When surgeons linger in the doctors' lounge awaiting the next case, their
productivity and revenue-generating potential suffer. To bypass this all-too-common
scenario, more and more surgeons are looking to add surgicenters to their
practices. When established in the right market, on-site surgicenters
can greatly improve physician productivity and boost group practice income
by 15 percent to 30 percent.*
In 1995, we opened the first orthopaedic group in-office arthroscopic
surgicenter in the country, where we perform shoulder stabilizations and
decompressions; shoulder, knee, ankle, and elbow debridements; meniscectomies;
cartilage transplants; ACL reconstructions; loose body removals; drilling
of bony lesions; and elbow arthroscopies. As a result, I now finish what
used to be a full day's work-including five to six cases and my clinic
visits-before 1 PM. I then go to the local hospital to perform inpatient
cases in the afternoon and complete work by 3:30 to 4:00 PM.
My productivity, and that of our other surgeons who use the surgicenter
extensively, has improved for two reasons:
- We have drastically reduced case turnover time. The average turnover
time for arthroscopy cases at our center (8 to 12 minutes) is 75 percent
faster than that at the local hospital (42 to 47 minutes) and 25 percent
faster than that at the local ASC (25 to 35 minutes).
- I can see patients between procedures. Because I am always in my clinic,
and because our physician's assistant does all the prep and drape work
on the front end and closes the wound and places dressings at the time
of case completion, I am able to see four to six patients between procedures.
Don't Believe the ‘Field of Dreams' Myth
To reap these rewards, it's not a matter of simply building a surgicenter.
Don't naively believe the field of dreams myth that states "If you build
it, they will come." Rather, it's essential to make wise and informed
decisions before proceeding. On-site surgicenters can succeed only when
there is an appropriate payor mix of patients available and there are
enough physicians to maintain a high case volume.
If you're considering an on-site surgicenter, I recommend performing
the following three analyses before making any decisions:
- Payor analysis. The managed care forces in your market can dramatically
affect your potential for surgicenter success. Managed care covenants
that dictate surgical locations, for example, have the potential to exclude
you from an entire market. We have found it impossible to negotiate with
plans that direct all outpatient care to hospitals in turn for discounted
inpatient care.
Initially, we performed 75 to 80 percent of our patients' cases in our
surgicenter. Today, however, we can perform only approximately 45 percent
of our patients' cases in our surgicenter because of such exclusive agreements.
Nevertheless, we still succeed because we direct patients to the surgicenter
who have excellent insurance coverage, such as indemnity plans and workers
compensation.
- Case volume analysis. To have a successful surgicenter, you not only
need the type of cases that are well reimbursed, but you must have sufficient
case volume. Don't give up on the idea of a surgicenter, however, just
because your group practice internally can't produce enough case volume
to be profitable. The analysis may suggest that you need to invite more
physicians to participate.
- Environmental analysis. The third component of the analysis is the local
competitive environment. Are there already five or six ASCs in your community?
Will opening a surgicenter put you in direct competition with the local
hospital? If so, and if the hospital employs a large majority of your
referring physicians, you may be faced with a very difficult competitive
environment.
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Outstanding efficiency, coupled with the excellent patient care that we can control, helps us keep our patients extremely satisfied.
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Clearly, you don't want to let the competitive threat from the local hospital
alone impede your progress. However, it's important to consider the fact
that the hospital is likely to dissuade your group from proceeding, since
hospitals derive about 75 percent of their revenue from outpatient cases.
Your business manager may be able to perform this analysis, but he or
she must have the experience and time to complete this type of work. I
recommend procuring the services of an independent consultant who is not
involved in the building of surgicenters. Such analyses will cost approximately
$10,000 and are well worth the investment.
Keep it Small
If the analysis concludes that your market will accommodate the surgicenter,
there are several additional implementation tips to consider:
- Don't invest heavily early on. Given the dynamic market forces at play
in health care, like the exclusive hospital-managed care plan agreements
mentioned earlier, over-investing can be a fatal error. We extended our
office space by just 2,500 square feet and added one OR, one procedure
room, one preop and recovery area, and two bathrooms to satisfy local
and national coding requirements. You should allow room for expansion
later, and you can always extend your hours should your center become
fully used.
- Minimize equipment investment. When we started our center, we purchased
the least amount of equipment that was necessary, and we bought nearly
everything used-from our OR lights and tables to the anesthesia and sterilizing
machines. Wholesale liquidators will sell used equipment for 30 percent
to 60 percent below retail prices. When buying used equipment, however,
limit your purchases to items for which parts are available. We also signed
one- and two-year consignment agreements to use arthroscopic disposables
so we could get our arthroscopic equipment at no initial cost. To effect
these decisions, we assembled a surgicenter committee consisting of a
chief of surgery, two other surgeons, one nurse, and a nurse manager.
-Don't blindly enter into a hospital joint venture. I have seen several
group practices enter into joint ventures equally with the local hospital
to alleviate their initial capital investment. In these cases, the hospital
provided 50 percent of the initial capital outlay, and the physician group
provided 100 percent of the case volume. In this situation, the hospital
receives 50 percent of the cash flow indefinitely. On the other hand,
a partnership with an HMO-owned hospital that offers you something in
return, such as sole access to its patient population, may be worth considering.
Today, starting a small surgicenter like ours will require an investment
of approximately $1.1 million. If you've completed your case and volume
analysis and are satisfied with the outcome, you'll see a positive cash
flow in approximately 9 to 12 months. With this type of pro forma, you
should be able to find a private or commercial lender willing to provide
the cash outlay to build and maintain the surgicenter's financial needs
for the first year.
- Choose the best clinical nurse manager you can find. We chose nurses
from the local marketplace whom we had worked with, and we offered attractive
pay scales and a 6:30 AM-to-2:30 PM work schedule, with no weekends or
call.
- Consider a procedure room. We added a procedure room, which a pain management
specialist (anesthesiologist) uses two and a half days each week to perform
up to 30 cases. We collect the facility fees from these procedures, which
can generate up to 30 percent of our revenue. In turn, the pain specialist
benefits from our many referrals and bills his own professional fee for
seeing and treating the patients.
- Keep it purely outpatient, for now. Although a 24-hour stay seems ideal
because it allows you to perform some tough reconstructive procedures,
I have seen several instances where this approach has failed. Many short-stay
units around the country are closing because the group practices simply
don't receive sufficient reimbursement.
- Stay in constant contact with your payors. It takes continuous monitoring
to maintain solid payor relations, especially when the local hospitals
realize decreased patient volume. This has been our greatest challenge,
and one that requires constant vigilance.
Satisfaction All Around
Despite the challenges, we continue to view our surgicenter as an integral
part of our practice. The desirable work schedule satisfies our staff,
and the ability to schedule cases and patients jointly allows physicians
to be much more productive. Our patients also appreciate the efficiency
and personal care they receive. Our average postoperative recovery time
is 42 minutes; this compares to the local hospital's postop recovery time
of 1.5 hours. This efficiency, coupled with the excellent patient care
that we can control, helps keep our patients and doctors extremely satisfied.
