Improving Profits with a Management Company

You are a dedicated GI physician who has just completed construction on a single specialty ambulatory surgery center. You’ve got your equipment, staff, and certifications in place and already have a list of patients eager to have their procedures at your beautiful, brand new facility. After months of working with a development team, you are ready to cut the cord and start running your facility. And then the question comes from the head of the consulting team: “Are you thinking about retaining us further for management services of your facility?” And you’re thinking-No way! Spend more money? Have even more hands involved?

Well, here are a few reasons to re-think what a management company can, and should, be doing for you. Finding a management company with these traits can put even more money back in your hands!

1. Expertise-Obviously the most important reason to use a management company is that they have experience and credibility in the ASC industry. This isn’t their first rodeo and good management companies will know how to handle any issue that may arise, whether its related to keeping on top of licensure and credentialing paperwork or preparing the budget.
2. Negotiation skills-Expertise in this area will directly affect the bottom line. A management company can help you save money on contracted services, or collect more when it comes to managed care. A management company can periodically review your managed care contracts and negotiate for new rates based on their experience in the marketplace. They can also review your service contracts and negotiate for better terms based on market conditions.
3. Vigilance- You already have your Center Director playing two roles: administrator and nurse. Don’t add financial ovesight to her already growing list of responsibilities. A management company with access to billing software can provide direct oversight of the billing and collecting process, tracking how much and when reimbursements are applied, and allowing them to react when problems arise.

Ortmann Healthcare Consultants provides management and consulting services to new and existing ASCs. If you are interested in learning more, you can reach us at 803-252-7979.

Submitted by Jessica Miller, Director of Regulatory Affairs

Talk of the Day-Increase ASC payments!

In case you just hit the web today, the talk of the internet is the news coming from MedPAC. MedPAC, the Medicare Payment Advisory Commission, has advised Congress in a new report to increase payments to ASCs by an average of .6 percent. In the report, MedPAC also points out that the payment rates offered by CMS for ASCs in 2008 decrease payments for the highest volume procedures. This topic has not stirred a lot of conversation or debate, which suprises me because I have always thought it to be backward thinking. If Medicare begins to pay less for the procedures performed most often in ASCs (think GI procedures), those procedures may no longer be financially supportive in a freestanding outpatient setting. There may then be a shift to bring those cases back to the hospital, where the procedures are more costly to the US health system then in the surgery center! To me it woud seem that those procedures with high volume benefit the most from being in a low cost setting- what do you think?

This recent news is being covered by various outlets and you can find more thorough reviews here and here.There is a link at the bottom of the second article to access the full (all 424 pages!) report.

Wrong Patient, Wrong Site, Wrong Surgery payment denial

Medicare recently announced that beginning on January 15, 2009 they would no longer reimburse ASCs, and other surgery providers, for surgery performed on the wrong patient, wrong site, or wrong surgery. The ASC Association has several links to information concerning the ruling from Medicare and the importance of eliminating these “never events”. According to the National Quality Forum (NQF), “never events” are “errors in medical care that are clearly identifiable, preventable, and serious in their consequences for patients, and that indicate a real problem in the safety and credibility of a health care facility”. “Never events” can reuslt in death or serious injury to the patient and increase the cost of providing healthcare because of the excess cost to remedy the event. The NQF has established 28 “never events”. A full listing of the events and other additional information is available at the NQF website.

One crucial step to achieve as a result of this announcement is for centers to prepare and implement a Wrong Patient, Wrong Site, Wrong Surgery Policy to ensure that these types of events are eliminated from occuring. We recently implemented a policy to cover wrong patient, wrong site, and wrong surgery events for use in our centers. If you need assistance in updating or writing your own Policy and Procedure manual, Ortmann Healthcare Consultants can help. Please contact us at 803-252-7979.

Calculating your 2009 reimbursement

As the end of the year approaches, many centers are beginning their financial planning for 2009. A large part of this planning will include accounting for the gains or losses in reimbursement from Medicare. Depending on your specialty, it is important to know if the Medicare rates for 2009 will help or hurt your bottom line. The ASC Association has a great tool for determing the effect new rates will have on your reimbursements, per code. Visit their website and clink on the Medicare tab. On the right sidebar you will see a link to their 2009 Medicare Rate Claculator. In some locations, the wage index has also been changed, and you will be able to find that information there as well.

If you need additional help with your budgeting, Ortmann Healthcare Consultants can put together a proforma showing exactly what codes have changing reimbursement and how this will affect your business. Please feel free to contact us.

Financing Your ASC Part II

It wasn’t that long ago that if you had an M.D. after your name, it wasn’t that difficult to get funds. Now, it’s best to prove that not only are you an outstanding physician, but that you also have a sound business plan prepared. Putting together a financial proforma as a part of your request for financing is essential. Not only will the proforma prove to a lending institution that your venture will be profitable and that you will be able to pay back all of your loans, it will give you a sense of security that you are not crazy to think about building an ASC in this economy.

What does a good financial proforma contain? The starting point is expected revenue. You need to have a good idea of how much revenue you can expect to collect from your facility fees in the ASC. The proforma’s revenue should never include physician professional fees. You will receive these fees whether performing surgeries in your own ASC or in another location. If these fees are needed in order to make the ASC financially feasible, then you should not be building the ASC, or you need to find more partners. Make sure you are looking only at your facility fees for expected revenue.

Be as accurate as possible in determining your workload. Use one year’s worth of actual patient data to determine the amount of revenue to expect. Be sure to discount for secondary procedures and for patients you might want to leave in a hospital setting because of age or health issues. Look up the facility fees for each CPT code from your patient data at the Medicare Rate; then, you may increase the fee for non-Medicare patients based on a percentage of Medicare, similar to what your practice receives from insurance companies. Too often revenue is calculated with guesswork of what is currently happening in the physicians’ practices—a guess of the number of cases and a guess at the expected reimbursement. You may be surprised at the effect Medicare patients can have on the average facility fee. When it comes to the type of money needed to build an ASC, the word “guess” should not be in your vocabulary.

Using accurate data that can be supported in discussions with a financial institution is essential. You should be able to answer all questions of how you arrived at a particular revenue figure and show supporting evidence. Money is available, but only to those who can prove a venture makes sense.

Once your revenue is determined, it’s time to look at expenses. You will need three loans: construction, equipment and working capital. Here it is best to work with a consultant who can help you obtain these figures accurately. Too much goes into this process for the scope of this article but it’s important to work with a developer who can give you accurate information. If you can show a bank that you have carefully considered what goes into a surgery center, that you really have a knowledge of revenue versus expenses, you should be able to obtain funding. Financial institutions have to make loans—that’s their business. But they have to make good business decisions, and if you can show the people you work with that your project is sound, you will be successful at obtaining funding.

Your construction loan should be an accurate accounting of what it will take to build your center. You will need to decide on size of the center first, because that is what will drive your costs. You may find that you need to adjust your size downward as you go through this process, but with research you can find a size that is reasonable. You will also need to make sure your size meets the requirements in Medicare and State regulations. Your costs could include purchase of land, construction of shell and interior (or if using an existing building, construction of space to meet ASC regulations), architectural fees, and interior design. Working with an experienced consultant can make this process easier. When requesting funds for construction, you will need to give an accounting of how your total request will be used.

An equipment loan will be needed to fully equip the ASC. This loan should include not only the “big ticket” items for the ORs (lights, scopes, crash carts, anesthesia machines, microscopes, video equipment, sterilizer, instruments) but funding for every bit of furniture, shelving, cart, computer, printer, locker, filing cabinet, and so on—every item that will be placed in the ASC. The equipment should be researched carefully so that you will ask for the funds necessary to fully furnish and equipment the center. It is more difficult to go back later and ask for additional funds. If you are working with a consultant, estimates should be available. Equipment planners can also be contacted.

Don’t forget Information Technology when creating your equipment list. You will need funds at a minimum for software that will do scheduling and billing for your ASC as well as the necessary hardware to run this software. You may also wish to consider electronic physician documentation and electronic charting. Creating an electronic medical chart will cost, but it will also save the cost of building space for storing paper charts.

The final loan is the Working Capital loan, funds to pay pre-opening expenses that don’t involve construction or equipment. Examples could vary from stocking the ASC with supplies, to paying for staff, fees for licensure/accreditation applications, and legal fees for agreements. More importantly, the Working Capital should include a line of credit to pay for the center’s first three to four month’s expenses: lease, utilities, staff, benefits, surgical supplies, and so forth. It takes time to get the state to come in for its licensure inspection and more time to achieve Medicare Certification. Even though you may begin performing Medicare cases as soon as you pass your inspection, it may take two months to get your information in the Medicare system so that you can send your first bill.

After you have your state licensure and Medicare certification, then it’s time for insurance contracting. That can take anywhere from weeks to months more. Working Capital is important during this time in order to pay your staff, utilities, lease payments, etc. Securing Working Capital should be in the form of a line of credit—that way you can borrow only what you need.

All of this takes some work upfront, but in the end your project will go much more smoothly. Ortmann Healthcare Consultants can help you with this process. Please feel free to contact us if you have questions or need assistance with the financial planning of your facility.

Submitted by Chris McMenemy, VP Administration

The Changing Face of ASC Reimbursement

Caryl Serbin of Serbin Surgery Center Billing, LLC, recently wrote a great article for SURGistrategies about the Changing Face of ASC Reimbursement. While there is too much information to condense for you here, I have provided a link to the article here. It is a great read for those interested in a broken down synopsis of the changes to come for ASC reimbursement in 2009.This is a must read for owners, physicians, administrators, and others with their hands in the financial side of an ambulatory surgery center.

Financing Your ASC in a down economy

All we hear in the news lately is doom and gloom about the economy, about financing prospects, about obtaining credit, about anything financial. Two months ago, you may have been thinking about building an ambulatory surgery center, but what a difference a couple of months can make! So, given the current state of the economy is now the time to build an ASC? Are you crazy to even entertain the idea?

Well, the good news is that there is money out there if you know how to look for it, and if you are prepared with a plan to submit to the financial institution.

Even if money is available, is it still a good idea to build an ambulatory surgery center, with the current economic situation? I think it is. Healthcare is not a service industry. Healthcare is not likely to see the significant decrease in the numbers of patients as the service industry will see in numbers of customers due to the economy. Yes, it is possible some people will hold back on elective surgery and that you may see some sort of reduction in cases, but a shortage of patients is usually not the primary problem for most physicians who perform surgeries. The concern of many physicians is the ability to use your time effectively. Time is money, and if you are in a situation in which time is being wasted by ineffective scheduling in the place you perform your surgeries, you are losing money.

With your own ASC, you may even see an increase in the number of cases you are able to perform per week within the specialized setting of your ASC. So any small decrease in patients may simply mean a shorter wait time to receive treatment. Instead of a six-week wait, your patients may have only a couple of weeks to wait. You remain busy. Bottom line: Patients who need medical care will make it a priority in their home budget.

And poor economic conditions can benefit you financially as you bring together the many aspects of your ASC, especially in the areas of construction costs and equipment costs. As other sectors of the economy slow down, contractors are hungry for work. And although it may seem insensitive to say this, one person’s pain can be your gain. You are likely to see more competitive pricing now than in the past. Always seek more than one bid on your project, so you allow that competition to surface.

The same is true for equipment purchases. You may have always used one particular manufacturer for a piece of equipment but take this time to look at alternatives. Even if you decide in the end to stay with the equipment you have always used, the fact that a sales rep knows you are looking at more than one vendor will typically have a very positive price on the quote you receive. You may be surprised at how much “wiggle room” is available in equipment pricing.

Finally, an ASC is a good source of additional revenue. And in a down economy, with the constant threat of cuts to physician’s fees by CMS (and don’t even get me started on negotiating with insurance companies), additional revenue is always welcomed. An ASC that is carefully planned is a good source of revenue both through its facility fee component as well as the time you may recapture through effective scheduling and nursing care that will allow you to see more patients. If you have been thinking about an ASC, it’s still a good time to carefully explore your ideas.

Ortmann Healthcare Consultants has relationships with many lendors in many markets. If you need assistance in financing or are still exploring the possibility of financing an ASC, leave your comments or contact us directly!

Submitted by Chris McMenemy, VP Administration