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Print this PageGrowing an ASC Business in Tight Economic Times
By: Jennifer Collins, Administrator,
Parkway Surgery Center
Like a lot of outpatient surgery centers and the healthcare industry as a whole, our center, Parkway Surgery Center, in Hagerstown, Maryland, was challenged by the economic downturn of 2008-2009. It was obvious from the beginning of the crisis that it was going to be a serious situation. That’s why we started taking important steps right away. .
We definitely focused on cutting overhead expenses. Case costing, inventory controls and down-staffing were our most effective tools to navigate the economic pressure. But they are also the keys to achieving our long-term goals. And applying best practices in these areas will deliver results in good economies and bad.
We have big growth plans, and we didn’t let the turbulence of the recession distract us from executing on those. Now that the worst of the recession is over, we are in a very strong position and look forward to continued growth.
Increasing Caseload, Improving Cash Flow
Our leadership team views a strong case volume as the lifeblood of our center. But as a spine-focused ASC, we have to choose additional cases carefully. In 2009, we were able to increase our revenue by adding another pain intervention physician to the center and significantly increasing our worker's compensation caseload. High-volume pain management cases are often a very effective complement to relatively low-volume spine surgeries.
High-volume pain management cases are often a very effective complement to relatively low-volume spine surgeries.
Another way we increased our cashflow was by collecting out-of-pocket deductibles and co-pays up front. It seems like a small step but it makes sense, especially in a tight economy. Previously, the center had not asked patients to pay upfront. Our business partners at Blue Chip strongly encouraged us to adopt this best practice, which seems to be used by a small percentage of centers overall, but all of the most profitable ones.
Optimizing Back-Office Processes
At the beginning of 2009, our accounts receivables balance had swelled to 118 days. There was plenty of room for improvement During the year, we worked it down to a more reasonable 23 days. This was another area where our higher cashflow, and upfront collection of out-of-pocket fees and co-pays helped. This change decreased our need to collect balances due after the fact, which can be very costly and time-consuming and sometimes is unsuccessful. Again, this was a very important move for us to make, and something of a “no-brainer” during a recession. It really made a difference to our overall financial health.
We also worked very diligently to clean up our inventory and standardized our supplies. While it’s important that all the surgeons are comfortable with the equipment and supplies in use at the center, it’s just as important to the business that the cost advantages of standardization are well understood. By refining our case costing reports and making them more comprehensive, it was easy for the surgeon-owners to see the benefits of more efficiently using supplies and drugs.
Clear case costing reports made it easy for the surgeon-owners to see the benefits of more efficiently using supplies and drugs.
Better Performance through Visibility
In the past, our center didn’t necessarily have detailed or accurate insight into our business, especially our overhead costs. But, today, thanks to the investments we made during the downturn, we can produce accurate and informative case costing analysis reports directly from our operating software system.
Armed with this data, we have carefully examined our performance in every area of our business, especially in procurement of materials and supplies, as well as staff utilization. We’ve even used it to refine our contracts. For example, the center realized a substantial cost savings on anterior cervical cases by changing implant vendors. Previously, we didn’t have clear insight into our true costs, so the cost reduction opportunity wasn’t apparent.
Staffing is another area where we’ve improved. With real visibility into our needs at different times, we implemented a low-census policy to adjust staff during down times. Several personnel duties and job descriptions were merged as well, such as the scrub tech and materials manager. The result is that we’ve aligned our staffing costs to our true needs, and greatly reduced our risk of overstaffing, which can really hurt the bottom line.
Overstaffing can really hurt the bottom line.
Our management partner, Blue Chip Surgical, assisted us in these cost-cutting measures and helped us develop a benchmarking tool to track additional performance indicators and track them against other successful centers.
Blue Chip also took the lead in renegotiating stronger contracts with our in-network payers and helping us take advantage of out-of-network strategies. Optimizing contracts is an area where increased visibility into the business can really pay off, but it takes specialized knowledge and an experienced business partner.
As an administrator, it is important to consistently stay on top of all of the numbers — from budgets to staffing census to inventory. The improved reporting methods we implemented during the downturn will enable us to make smarter, more efficient decisions as we enter our next phase of growth in a healthier economic environment.
Expansion Plans
The steps we took to improve efficiency were very important, but we did more than just cut costs. We continued to move forward with our growth plans. For instance, we are negotiating a merger with a local orthopedic group to bring orthopedic cases to our surgery center. Many growing multi-specialty or orthopedic-focused ASCs add outpatient spine cases; we think adding orthopedic procedures will be an effective strategy for us.
Several new part-time pain intervention physicians will join our pain clinic. As you can see, we are always looking for ways to build our case volume. Of course, we don’t just take on any physicians. We only want to work with clinically distinguished doctors, who are good team players and recognize the requirements of running a successful surgery center. We are also working on the addition of two procedure rooms and building out a larger pool of PRN staff.
Bottom Line: A Strong Foundation for Growth
We knew that Parkway Surgery Center had a strong business foundation and so would be in a strong position to survive the recession. But we also saw opportunities to thrive and grow, and we took advantage of them. We applied best practices and kept our focus on critical parts of our operations. While these steps helped us get through a difficult financial period, they really are necessary for success in all kinds of economies.
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