Including a New Specialty in an ASC
An Ambulatory Surgery Center (ASC) is a model that can prove to be financially successful for owners and managers in the healthcare business. However, not all ASCs begin equipped to perform services or a new specialty outside of their originally prescribed plans with providers involved in the business. The Ambulatory M&A Advisor takes a look at the process of adding a new specialty to an ASC, how to prepare staff for the new specialty, and mistakes that can be avoided when a new service is added on to an ASC.
The Process of Adding a Specialty
Benita Tapia, Administrator, 90210 & Precision Ambulatory Surgery Center says that when discussing her ASC, their process is usually doing a pro forma in which financial numbers are calculated regarding the disputed specialty.
“This allows us to make a decision as to whether the new specialty or service would be beneficial to the center,” Tapia says.
Chuck Strasser, Executive Director of Allied Physicians Surgery Center agrees that a pro forma is a necessity, but first and foremost, somebody has to approach him with the idea; be it one physician or physician group.
“They have to tell me they are looking to use our facility or would like to have the privilege of doing certain cases there, if they are not already being done at the facility,” Strasser says.
“It is always a little difficult because you always have to look at the case itself. Is it worth bringing to the facility? When I say ‘worth’ I mean the cost compared to the reimbursement. We are a for-profit organization so we break down the cases to figure out the worth of that case. I would gather the CPT codes for procedures that the physician or physician group wanted to perform. I like to take a look at what Medicare reimburses for those procedures. We do about 30 percent Medicare for procedures at our facility. You can do most things on Medicare, but it does not pay for implants.”
Strasser says when exploring the idea of a new specialty, he likes to get a basis on what the reimbursement is for Medicare to his business.
“We do cost analysis on almost every procedure down here. I take a look at time involved, I take a look at staffing, I take a look at supplies used, I take a look at implants. Putting all of that together, I come up with the actual cost of that case leading to the next step of what my reimbursement is going to be. I start with Medicare because it is so specific. I could pull up a 29882 and know what I am going to be getting. Then there is a comparison made between the reimbursement and the cost. I then look at insurance contracts. I take a look at what reimbursement may be for those also,” Strasser says.
Andy King, President of Acumen Healthcare says that the way he looks at a business is the way that all people should look at their business. This is a volume, pricing and cost control issue. Looking at those together they end up to be margin or profit at the end of the day. So, if an ASC is looking at a new business line, they would actually start with volume, which is created by the surgeon in the surgeon’s office.
“Obviously, you are getting a request from a surgeon to initiate a new specialty or product line. You would go up and count the volume (procedures done by CPT code). You would probably want to get the volume and verify what they are telling you. They may say they can do 30 cases a month, so you want to verify what they are telling you is correct. From there, you look at pricing or the revenue cycle. You look at the revenue that is going to be created by the volume that you just counted and in order to do that you want to look at your reimbursement,” King says.
King says that when considering reimbursement opportunities for the specialty, a manager should remember that reimbursement comes in different tiers that go by payor mix.
“You look at the top four or five payors in your market and you want to make sure that you do not understate or overstate your revenue, particularly overstate. You want to look at those payors by percentage and calculate the volume you just counted by CPT code and translate that into net collectible revenue,” King says.
“Managed care also has a bit of a quirk, particularly with Medicare and CMS. A lot of times in the past you have been able to unbundle and get CPT codes paid at 150 percent, and sometimes now going forward, with bundled payments they are bundled into one CPT code and you are only getting reimbursed one CPT code.”
Not only is it important to closely examine the specialty or service in question, but an ASC manager should take a close look at the internal workings of their business and make sure that they are equipped and prepared for such a change in the business.
Strasser says that when looking at the business internally he is going to make sure he gets a clear picture on how many cases are in question and if the ASC can accommodate it to begin with.
“I don’t want to bring a group or a surgeon on and not have block times or a large enough space available. I think starting up a new center, depending on the size of the center, this decision is most likely easier to make. We are pre-established and are at about 80 percent utilization, so I am not going to commit to something I cannot perform,” Strasser says, stressing that internally, managers need to look at OR availability block time.
“That is very important.”
Tapia echos that it is important that her business determine if they could accommodate the extra cases that service or specialty requires. This means examining whether they have enough pre op/PACU beds and ORs .
“We would need to make sure that speciality or service does ASC approved cases. We would then determine if we have the equipment, instruments, staffing to provide for that new service or specialty or calculate the cost associated with purchasing new instruments, equipment and hiring trained staff,” Tapia says.
Internal examination does not stop at the OR availability, but also extends to the staff being properly prepared to take on a new service.
Tapia says that when approaching concerns about staff, all staff should be in-serviced prior to starting a new specialty.
“Usually we will also have staff meet the staff they will be working with from the surgeons professional practice. Nurses and technicians are educated on new pre-op, intra-op, post-op and discharge instructions/orders for that new specialty and service, Tapia says adding that billers are also in-serviced on new codes for billing so as to maximize reimbursement and prevent denials.
King says if it is a big procedure being added on managers want to make sure their anesthesia staff are comfortable with it.
“A lot of times, if you are starting a Spine or Total Joint procedure, they are more complicated cases, so you want to make sure your anesthesia staff is capable and they have the equipment, knowledge and the ability to take care of these patients,” King says.
“The best way to prepare the nurses is to sit down and talk about it in an open forum and then go through the new equipment and then have the surgeon or anesthesiologist talk about what they are going to be doing differently. Then go through a mock situation if it is that new or different. Most often a mock situation is not needed and you just may need to talk about anything that might be new,” King says.
Strasser says that like most ASCs his business is multi-specialty, and they perform a variety of services to their patients.
“Thinking outside the box, we don’t do Bariatric. If I had a physician come to me wanting to do Bariatric surgeries, there would have to be a training for the staff then. But for most things we already practice, based on the complexity of the situation, they are issues that the staff would be able to learn on-site,” Strasser says.
Avoiding Errors with Additional Services
King says the number one mistake made when adding a specialty or service is overestimating volume.
“Typically, you will get a request from one of your large volume users that will say they can do X amount in a month. You run your analysis based on what they say, and then at the end of the day he does significantly less. Then the performance that you had planned for the new specialty does not become a reality,” King says.
“The second thing would be overestimating revenue. If you are thinking you are going to get 4,000 dollars from a payor and at the end of the day you get 800 dollars per case. The third mistake would be underestimating or forgetting the capital cost part. You might forget that your service maintenance agreement on some equipment is very expensive. If you get into Spine or something else, you might have an affiliated service that you were not aware of.”
Tapia says other mistakes include not performing prior mentioned necessities like not being proactive on doing a pro forma prior to starting a new specialty to make sure it will benefit the facility, not doing enough education of staff prior to starting a new service, and not having the right equipment, trained staff.
If you would like to learn more about the concepts covered in this article, want to sell your business or discuss how Ambulatory Alliances, LLC might be able to help you out, contact Blayne Rush, (469)-385-7792, or Blayne@ambulatoryalliances.com.
If you have suggestions for future topics, email Blayne@ambulatoryalliances.com.