3 Essential Steps for Hospitals to Turn Around Their Surgery Centers

Hospitals and health systems have been responding to the trends of slowing inpatient admissions and rising outpatient volumes through many different ways: acquiring physician practices, developing urgent care clinics and installing community health centers are but a few examples.

But one of the biggest areas within hospitals' outpatient strategies that has added significant value to their bottom lines has been ambulatory surgery centers. Since last fall, numerous transactions and developments have occurred between hospitals and ASCs. Edward Hospital & Health Services, based in Naperville, Ill., purchased majority stakes in two ambulatory surgery centers located in the health system's service area. Aurora Health Care in Milwaukee acquired Manitowoc (Wis.) Surgery Center for $3.2 million. The University of Minnesota in Minneapolis is also amidst a multimillion-dollar construction project that includes an ASC.

Having a stake in or building an ASC is a good start, but it takes hard work and diligence to keep the center at a profitable level. In some cases, surgery centers fall into the red if management and oversight fall by the wayside.

Joe Zasa, co-founder and managing partner of ASD Management, a surgery center management company, recalls one such story. A few years ago, a multispecialty surgery center in Florida with two operating rooms that focused on orthopedics, ENT and dental was losing $150,000 every month. It was nearly bankrupt, but it now stands viable today thanks to a turnaround process he and others implemented.

Mr. Zasa explains there are three vital steps hospitals must take if they want to improve their ASCs and convert them into a valuable asset.

1. Conduct a diagnostic analysis. Every ASC has to be successful in four key areas: clinical/patient care, risk management, business office and managed care, Mr. Zasa says. Doing a full diagnostic examine of these areas within the ASC will help leaders gauge where the problems are.

For example, on the clinical side, executives should ask: How is the center delivering care from a patient care standpoint? What is the nurse-to-patient ratio? What are the turnaround times? Are staff members cross-trained? What are the infection rates? Is there an active quality assurance program?

For the risk management, business office and managed care aspects, leaders must consider: Does the ASC have an active risk management program? How is compliance managed? Does the ASC have good payer contracts? Is it out-of-network or in-network, and would the center benefit from moving toward one or the other? Are there carve-outs for high-volume procedures and implantable devices? Are staff members scheduling properly? Is billing accurate? Are there sound cash management and internal control policies?

Mr. Zasa also says surgery center leaders must consider "organic issues," which involves looking at physician partners, what their ownership stakes are, how hospital ownership affects physicians and what the reputation is among physicians and community members.

2. Develop an action plan based on that diagnostic. Once leaders perform the diagnostic analysis, they should know where problems within the surgery center originate.

For example, if during the diagnostic, executives discover the ASC is simply lacking revenue streams, there are several actions to take, Mr. Zasa says. Renegotiating managed care contracts and readjusting the fee schedule could help, and if the ASC still is missing out on significant volume, it's time for a total revamp.

"If there's a lack of volume, then you have to go out there and attract new owners and programs to the surgery centers," Mr. Zasa says.

Specifically, Mr. Zasa says there are three growing specialty lines that ASCs should consider adding if they want to boost their top line: minimally invasive spine surgery, cardiovascular procedures (like those for pacemakers and cardioverter defibrillators) and orthopedics (like total joint replacements). "This is a coming outpatient trend, and we're seeing a lot more of it," he says. "Hospitals should expect to see that."

3. Get physicians and staff onboard. ASCs can have all their ducks in a row from an operations standpoint, but if the right physicians and staff don't buy into the management program and see it as a team effort between surgeons, anesthesia, staff and management, then they will never get off the ground or back on their feet.

Great leadership among staff and physicians is what Mr. Zasa calls the "pixie dust" of a successful center. Further, he compares surgery center management to football. The best football programs are a mix of solid recruitment with a good system that gets the most out of its employees. "The next time you watch Monday Night Football, listen to the starting lineup," he says. "You will find that most of the players did not play on championship teams, or even the historically great college football programs. They were excellent players in mediocre systems."

It's those leaders — the physicians and staff members — that are responsible for the execution of the surgery center, and whether it can be a valuable part within the hospital.

Mr. Zasa says some ASCs "can't be fixed," but for those that can, a turnaround can occur in as little as three to four months. Following the outlined steps can help hospitals that want to boost their surgery center's performance and make it a core community asset.

"Essentially, a turnaround entails the diagnostic to identify key deficiencies, the adoption of sound management systems, attracting core staff who can implement the systems and incentivizing them to feel like owners, attracting the right physicians and the entire group buying into the management system or program," Mr. Zasa says.


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