ASC Development Beyond the Blueprints
The development of an ASC is a process that has several steps involved. From case planning, investors, and financing, there are many aspects to ASC development that can make or break the success of the center. One of the first steps that can define the success of a business development is selecting an architectural firm and contractor to help properly design the actual center.
Charles Dailey, Vice President of Business Development and Business Strategy for ASD Management says that in his opinion there are four things that he would ask an architectural firm or construction manager prior to the development of a new ASC.
“I would ask an architect how much experience they have had in the past with healthcare projects. This is pretty much drilling down on experience specific to Ambulatory Surgery Centers. A lot of the firms that we use do have healthcare divisions and they do specialize. It’s good to know that a business is well versed in that market,” Dailey says.
The second question would be to ask how much experience the firm has working with state healthcare licensing boards.
“For example, in the state of Florida we have the Agency for Healthcare Administration. Our construction has to be up to code and has to pass inspection to meet AHCA standards. So, you really want an architect that is going to design a project with the working knowledge of what is needed based on the industry standards,” Dailey says.
“The third thing I would look for is a firm that has relationships or works very well with construction companies. Usually, after the firm gives us the design we will have a bid for the project and the construction companies will come back with their pricing. There might need to be some changes with the design and a lot of that requires an architectural firm that will be flexible with the design based on construction needs.”
Dailey says the final detail would be to determine if they are able to work with his company’s client, the owners of the surgery centers who have contacted his firm to design, develop and eventually manage their ASC. Daily says he has to ensure that the architecture firm has the ability to communicate well with the customer and listen to their needs in terms of design.
“We go through a process where we have the architectural firm and us present a basic plan from the past. We will take input from our clients on what is important as far as designing their surgery center. We take in a lot of different aspects like volume, the types of surgeries they will be doing, the discipline they are going to be focused on, etc,” Dailey says.
David McLemore, Executive Vice President, Healthcare Practice Leader with Kirksey Architecture says that as far as ramping up the project to look at the viability of a site, when architects are approached by owners regarding feasibility for a project, generally, it falls into one of two categories.
“One, they want to retrofit an existing building and turn it into a licensed ASC, or two, they want to build a new building entirely. We try to establish that first because you need a set of criteria when trying to understand the adaptability of an existing structure versus a green field site,” McLemore says.
In either case, McLemore says states have established certain criteria relative to what are unsuitable sights.
“For instance, they won’t let you put an ASC in a building that is too close to high powered electrical transmission lines, or too close to buried high pressure gas transmission lines,” McLemore says.
McLemore says that the eagerness of clients to start the process of construction can be an issue for the success of a project if they jump in head first without a thought or proper consultation.
“We advise our clients to not get too far ahead in the process only to find out that the building or dirt that they are looking for, because of those broad brush requirements, is not suitable,” McLemore says.
“We try to help them not get too far down the path, spend too much money, before they make sure that they meet some of those very basic up front requirements.”
Oftentimes, McLemore says clients have been given information that is not relative to the cost of converting an existing facility or building a new facility.
“Those construction costs fluctuate a lot up and down in the economy, so we try to help and make sure that their construction costs and site development expectations are in line with current market conditions. You don’t want to start a project and your overall project budget proforma, won’t support that initial investment in bricks and mortar,” McLemore says.
“We also like to make sure that they understand that the time frames associated with going through the regulatory process can be an issue. Oftentimes, we find our client has been given either outdated information or not conservative enough estimates on regulatory approval timelines and they can potentially be heading down a path where they are expecting a facility to be opened and operational, generating revenue quicker than is realistic based on current market conditions and industry workload.”
Dailey says that even in the design of an ASC, mistakes can be made that go both ways.
According to Dailey, the space has to really be supported by the volume that the surgery center can actually produce. Sometimes, people that want to own their own surgery centers will design a surgery center too large and the amount of volume that they are producing would not really carry this grand surgery center that they have designed and developed.
“Usually a firm like us can communicate with the architectural firm, and we can actually downsize the project to make sure it actually fits with the business model of that day and age,” Dailey says.
“The flip side is sometimes designs are drawn too small. All parties involved need to not only make decisions for the immediate present, but for the future down the road. A good development company will analyze the business; make calculations and projections based on the growth of the center, different areas of opportunity to expand down the road.
You really want to design a surgery center that allows them to grow into what they want to. An architecture firm works with us in thinking ahead down the road for the center and where the center wants to be and how to design it.”
Communication Between Parties
As far as communication is concerned within the development of a project, McLemore says this can be accomplished well if an owner goes and puts together a team where they have got a builder, a broker, if it is a new piece of property, there may be a civil engineer involved.
“I think everybody there shares communication equally. Everybody has around a 20 percent role up front. There is a lot of due diligence that everybody has to share equally,” he says.
Norman Lazarene, owner of Norman Lazarene Associates has been focused on the planning and design of healthcare facilities like ASC’s for over 40 years.
“Over this span of time we have recognized a common starting point for a successful physical development of the ASC. One of the single most important components for achieving the desired results is to assemble a collaboration of an experienced architect and your facility personnel in order to address the proposed development,” Lazarene says.
“Initial discussions include, but are not limited to, the facility’s proposed size, program and spatial requirements, physician specialties to be utilizing the facility, equipment requirements, regulatory requirements such as Accreditation, Medicare Certification and/or state licensure, and so on. If the proposed development is to be a new free standing structure or constructed within an existing structure, it is important to confirm the local planning and building department approvals of the facility and use for such a site and/or structure.”
Lazarene says the discussion and exchange of information enables the architect to commence with a concept plan for development that is cognizant of the developers project objectives and goals.
The architect’s familiarity with the ASC applicable codes and regulatory agency requirements enables the preliminary design to imbed such requirements in the plan as early as possible, Lazarene says.
“This facilitates the subsequent design refinements resulting from the ongoing team collaboration,” he says.
Lazarene says choosing a general contractor who is experienced in constructing Ambulatory Surgery Centers is in the best interest of the project development. According to Lazarene, knowledge of an ASC’s building standards, specifications, code requirements, equipment, utility coordination, as well as providing all services necessary for the unique construction of the ASC is essential for a cost effective and timely project delivery.
If you have an interest in learning more about the subject matter covered in this article, the M&A process or desire to discuss your current situation, please contact Blayne Rush, Investment Banker at 469-385-7792 or Blayne@AmbulatoryAlliances.com.