More than 80% of surgeries performed in the U.S. are done in ambulatory surgical centers (ASCs), according to ASC Industry Overview, a 2024 report compiled by consulting and sales firm BH Sales Group.
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September 2024Physicians who establish or take over existing ASCs are involved in a venture that can allow them to be more cost-effective, provide more efficient care, and develop a secondary revenue stream, experts say.
“As the strings of healthcare revenue keep tightening, we as surgeons (and business and healthcare leaders) must be thoughtful in leading a value-based practice,” and, ideally, developing secondary revenue streams, said Adam Zanation, MD, MBA, an otolaryngologist and head–neck surgeon, partner of Carolina Ear Nose and Throat–Sinus and Allergy Center, and shareholder and board co-chair of Viewmont Surgery Center, both in Hickory, N.C. “A well-planned and efficient surgery center can be a part of this,” he said.
His surgical center, which opened in 2009 and recently expanded from three to six operating rooms, handles ENT procedures ranging from simple ear tube insertions and tonsil removal to complex ear and sinus surgery, endocrine surgery, parotid surgery, and implantation of hypoglossal nerve stimulators to treat obstructive sleep apnea.
Considering whether you should launch or join an existing surgical center? Several otolaryngologists share their insights on how to get involved, discuss existing regulatory or legislative issues, offer advice about opening, owning, and/or practicing at a surgical center, and share how to be mindful of common pitfalls.
How to Start Your Own Surgical Center
Whether you want to start a surgical center from scratch or take over/purchase an existing center, pros and cons exist for either scenario, said Douglas D. Reh, MD, partner in and director of Clinical Research Centers for Advanced ENT Care, medical director and owner of ambulatory surgical center SurgCenter of North Baltimore, and president of Mid-Atlantic Surgicenter Associates. Dr. Reh performs all his ASC-related cases at SurgCenter of North Baltimore; the center opened in June 2023 and handles about 150 cases a month—mostly ENT as well as ophthalmology and plastic surgery procedures.
The advantage of starting a new center is that you will have more control over how the center is structured. The disadvantage is that there are regulatory requirements, depending on your state.” — Douglas D. Reh, MD
“The advantage of starting a new center is that you will have more control over how the center is structured,” said Dr. Reh. “The disadvantage is that there are regulatory requirements, depending on your state. You may need a certificate of need, which is a document that differs based on your state but essentially ensures the necessity, quality, cost-effectiveness, and financial viability of a new center.”
One advantage of buying an existing center is that you may be able to use the center’s current existing carrier contracts; the center will likely already be set up to run and allow you to start performing cases, he added; however, “you’ll be inheriting the current structure of an existing center, which may not align with your goals.”
With an existing center, “review financials, know the debt, and know what you are really getting with the purchase,” he said.
The financials of a new versus existing surgical center are important, said Lisa Ishii, MD, MHS, senior vice president of operations for the Johns Hopkins Health System and president of the Johns Hopkins Surgery Center Series, a collection of seven ambulatory surgical centers in the Hopkins network, all in Maryland. They handle every kind of surgery through six multi-specialty centers and one single-specialty gastroenterology center.
“Ambulatory surgical centers are meant to be lower-cost investments,” she said. “They don’t typically stick around as long as a hospital. If you make capital investments, and then you keep the center for 25 years, then it may not be worth an additional capital investment. You may just want to start new, because of the updating to bring it up to code,” such as modernizing surgical equipment, ensuring accessibility, and remodeling the space.
People and scope are critical components to opening a new surgical center, said Richard Thrasher, MD, managing partner of the ENT and Allergy Centers of Texas, six offices that are a division of ENT Specialty Partners. A central group of 15 surgeons performs a mix of ENT, general surgery, urology, pain medicine, and orthopedics procedures—up from eight when he launched in 2012.
“To start, you have to have a small core of physicians who are dedicated to one another over everything else,” he said. “I say that because all surgeons want to get involved in ambulatory surgical centers for a couple of reasons. As a surgeon, a lot of the value that you create is being profited on by another entity. So, you want to make sure that the value that you bring to your specialty, your surgical skill, is captured as much as possible by yourself. The only way to do that is to be an owner in either the practice you have or in the surgery centers in which you operate. The problem is because so many physicians want to be involved in ASCs, many will try to diversify as much as they can.” A physician who works for three different surgical centers will do a third of their procedures per center, he explained. “Ideally, if you have a core dedicated group that is going to bring 100% of their cases to one surgical center, you’re going to benefit one another far more than if you’re splitting that out over three surgery centers. That’s a critical component.”
Working with a committed core group also helps with making decisions that support the common good, such as selecting equipment that everyone can use cost-effectively for a better return on investment, rather than every person only looking out for themselves, he added. “You could have orthopedics and urology and ENT have their own surgical towers, but that’s an extraordinary waste of money,” he said. “There are going to be times when starting a surgical center when things will be tight when you have to make tough decisions on cost.”
Also, don’t start too big. “When we started our surgical center 12 years ago, we decided to build it in a 5,000-square-foot building, which is very small for a surgical center,” Dr. Thrasher said. “It was two rooms, because the goal was, if there is any space in that center that is not generating revenue, it is losing revenue. You want to maximize the operating space. So, you have to keep those ORs full. Most surgeons prefer to operate in the mornings until one p.m., but we decided we would build two ORs and have cases from seven a.m. to five p.m. as much as possible. Our core group of surgeons had a discussion that in order to maximize space utilization, we would have pediatric patients start first in the morning and adult patients would go later in the day, regardless of what that meant to adjust the surgeons’ typical routine.” Dr. Thrasher’s group includes surgeons working in orthopedics, general surgery, and urology who can schedule adult patients in the afternoons. “We were able to maximize the use of the OR throughout the business day, and [that] allowed our surgery center, at one point, to be the most profitable center for Surgical Centers of America per square footage. That’s because we started small and decided to maximize constant usage of the ORs as much as possible.”
Know the Regulatory and Legislative Issues That Exist
These vary by state and city and change frequently, so look into what currently applies to your specific location.
Dr. Reh said, “Each surgery center has to receive a license from the state prior to seeing patients. If [you are] starting a new ambulatory surgical center, make sure you have individuals on staff who know what is needed to meet the requirements.”
Local regulations unique to your city typically cover issues such as zoning, parking, utilities, and/or backup energy, said Dr. Thrasher.
The Joint Commission is a national accrediting body that works to ensure patient safety in healthcare settings, including ASCs. Others, such as the Accreditation Association for Ambulatory Health Care, are popular in the mid-Atlantic, said Dr. Ishii.
“From a regulation perspective, if you want to take patients with Medicare, you have to be accredited by one of the accrediting bodies so that the Centers for Medicare and Medicaid Services (CMS) will approve it,” said Dr. Ishii. “You also have to get contracts with payers. If you’re part of a health system, then your system may negotiate on your behalf. Our rates were negotiated by our office of managed care. If you’re a single shop, then you’re going to have to do your own negotiating.”
Some areas are making it easier to create ASCs, said Dr. Zanation. “Many states, including my own, North Carolina, are reducing the legal hurdles for certificates of need for ambulatory surgery centers. The lawmakers in these states recognize that these surgery centers offer high-value and lower-cost surgical care compared to hospital systems and hospital-owned outpatient surgery centers. Often, the same operation performed at an outpatient surgery center is less than half the overall cost as it would be at a hospital or healthcare system.”
Tips and Advice from the Trenches
Above all, it’s important to know what your goals are and that they mesh with those of your partners, said Dr. Reh. “I have had the experience at other centers where some of the surgeon owners’ goals were not aligned with mine and my group’s. This created conflict and stress for the partners and the staff running the center. Make sure you like and trust your partners!”
Owning and being affiliated with your own surgical center has several benefits, said Dr. Zanation: “Controlling the level of efficiency and culture that exists within your own center benefits the physician’s time and overall well-being. Additionally, these centers provide more cost-effective surgical care, which benefits patients and society as a whole. Lastly, a physician-owned and led center should foster a culture of excellent and patient-centered care across the entire spectrum of the business unit, and if the center is run well, there’s a good return on your investment, which aligns well with your primary surgical practice.”
Taking over an existing center “has worked well for our group by purchasing a majority control of our center,” said Dr. Reh. “While we had to assume a large amount of debt, it has allowed us to set up the center in a way to meet our needs and goals.”
Staffing is a crucial part of a surgical center’s success, many say. “Develop an appropriate culture in the surgery center with staff,” said Dr. Thrasher. “We have selected high-quality nurses and scrub techs. When recruiting, we want to create a culture of teamwork and respect. Since we opened in 2012, 40% of our staff has been the same. We bring in staff who adapt or are weeded out very quickly. That has been critical to our success.”
Other surgery center staff are also paramount. “Make sure you have a competent ASC administrator who has experience in recruiting good staff and managing all aspects of the surgery center, including equipment, contracts, billing, revenue cycle, human resources, and vendors,” Dr. Reh said. “Select anesthesia providers who also share your goals. You want competent and efficient anesthesiologists who can deliver high-quality patient care.”
The current market is incredibly difficult for hiring, as staffing in general hasn’t recovered from COVID-19.” — Lisa Ishii, MD, MHS
Staffing overall is “one of the biggest challenges today,” Dr. Ishii said. “The current market is incredibly difficult for hiring, as staffing in general hasn’t recovered from COVID-19. People are having to pay more for their staff than they ever have.”
Location matters, too. “Pick a physical location that meets your needs,” said Dr. Reh. “Select a facility that has the necessary operating and procedure rooms to meet your case volume requirements. It should be designed
for good patient flow, from pre-op to OR and recovery/PACU [post-anesthesia care unit]. It should be geographically located to serve the surgeon’s patient population.”
Ensure the business stays in business, advised Dr. Ishii. “The most important factor is your rates,” she said. “Make sure you can negotiate reasonable payer rates that cover the expense of the procedures. Have your center in a location with a patient base that has a favorable payer mix. Also, make the size of your surgery center [match] what you think your case mix will be made up of.”
As an otolaryngologist, consider whether you will have a single specialty or multispecialty center. “The way you put your case mix together will determine how well you do financially,” she said.
What Are Common Pitfalls?
The flip side of successes can turn into major challenges.
Opening surgical centers “can be financially risky, such as assuming debt to purchase an existing center or to build a new center,” said Dr. Reh. This includes managing the fear of the center failing to avoid financial loss, as well as letting the staff down. Underestimating the overall capital expenditure is an issue, too.
Surgical centers can be time-consuming to run effectively, “which is why having a team that you trust and [who] can competently run the center is essential,” Dr. Reh added. “From experience, staffing is vital. I have worked with staff/administration that did not have the bandwidth to run an efficient center, which makes the risk much more visible.” Having staff who understand the regulations that keep the center in compliance with The Joint Commission standards, and staff—either internal staff or a third party with transparency in billing and collection—who ensure collections are coming in, is crucial, Dr. Thrasher said. “If these things aren’t done well, it could result in your being shut down, either by the state with noncompliance or financially not being able to keep up with others.”
Good administrative partners also negotiate fair contracts with payers and keep track of appropriate supply and staff costs to avoid financial loss.
“Running a surgery center takes real work, effort, and strategy,” said Dr. Zanation. “There has to be a constant evaluation of ways to do things better, more cost-effectively, as well as more efficiently. The best people to do these evaluations are the surgeons who are stakeholders in the company and are direct patient advocates.”
Doing so can help foster a favorable experience for surgeons who want to own or operate an ASC.
“Overall, surgical centers allow physicians to be more efficient and see more patients in their practice,” said Dr. Reh. “Most ambulatory surgical centers, within reason, cater to their physicians and patients to make it a positive experience for everyone involved.”
Cheryl Alkon is a freelance medical writer based in Massachusetts.