1. Case volume. Monthly case volume is a good indicator of an ASC's performance; however, there are a few things to consider when looking at this figure. Brian Brown, regional vice president of operations for Meridian Surgical Partners, says preparing a "budget" for case volume can provide a better reflection of what your surgery center should be doing.
Mr. Brown says the important thing to consider if revenue per case is off budget in a month is to take a look at other metrics and consider the bigger picture of how the ASC was running. "More intensive cases can affect all expenses that fluctuate, such as salaries and supplies. If those seem to be on or under budget, then the ASC was able to effectively manage an upturn in more intensive cases," he says.
3. Salaries per case. Salaries and supplies are two expenses that can account for half of the cost of running an ASC and, as such, they can be major indicators of how ASCs are operating. They are also the two areas that can easily be controlled, unlike rent, insurance, etc., according to Mr. Brown.
ASCs will want to look at the budget and include areas such as scheduled bonuses and raises and employment taxes. Mr. Brown advises ASCs to make sure contract labor is kept low, as temporary workers usually are employed at a higher rate than full-time employees.
Watching this statistic will also be essential when planning for situations such as vacations or other absences. "If a physician is on a two-week vacation, you will want to adjust accordingly, such as flexing some staff members' hours. Otherwise, you will see a significant increase in salaries per case," Mr. Brown says.
4. Hours per case. This statistic depends on your ASC's specialty mix, according to Mr. Brown. ASCs heavy in orthopedics and spine will expect to see higher hours per case, whereas GI- and ophthalmology-driven ASCs will typically have lower hours per case.
"Each center is unique," Mr. Brown says. "It is also important to focus on your specific physician mix to determine what your target should be. Surgery times for like-procedures vary by physician. If your physician takes 30 minutes per cataract versus 10 minutes, your hours per case goal will be affected."
5. Supplies per case. As previously discussed, supplies are another significant line item expense ASCs can control. Mr. Brown notes that it is essential for ASCs to budget for supplies based on its case mix. Some important supply items to look at are implants, IOLs and pharmaceutical expenses.
Implants should be monitored particularly closely, and ASCs should make sure expensive devices are covered by payors. "ASCs need to break out implants and make sure payments have been received. Back-office employees should make sure patients have the proper authorizations when submitting claims, because margins can be affected if implants are not paid for," Mr. Brown says.
6. Days in A/R. The national average for days in A/R is around 35 days. Mr. Brown says ASCs should use this number as a baseline, but also consider the unique circumstances surrounding a particular ASC. "You need to set realistic goals based on your managed care contracts and what percentage of your business is in-network versus out-of-network," he says.
For example, an ASC that is 95 percent in-network can usually expect faster payment than an ASC that is 50 percent out-of-network. This can be the result of many factors. In-network ASCs have the benefits of agreed upon rates and can often process most of their claims electronically, which result in a more timely payment, according to Mr. Brown. "For ASCs like this, 15-21 days in A/R may be a better target. At one of our centers, most major payors pay in 7-9 days, when accounting for a 24-hour turnaround for dictation. If A/R would spike to 35 days, you will need to investigate what happened," he says.
Out-of-network ASCs, on the other hand, often cannot submit claims electronically and do not have agreed upon rates. Mr. Brown notes that insurance companies will often push out-of-network claims to the bottom of the pile before sending payment. "In this case, I wouldn't use 35 days as a target — probably closer to 40-42 days," he says.
Mr. Brown says out-of-network contracts are not an excuse not to be aggressive in collection processes. "Cash drives ASCs. It does no good to bring in cases if you can't collect on them, and if you can't collect, you are out of business," he says.
7. Collections goal per month. Mr. Brown says a good benchmark for collections should be based on the prior two months' net revenue. The average of the month should then be multiplied by 98 percent to account for 2 percent bad debt. "It's not a hard and fast method, but it gives the business office a number to shoot for and can drive upfront collections in the month," he says.
Using the goal, ASCs can examine how they did and then identify areas for improvement if the goal is not met. "Occasionally, it may be something big, like billing for implants that weren't covered, or it can another factor, such as an insurer is slow in paying that month," Mr. Brown says.
Another good technique to keep the business office incentivized to meet the goal is to provide bonuses or other perks if goals are met.
Learn more about Meridian Surgical Partners.
"In our budget process, we look at a two- to three-year period to get an actual reflection of what will happen in the next year. When we analyze case volume, we consider it in comparison to the budget and prior year," Mr. Brown says.
It is also important to consider the timeframe and account for oscillations in physicians' practices depending on the specialty and the state of the economy. "In the beginning of the year, many deductibles are reset for patients, which can lead to them putting off elective surgeries, whereas toward the end of the year, it is the reverse," Mr. Brown says.
2. Revenue per case. This statistic is affected by two factors:
- Rate variance — Reimbursements will vary depending on payor. Medicare and other federal programs will most likely be the lowest payors as compared with commercial payors, which will most likely be higher. The greater the number of Medicare cases, the more fluctuation will occur in your rates because the lower Medicare rates may skew the average overall, according to Mr. Brown.
- Volume variance — The more intensive your cases, the higher your revenue per case will be, according to Mr. Brown. This will depend on the specialties and subspecialties at an ASC. "For example, ACL repairs in orthopedics require more OR hours, but are higher paying than arthroscopies. If one month sees 20 percent of all orthopedics cases as ACL surgeries, this will affect multiple levels of the ASCs operations," he says.
Mr. Brown says the important thing to consider if revenue per case is off budget in a month is to take a look at other metrics and consider the bigger picture of how the ASC was running. "More intensive cases can affect all expenses that fluctuate, such as salaries and supplies. If those seem to be on or under budget, then the ASC was able to effectively manage an upturn in more intensive cases," he says.
3. Salaries per case. Salaries and supplies are two expenses that can account for half of the cost of running an ASC and, as such, they can be major indicators of how ASCs are operating. They are also the two areas that can easily be controlled, unlike rent, insurance, etc., according to Mr. Brown.
ASCs will want to look at the budget and include areas such as scheduled bonuses and raises and employment taxes. Mr. Brown advises ASCs to make sure contract labor is kept low, as temporary workers usually are employed at a higher rate than full-time employees.
Watching this statistic will also be essential when planning for situations such as vacations or other absences. "If a physician is on a two-week vacation, you will want to adjust accordingly, such as flexing some staff members' hours. Otherwise, you will see a significant increase in salaries per case," Mr. Brown says.
4. Hours per case. This statistic depends on your ASC's specialty mix, according to Mr. Brown. ASCs heavy in orthopedics and spine will expect to see higher hours per case, whereas GI- and ophthalmology-driven ASCs will typically have lower hours per case.
"Each center is unique," Mr. Brown says. "It is also important to focus on your specific physician mix to determine what your target should be. Surgery times for like-procedures vary by physician. If your physician takes 30 minutes per cataract versus 10 minutes, your hours per case goal will be affected."
5. Supplies per case. As previously discussed, supplies are another significant line item expense ASCs can control. Mr. Brown notes that it is essential for ASCs to budget for supplies based on its case mix. Some important supply items to look at are implants, IOLs and pharmaceutical expenses.
Implants should be monitored particularly closely, and ASCs should make sure expensive devices are covered by payors. "ASCs need to break out implants and make sure payments have been received. Back-office employees should make sure patients have the proper authorizations when submitting claims, because margins can be affected if implants are not paid for," Mr. Brown says.
6. Days in A/R. The national average for days in A/R is around 35 days. Mr. Brown says ASCs should use this number as a baseline, but also consider the unique circumstances surrounding a particular ASC. "You need to set realistic goals based on your managed care contracts and what percentage of your business is in-network versus out-of-network," he says.
For example, an ASC that is 95 percent in-network can usually expect faster payment than an ASC that is 50 percent out-of-network. This can be the result of many factors. In-network ASCs have the benefits of agreed upon rates and can often process most of their claims electronically, which result in a more timely payment, according to Mr. Brown. "For ASCs like this, 15-21 days in A/R may be a better target. At one of our centers, most major payors pay in 7-9 days, when accounting for a 24-hour turnaround for dictation. If A/R would spike to 35 days, you will need to investigate what happened," he says.
Out-of-network ASCs, on the other hand, often cannot submit claims electronically and do not have agreed upon rates. Mr. Brown notes that insurance companies will often push out-of-network claims to the bottom of the pile before sending payment. "In this case, I wouldn't use 35 days as a target — probably closer to 40-42 days," he says.
Mr. Brown says out-of-network contracts are not an excuse not to be aggressive in collection processes. "Cash drives ASCs. It does no good to bring in cases if you can't collect on them, and if you can't collect, you are out of business," he says.
7. Collections goal per month. Mr. Brown says a good benchmark for collections should be based on the prior two months' net revenue. The average of the month should then be multiplied by 98 percent to account for 2 percent bad debt. "It's not a hard and fast method, but it gives the business office a number to shoot for and can drive upfront collections in the month," he says.
Using the goal, ASCs can examine how they did and then identify areas for improvement if the goal is not met. "Occasionally, it may be something big, like billing for implants that weren't covered, or it can another factor, such as an insurer is slow in paying that month," Mr. Brown says.
Another good technique to keep the business office incentivized to meet the goal is to provide bonuses or other perks if goals are met.
Learn more about Meridian Surgical Partners.