Managing the Red Zone-Part III

Today’s post is the final in our series covering Management of the Red Zone in ambulatory surgery center development.

Planning in the Red Zone
If this were an ideal world and everything was perfect, we could generally rely on our time-line to help us complete the project in an orderly manner. The world, however, isn’t perfect, and rarely, if ever, is the best of time-lines. The successful coach learns quickly how to adjust his plays in the Red Zone when scouting reports prove unreliable during the game. When we are about to enter the “Red Zone”, it is time to stop and determine how well we have achieved our objectives and whether any adjustments must be made.

When entering the “Red Zone”, it is time for the principals on the development team to meet, assess their progress to date, and develop a detailed plan to finalize the project. At a minimum the meeting should include the developer, the architect, the general contractor, the equipment planner, the interior designer, and the Center Director.

The General Contractor is the key player in this meeting and should be asked when the Certificate of Occupancy will be received. The general contractor should be told that the ASC will be scheduling equipment deliveries, hiring staff, and purchasing services based on this date. The date must be accurate and we will expect him to jump tall mountains or hire added staff, if necessary, to meet the date he gives us. Some would say this date is a function of the dates stipulated in the construction contract; however, we don’t mention contract dates at this meeting, and prefer to ask the contractor to commit to an absolute date. We have generally found that a contractor will impose a more demanding date on himself than if we impose an artificial date on him.

In certain circumstances, it may be advisable to offer economic incentives if the contractor can accelerate the schedule. Once we have the absolute date for the C.O., we have our eye on the project goal, and we can identify all remaining key tasks and their required completion time, in order to successfully cross the “Red Zone”. A list of items to be checked is provided as Illustration 1. This meeting and our identification of all remaining tasks becomes our “Red Zone” plan, which should be typed and distributed to all participants.

Red Zone Management
Just as the head coach is in charge of his team, one person should be charged with maintaining the plan and communicating changes to all participants. Each participant must understand that any deviation from the plan must be immediately reported to the person charged with maintaining the plan. The person in charge likewise has to communicate all changes to all participants, and devise a means of overcoming any obstacles that may cause the plan to fail.

Once the plan is distributed to members of the team, weekly conference calls (or more frequently, if necessary) with all team members can reinforce the process, and keep the plan alive.

Our Experience
We have used the Red Zone management method for the past three years, and have finished ninety percent or more of our projects on time. We have learned:

1. Early focus on the completion of the project leads to consensus building and on-time job completion.
2. We are able to eliminate the development of most crises’ near the end of the project.
3. We have been able to achieve better planning among all members of the development team.
4. Working capital budgets are met and pro-formas are generally not exceeded.
5. Medical partners have a higher degree of satisfaction in the process.
6. General Contractors like the process and honor their commitments.
7. The ASC opens on time, sees patients rapidly after opening, and receives reimbursements from patient care early in the process of center opening.
8. We dramatically reduce the time needed to fully develop a center, and thereby, save substantial resources as a result.
9. We cross the “Red Line”.

And as today’s successful football team can only be successful by consistently scoring from the Red Zone, today’s successful ASC was likely coached during the development process by a team that understands the value of Red Zone Management, a team that knows how to cross the Red Line.

Submitted by Fred Ortmann, President, CEO

Congratulations York County Endoscopy Center LLC

York County Endoscopy Center LLC

It doesn’t get any better than this…Ortmann Healthcare Consultants is pleased to announce and congratulate York County Endoscopy Center LLC on the successful completion of their South Carolina State Licensure Survey. This is the second Ortmann Healthcare Consultants project to be successfully state licensed this week and it would not have been possible without the dedication of Dr. Stephen Bott, Susan Ordway, Center Director, and Sarah McKeever. Many thanks to all others involved in getting this project State Licensed! This center continues our tradition of “no deficiencies” on State Licensure surveys!

This facility was designed and constructed by GMK Associates.

Congratulations Harvard Surgery Center LLC

Harvard Surgery Center located in Watkins Medical Building

Ortmann Healthcare Consultants is pleased to announce and congratulate Harvard Surgery Center LLC on the successful completion of their Louisiana State Licensure survey. Harvard Surgery Center LLC is now officially licensed for podiatry ambulatory surgery services in Louisiana! The inspection was completed with zero deficiencies, continuing Ortmann Healthcare Consultants record of “No Deficiencies” for every State Licensure inspection we have been involved in. We also received positive comments on the quality of the work completed and how prepared the center was for inspection. This is indeed a proud day for Ortmann and for all of those who have been involved in the development of Harvard Surgery Center, LLC. Many thanks and special appreciation to Dr. Leon Watkins, Ed Pluta, and Nancy Nemeth!

This facility was designed by Marasco & Associates.

Managing the Red Zone-Part II

In this posting we will pick up where we left off last week discussing Red Zone Planning.

Mapping the Regulatory Process
For an ASC, proper execution in the Red Zone includes what you might call Mapping the Regulatory Process. Each state has a process whereby the state licenses and then, under federal contract, certifies the facility for Medicare participation. An uneducated prediction of the state licensure process is certain failure. Unfortunately, it’s rare for any two states to have the same process. It’s also rare to find a publication or guidance describing the various state processes, and rare that the same inspection agencies are used in any two states. Listed below are some of the state agencies this author has encountered in the various states:

• State Sanitarian
• State Fire Marshal
• State Department of Construction
• Board of Pharmacy
• Boiler Inspection Department
• Department of Radiation Protection
• Department of Hazardous Waste
• Department of Water Quality
• Department of Health- Licensure Division
• Department of Health- Medicare Division
• Department of Health- Medicaid Facilitation

There is always a pre-determined sequence that each agency follows to inspect an ASC, and scheduling the inspection at the various agencies according to their pre-determined sequence can take weeks. To avoid missing an agency inspection and delaying the project, it is a good idea to map the regulatory process in your state at the very beginning of the project. To properly map the regulatory process, you might want to visit your Department of Health (visit our Blog Post in the Regulatory category for a listing of state agencies) and ensure that you have identified all relevant inspection agencies and learn who schedules the inspections for each agency.

The Time-Line
The football coach has a playbook, and the ASC developer/owner should have a playbook, too. Time-Lines are management tools listing sequential step by step actions, matched with their respective start and end times, used by most project planning and management professionals. There should be a project time-line for each ASC to be developed. All project tasks, including those listed above dealing with regulatory aspects and inspection, should be integrated in the overall project time-line so that critical steps are not missed. Many computer software programs are available to help simplify this process for you.

Critical and Linked Tasks
There are some tasks that quite simply cannot be started and completed if the developer/consultant were to wait to begin the task’s implementation in the Red Zone, with only sixty days remaining on the project. There are also tasks dependent upon or linked to other tasks that must be done sequentially, which makes it almost impossible to start and complete such linked tasks in the “Red Zone” .
The critical tasks are primarily related to the acquisition of construction materials that require long lead times. Some of the products which require long lead times include:

• Heating, ventilation, and air-condition units
• Emergency generators and transfer switches
• Vacuum pumps
• Rated doors and door assemblies
• ADA compliant door hardware
• Concrete (very limited supply in some areas)

Other tasks are directly linked to another task which must be completed before the task can begin. Some of these tasks are:

• Completion of the CMS855-linked to Medicare Certification
• State Pharmacy License-linked to DEA License and necessary to purchase drugs and medical gases
• Acquisition of Center Insurance- linked to Managed Care Contracts

This is an extremly shortened list, as the number of tasks we have identified as necessary to complete the development of a surgery center number in the 700s!

Check back next week for our final posting in this series, covering Planning in the Red Zone.

Submitted by Fred Ortmann, President, CEO

Ambulatory Surgery Center Growth Study 2009

KNG Healthcare just released a study showing the critical impact ambulatory surgery centers have on the delivery of high quality, lower cost healthcare. The report was released in conjunction with the ASC Coalition.

Examing the growth in the number of ASCs from 2000 to 2007, the study concludes that Medicare payments to ASCs increased more than Medicare payments to hospital outpatient departments, reflecting the shift of many Medicare services into the ambulatory surgery center setting. The study also aimed to conclude that ambulatory surgery centers should continue to be utilized to decrease Medicare spending overall, by offering high quality services in a lower cost setting. Also of note, opthamology accounted for the largest percentage of Medicare spending growth in surgery centers, with GI procedures accounting for the second largest. This is no surprise as there is also an increased demand for more preventative cancer and other screening services. However, it has not contributed to a growth in the number of surgical procedures, which could indicate that surgery centers, especially those with physician ownership, have an increased incentive to reduce unnecessary costs. The study continues with a thorough discussion of the current policy issues and economic factors affecting ambulatory surgery centers. A copy of the full report can be found here.

Managing the Red Zone-Part I

In the next three weeks, Ortmann will be covering a topic relevant to a number of projects we are working- The Red Zone. The last 2-3 months when a project is nearing completion are the most crucial and good Red Zone planning will ensure your project is completed on time and on budget.

The Red Zone Defined for ASC’s
The development of an ambulatory surgery center can take between eight to twenty months to complete, depending on the availability of a pre-existing building. The “Red Zone” for the ambulatory surgery center is defined as the sixty (60) day period immediately preceding the date when the ASC is scheduled to receive its Certificate of Occupancy (C.O.) by the local building authority.

Why the ASC “Red Zone” is Important
The sixty days before an ASC gets its C.O. is a period of intense activity, a time when there is a virtual hemorrhage of capital and no transfusion of funds from patient care. During this time, final construction payments, the majority of equipment invoices, and many working capital bills will be presented for payment. The ASC center staff will be hired during this time, and many employees will be added to the payroll. If the individuals planning and developing the ASC prepared a realistic pro-forma before the development of the center began, which included not only financial data, but also accurate project development times, then there should be no problems. However, anything that delays the C.O. presents a significant obstacle to financial success as the entire project could be delayed by months.

There are many ways to fail in the “Red Zone”. If you fail to have the boilers on your sterilizers inspected, don’t timely apply for a pharmacy inspection, don’t timely complete and submit the CMS 855, or fail to properly implement any one of perhaps a hundred other tasks, you could potentially fail a state inspection. In most states, failure to pass an inspection means you go to the back of the line for re-inspection. This type of glitch could delay your project by one to two months. The additional time needed to open the center due to the glitches was probably not anticipated in the pro-forma, which means that you will likely need additional working capital from either the owner, or additional loans. Regardless of the source of the additional monies, the added debt will delay the time when the ASC becomes profitable.

The Crisis CAN BE AVOIDED
Many of the crises encountered near the end of a project can be avoided if the project is properly planned from the beginning: by mapping the state regulatory process, by developing an integrated time-line for all project tasks, and by identifying and completing critical tasks early in the development process. Please check back next week for the second posting in this series where we will cover Mapping the Regulatory Process and discuss Red Zone Management.

Submitted by Fred Ortmann, President, CEO

Mandatory Revalidation- is your 855B up to date?

CMS recently announced that mandatory revalidation of Medicare information will begin in Summer 2009. Medicare enrollees will be required to revalidate every five years. Revalidation can also occur as a result of requesting a change to your Medicare information or the filing of a complaint. If Medicare contacts you for revalidation, you have approximately 60 days to respond to their request. If new documents are not submitted in this timeframe, CMS can impose a one to three year revocation of billing privileges before you could apply for billing privileges again!

In most instances, revalidation requires the completion of a new 855B, that lovely Medicare Enrollment form for Ambulatory Surgery Centers (and other Clinics/Group Practices). That also means submitting the required documentation. Sure, Medicare gives you the listing of required documents, but what about those last minute items that somtimes aren’t finalized by the time you submit your enrollment form? I’m talking about your state license, maybe your fax number, possibly even changes in your address! It is the providers responsbility to report any changes, and most have to be reported within 90 days of the change, 30 days for Change of Ownership. Revalidation does not require a new certification survey or provider agreement.

To prepare for revalidation there are two items in particular that should be reviewed:

• Legal Information- Review your Legal Name documents and ensure that what is reported to the IRS matches all other records and documents, especially for your NPI and 855B. This is a good item to review early because if you do detect an error or need to report a change to the IRS, it can take upwards of 2 to 4 weeks to receive updated documents.
• National Provider Identifier (NPI)- Log into the NPPES and review you NPI information to ensure your Medicare provider number is crosswalked in NPPES to the appropriate NPI. You should also review the Medical Director, legal businss name, and Tax ID information for consistency with what is reported on the 855.

If you are contacted regarding revalidation and don’t know where to start, or just need assistance completing the form and compiling the documentation, Ortmann Healthcare Consultants can help! We have been completing the 855B for our clients for years, let us put our experience to work for you! Call us at 803-252-7979.

Submitted by Jessica Miller, Director of Regulatory Affairs

Question of the Day

Today’s blog post comes from an inquisitive reader, who not only wanted more information about Ortmann Healthcare Consultants, but also about Ambulatory Surgery Center Developers in general. Since selecting a development consultant can be one of the most important steps in planning an ambulatory surgery center, I thought it might be beneficial to share his questions, and our answers, with you.

What is an Ambulatory Surgery Center (ASC) developer?
When most people hear the term ASC developer, they immediately think of real estate developers, and automatically rush to the conclusion that an ASC developer simply finds the real estate or property where an ASC might be constructed. An ASC developer is a firm or a person who works with physicians, hospitals, or joint ventures between physicians and hospitals to manage and lead the full development of an ambulatory surgery center from the time a financial feasibility analysis is conducted through the time the new center is in operation. This process consists of well over six hundred discreet steps.

What does a full-service ASC developer do?
Major functions of a developer include:

• Perform financial feasibility analysis
• Assist in development of legal documents
• Helps locate real estate for the new center
• Assists in selection of development team members, such as the architect, attorney, general contractor, and interior designer
• Reviews Architectural Plans and plays key role in the design of the ASC
• Ensures compliance with all city, state, and federal regulations
• Assists in selection and training of center director/administrator and staff
• Provides “Core Materials” (e.g. Governing Body Bylaws, Policy and Procedure Manual, Quality Improvement program, Infection Control program) and much more
• Assists in completing and submitting all required State and Federal applications such as Medicare application (CMS855), State Licensure application, DEA application, CLIA application, NPI application
• Establishes equipment, supply and drug group purchasing agreements
• Sets up all insurance coverage for center including the set up of Human Resources program
• Works with financial institutions and obtains loans to finance center
• Negotiates managed care contracts
• Provide management services as negotiated

However, the most important role of the developer is to utilize their knowledge and experience to advise the client on all of the subjects previously listed so that good resource decisions are made and the center is financially successful. The developer is also a problem solver and serves to explore and solve any problems associated with developing the center.

How much will I have to pay a developer?
A full service developer will charge you between $150,000 and $200,000, or upwards depending on number of specialties, etc., to develop a center. Usually this amount is spread over the life of the project. The total amount could be saved by opening the center two months early or by negotiations regarding building costs. Equity firms will insist on owning as much as 51% of a center. However, they will have to be paid based on this amount or more every year; whereas a developer is paid only once.

Graduate Assistant Study: Looming Physician Shortage

Hello Blog Readers! Sorry for the delay in this posting. Ortmann Healthcare Consultants has had a very busy week with two facilities completing construction and preparing for State Licensure and Medicare Certification. I did, however, want to get a small post out there to give you something to think about over the weekend!

Ortmann Healthcare Consultants is pleased to announce, and wishes to congratulate, Bryant Nelson on his recent graduation from the University of South Carolina. Bryant graduated with a Master in Health Administration (MHA) from the Arnold School of Public Health. Part of his requirement as a graduate assistant and student in the MHA program, is the completion of a graduate thesis or residency project. For his project, Bryant explored the topic of the looming physician shortage in South Carolina. This topic is extremely important and relavant for healthcare professionals across the country, particularly in rural and underserved areas. Bryant has agreed to allow us to share his report with our readers. If you are interested in learning more about the physician shortage, please leave a comment on this post or contact Ortmann Healthcare Consultants at 803-252-7979.

Patient Disclosure for Same Day Surgery

Medicare announced today that it would allow for an exception for same day surgery when it comes to meeting the new standard of the patient signing informed consent and financial disclosure the day before the surgery. The ASC Association announced this news through an email press release. Below is an excerpt of that email.

“It is not acceptable for the ASC to provide the required notice for the first time to a patient on the day that the surgical procedure is scheduled to occur, unless:

• the referral to the ASC for surgery is made on that same date; and
• the referring physician indicates, in writing, that it is medically necessary for the patient to have the surgery on the same day, and
• that surgery in an ASC setting is suitable for that patient.

In such situations the ASC must provide the required notice prior to obtaining the patient’s informed consent. Cases of surgery occurring on the same day it is scheduled are expected to be rare, since ASCs typically perform elective procedures. Frequent occurrence of such cases may represent noncompliance with the advance notice requirement.”

More information is available on the ASC Association Website.