, but on the back end, it can be exponentially beneficial.
Jim Freund. Managing Partner for Physician Transaction Advisors. While a huge challenge for any ASC, focusing on operational and staffing efficiencies are important in balancing out rising costs. Considering options that enable organizations to streamline processes, which may include utilizing new technologies and available service offerings that may prove to be more affordable over time, can reduce costs.
Allison Griffin. Administrator of Urological Associates of Savannah (Ga.): Payers must recognize both the high-quality, low-cost advantages that ASCs offer and the growing patient demand for many of the other conveniences that ASC settings provide:
1. Ease and flexibility of scheduling
2. Ease of entry and exit to facilities (no complex parking or long walks to large hospital structures that are difficult to navigate)
3. Patients are more likely to undergo procedures in ASCs, which can lead to earlier detection and intervention, resulting in significant cost savings for payers
4. Patients appreciate the personalized care found in smaller settings with staff they recognize and trust
5. Lower ASC staff turnover results in improved provider productivity as they work with the same team day in and day out. As specialty provider shortages across the county escalate, utilizing providers efficiently will become essential so that wait times are reasonable.
Tracie Hark. Administrator of Northeast Missouri Ambulatory Surgery Center (Hannibal): ASC leaders need to be looking at every cost in the facility all of the time. We know the cost of our cases and have to have tough conversations with surgeons when they want to use newer, more expensive supplies and implants. If the surgeon feels the newest supply or implant is necessary for the patient, they may have to take the case elsewhere due to our low reimbursement. We find most of the time the surgeon is open to using the same supplies and implants he/she has been using and that just because there is something newer on the market that costs more, does not mean the patient has better outcomes. We also get creative with office supplies buying from discount internet sites when possible.
Tracy Helmer. Administrator of Tri-City Surgical Centers (Mesa, Ariz.): Facilities should utilize tools to refine, improve and create efficiencies within their space. Our CEO is a black belt in lean six sigma, and his thoughts are always helping drive us to better ways of delivery of our care. ASCs are known for innovative approaches to efficiency and patients love seeing our approach to providing focused, meaningful care. It helps drive the up the bottom-line, by reducing costly processes. Furthermore, keeping annual reviews with vendors, for pricing, streamlining product offerings, standardizing supplies and contract amendments should never be "off-the-table." Lastly, work with payer groups as an advocate for cost-savings. They do want to save expenditures for their insured clients. If we show them how that can be done, we have a chance to help them. Payer groups should not be automatically placed into an adversarial position and being able to partner with them creates a win-win for everyone.
Helen Lowenwirth. Administrator of East Side Endoscopy (New York City): ASC administrators need to be very creative these days. Salaries and operating costs in general are eating away at margins. Staggering staffing assignments to ensure coverage and minimize overtime is key and must be monitored carefully. Inventory management is becoming more important. Tracking inventory and supply usage can reveal areas for cost saving. Standardizing supplies and eliminating "physician preferences" is critical.
Kim Mikes. CEO of the Hoag Orthopedic Institute (Irvine, Calif.): Running a successful ASC takes stringent focus managing operations amid the challenges of reimbursement changes. At Hoag Orthopedic Institute, a specialty hospital hub with five ASCs, we are constantly managing all facets of the operation, including efficiencies, work force utilization, payer negotiations, investments in technology and tools, data analytics and a host of other concerns. Running a successful ASC takes meaningful effort, transparency in all relevant data and collaboration with our physician partners, closely monitoring facility operations, finances, policy, staffing, claims and revenue cycles. For our ASC model at HOI, having engaged orthopedic surgeons involved in operations provides an overwatch that allows us to make sound, effective and relevant decisions quickly.
Matthew Ornelas. Administrator of Baylor Scott and White Surgicare – Fort Worth (Texas):
1. Partnerships with vendors, anesthesia providers and ASC utilizers (both partner and non-partner utilizers) are crucial for financial stability. Explaining the why and emphasizing that everyone will grow and succeed together if we act in a symbiotic relationship vs. the traditional/old school mindset of being a sales rep.
2. Staffing costs continue to outpace the reimbursement rates so it is imperative to hire staff members who are agile in their role as well utilizing staff at the top of their license.
Matthew Solis. Administrator of Physicians Surgical Care Center (Winter Park, Fla.): Having some honest conversations with providers to maximize procedure times and increase volumes. If we can consolidate operating rooms and allow for one team to handle cases, and bring in a decent number of cases we can decrease some operational costs and be somewhat profitable.
Randy Reynolds. Senior Vice President of HealthCrest Surgical Partners (Oklahoma City): Hyperinflation has negatively impacted the bottom line of most businesses, especially healthcare facilities where stagnant insurance reimbursement rates persist. ASCs must run as efficiently as possible while providing quality patient care. Specialties must be evaluated to ensure that they are profitable to the facility. Vertical scheduling becomes even more critical for clinical and anesthesia staffing purposes. Case costing must be performed to help ensure that supplies and implants utilized will allow for the related cases to have a contribution margin. Vendor contracts need to be reviewed to determine if more cost-effective sources are available.
Bill Rhoades. COO of Harrisburg (Pa.) Endoscopy & Surgery Center: ASC leaders need to be very proactive on staying on top of insurance reimbursements and being very creative with purchasing medical supplies. I work on this daily to find the best pricing for our medical supplies as well as all our equipment repair costs. It never hurts to contact your suppliers and work out better rates for supplies and repairs. Companies that want to keep your business will try and help in any way possible and being a loyal customer should always account for something. We also make sure that our medical billing department is running effectively and verifying that the payments are correct and received in the appropriate amount of time.
Charleen Tacket. Administrator of Vital Heart & Vein (Houston): Balancing rising costs in supplies is always at the forefront. We continually look at reducing supply costs with our vendors and to try to find creative ways to reduce costs while keeping a high level of quality. This can come in the form of rebates or just reducing overall line-item pricing. We also balance our staffing models to run at optimum efficiency. Our staff works swiftly to provide us with excellent turnover times. These are things that must continually be evaluated and remain focused on to make sure that we are doing everything we can operationally to ensure financial stability.
Bill Willis. ASC Director at Vance Thompson Vision. Operational efficiency is crucial for ASCs facing rising costs and declining reimbursements. Key strategies include:
- Staffing: Prioritize cultural fit, pace and intensity over experience. All candidates should shadow the team to understand the work and pace and involve surgeons in the interview process to reduce turnover and maintain an experienced team.
- Product selection: Choose the best products while leveraging a group purchasing organization for collective buying power to reduce supply costs.
- Vendor relationships: Build strong vendor relationships to secure favorable agreements.
- Time management: Focus on efficiency by optimizing processes and empowering your team to save time and the result is improved profitability through increased volume. Study both successes and failures to continually improve.