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Of the nearly 6,000 surgery centers in the United States, roughly half are struggling financially or are only moderately profitable.

Though the statistic is well known in the industry, it is no less daunting to surgeon-owners stuck in struggling or underperforming ASCs. The results can be painful – expensive “cash calls” to recapitalize the business, time-consuming contract renegotiations, and potentially difficult conversations within the partnership group.

Why ASCs Fail

Underutilization is almost always the problem, and that’s typically caused by:

• Poor case mix
• Physician failure to deliver cases
• Faulty business plans based on inaccurate projections
• Lack of physician engagement
• Overbuilt facilities
• Weak recruitment practices
• Emotional exhaustion from the responsibility of managing a poorly performing center.

Underutilization is a huge problem in the industry, but also a huge growth opportunity, because most ASCs have capacity to add cases. And, in our view, it's a problem that can be solved.

Some underperforming surgery centers have sufficient volume, but profitability takes a hit thanks to:

• Poor case costing and non-standardized supplies and equipment
• Bad payer contracts
• Inefficient back-office processes – especially billing and collections
• Disorganized or undisciplined financial management practices
• High staffing costs.

While most of these risks and threats can be avoided through careful upfront planning, they can also be eliminated by an active, hands-on management and comprehensive, best-practices-based plans to “turn around” underperforming surgery centers.

Blue Chip Turnarounds

Blue Chip’s strong track record is based on a proven approach and deep expertise in a few critical areas:

• Thorough Diagnosis: Many centers lack easy access to important operational data and true visibility across the business; thus, they don’t even realize that they are failing. Effective turnarounds start with a clear diagnosis of exact issues in specific areas (e.g., scheduling, volume, AR/AP, billing, collections, payer contracting).
• Operational Excellence: At top-performing ASCs, the little things mean a lot. Standardizing equipment and supplies helps improve margins. Improved scheduling boosts productivity and reduces overhead. Careful attention to copayment collection can enhance cash flow. These disciplines are not difficult to instill, and collectively they can pay large dividends.
• New Owners & New Cases: High-volume centers are notable for having highly committed partners who drive a profitable core of cases and who act as ambassadors for the center – keeping the pipeline full of potential investors and non-owners who bring regular cases to the center. Adding new types of cases – spine, for example – to existing centers is a proven enabler of success, provided a number of important risks are addressed and mitigated.
• Effective Targeting & Recruitment: Strong, ongoing recruiting practices are the answer to the need for new cases. To reach the best, most profitable answer, the ownership group must evaluate prospects and target both the optimal mix of cases and right type of individuals (e.g., team-oriented surgeons with reputations for clinical excellences). In fact, Blue Chip places great importance in this area, with specialists dedicated full-time to consistent growth and recruitment for the center.
• Contract Renegotiation: Sub-par contracts can sink ASC performance. Most surgeon groups lack the detailed knowledge and experience to restructure contracts for mutual benefit. For instance, when is it appropriate to start over by ending existing contracts, or to move to out-of-network status? Blue Chip brings a unique perspective and experience to contract negotiations, given our strong track record as ASC investors and past senior leadership positions with successful managed care companies.
• New Business Partners: Successful turnarounds usually require new management partners with the skills and insights to recognize operational inadequacies, to craft an effective plan for improving risk-reward sharing and new capital generation, and, finally, to execute the turnaround via management best practices and process discipline.

While we believe better initial planning would greatly reduce the need for turnarounds in the industry, Blue Chip has a proven approach for acquiring underutilized and underperforming centers and optimizing their performance quickly – delivering the desired results within the 120 days.

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Blue Chip Surgery Centers • 4760 Red Bank Expressway, Suite 222 • Cincinnati, Ohio 45227 • Phone: (513) 561-8900 • Fax: (513) 561-8901