ASC Business Challenges
SUCCESSFULLY ADDRESSING BUSINESS CHALLENGES AT AMBULATORY SURGERY CENTERS
Article by Herb Rubenstein, President, Herb Rubenstein Consulting, and
Cher Pascoe, President, Pascoe Professional, Inc.
Introduction
Ambulatory Care Centers or Ambulatory Surgery Centers (ASC) represent an advancement in the field of medicine in both the U.S. and Europe. They are right sized for outpatient surgery. They are places that are relatively free from infection. They provide flexible scheduling for doctors. And, they generally provide excellent service to those who rely on them.
Yet, these Centers are faced with many practical, business, and organizational problems that must be fixed for these Centers to operate at their full potential. With the increase in the number of Americans being covered under insurance starting in 2010, and with the cost or payment per unit of service being slashed by insurance and government pay sources over the next decade, ASC's are in the sights of a perfect storm that could dramatically reduce their profitability and challenge their existence in many locales.
This article is the first in a series of articles that addresses business and operational challenges that are currently at ASC's and are likely to grow in the future. This series cannot cover every business challenge or problem that exists on a recurring basis at ASC's. However, it will address throughout 2009 and beyond many of the challenges that sound business knowledge and practices can help address in this key sector of our medical service delivery system.
Marketing: A Huge Challenge for ASC's
Since doctors are actually the primary customers for ASC's and they tell their patients where surgery will be held, one would think that marketing is not very important to the success or financial viability of ASC's. In fact, that is the current industry mindset in the ASC space.
However, marketing will become a huge factor in the success or failure of an ASC. If all ASC's were alike, then the patient would have no reason to pick one over the other. However, as competition between ASC's heats up and the stakes get much higher as we move to national health insurance, ASC's will need to stake their claim that they are better than the competition and begin to market not only to doctors, but also to the general populace. Today, the ability of ASC's to market themselves successfully is woefully inadequate compared to the challenge they will be facing in the next five years.
Efficiency
If the main competition to ASC's were merely hospitals, as it was a few years ago, then ASC's would not need to be efficient at all. In fact, they would only need to be a little more efficient than hospitals, which, in some cases and in some locales, is not too tough of a challenge.
However, this article suggests that ASC's will become competitors with each other as the number of ASC's increases with the dramatic rise in surgeries that will take place due to health insurance for everyone coming into full implementation by 2015. Today, ASC's are paid reasonably well per unit of service they provide. By 2015, they will likely be paid substantially less per unit of service as volume increases and those with the money and power in the future health care industry will be able to demand lower and lower prices (reimbursements) for each unit of service.
Therefore, ASC's must become more efficient in two different respects. First, they must figure out a way to lower their costs per unit of service without significantly lowering their quality of service. Second, they must become more efficient in their paperwork, their medical records preparation and filing, and in all of their overhead functions. These efficiencies can never be developed on the spot. They must be developed by careful business planning, careful strategic planning, audits of their operations, surveys of their employees, and consultants who observe their operations to look for ways to save money day in and day out.
Customer Service
For the moment, let us assume the customer of the ASC is the patient who has surgery. This patient today rarely has their surgery start on time. This patient today has to fill out paperwork in a most inefficient manner on the day of surgery rather than being able to fill it out via computer or email in the leisure of their home a day or two before surgery. This patient often does not go home in the timeframe that was promised.
In other areas of customer service, ASC's are brilliant. Staff is friendly and well trained. Usually financial arrangements are properly handled, but there are the surprises, like the one a co-author of this article had at 5:45am when he brought his wife to have surgery at an ASC. The week before surgery, I was told insurance would cover the cost of the surgery. However, as soon as my wife and I arrived at the ASC and checked in, the Center's manager demanded $3,650 on the spot, one hour before the scheduled surgery, and stated that if we did not give her a credit card or check immediately, the surgery would not take place that day.
These types of billing irregularities are not common, but they do occur. As a result, patients sometimes do not clearly understand their financial obligations when they have surgery at an ASC. This is just one of many factors currently contributing to the large accounts receivables that ASC's carry on their books.
ASC's dedicated to improving customer service must listen to the customer. The obligatory call to the patient from the Center, just to see if things went all right three or four days after the surgery, are nice, but insufficient. Research including in-depth interviews and careful observation of actual customer service are required for ASC's to get a handle on current challenges with their customer service and ways to improve it dramatically without breaking the budget. In essence, ASC's need better measures of customer service so they can track the level of service they are giving to the patients they serve.
Similarly, they need to track the level of customer service they provide to the doctors who use their services. Today, with the doctors being the investors (owners), the customers, and the board of directors, we are sure that the managers of ASC's hear about it when customer service to the doctors is not to the doctor's liking. Even though, having solid measures of customer service to doctors will become an essential element of successful management of ASC's in the future.
Operational Effectiveness
The literature on ASC's is now being filled with articles showing the ten to sixteen types of statistics that each manager of an ASC needs to keep tab of to know if the ASC is running on all cylinders, financially and organizationally. We applaud this scorecard approach, but caution ASC managers that the only statistics that are truly useful in running an ASC are statistics that are leading indicators and not just statistics that measured what happened yesterday. Reliance on these lagging indicators keeps ASC's and their boards blind to what is about to happen, although it informs them very well on what just happened in the Center.
Cost accounting is essential and great strides have been made recently so each Center knows which types of surgeries produce a profit and which types of surgeries are running a deficit. With most doctors giving only a few days notice to the surgery center that a surgery needs to be scheduled, ASC's need to be ready for the expected and the unexpected, and the unexpected always costs a business more to fulfill.
Building accurate predictive models of demand for ASC's and building systems of intelligence gathering from doctors so that at the earliest indication that surgery will be required the ASC is notified, are procedures that are already in place in many ASC's, but can always be improved.
Most ASC's will not be expanding into another location anytime soon, since most of them have been built recently. However, location is critical to the success of an ASC, and whenever an ASC is considering expanding into another location, a very careful site selection process must be undertaken to promote the proper use and optimal operational effectiveness of the ASC.
Operational effectiveness is also a function of issues larger than the ASC itself. ASC's cannot treat people with systemic diseases, cardiac conditions, and other long-term ailments. Each ASC and the associations representing ASC's need to secure explicit clarity from the regulatory bodies as to who is currently excluded from being treated at ASC's due to complicating health factors. Each ASC and the associations representing ASC's must fight unreasonable barriers that government places on them to serving people that they can legitimately and safely serve. If a market is unnecessarily reduced by government that ASC's can service, it will hurt not only the ASC's and their operational effectiveness, it will hurt the general populace and the medical system itself, by wrongfully denying these groups of people the benefits of having surgery at the lower cost ASC.
Operational effectiveness also depends on ASC's educating the patients they serve, not only on pre-op but also post-op. We know of no statistics of patients who do not conduct themselves in a manner after surgery consistent with proper healing. They prevent the surgery from being as successful as it could be. Training and educating patients, and conducting rigorous follow up with patients post- operatively may seem to be a service that does not pay ASC's and therefore, should not be done.
ASC's, like all medical facilities, can improve in the area of post-op education, training and follow-up. Some of the benefits of surgeries are lost soon after the surgery because of patients failing to follow the correct post-op regimen. ASC's could significantly strengthen their relationship with patients by becoming more vigilant in post-op communications with patients.
Finally, operational effectiveness requires the optimal use of information technology. ASC's generally do not use and have not trained their staffs to use the latest information technology. IT is not a luxury. It is a necessity because it creates efficiencies and it makes staff more effective. Every ASC should conduct an IT audit to see that it is deploying IT to the maximum feasible extent that is economically affordable. In the long run IT not only saves money if implemented properly, it also allows an organization to scale and provide more and better services to more and more customers.
Conclusion
ASC's have significant business challenges. The next five years will place extreme financial pressures on ASC's and they will need to respond with improved procedures, more efficient processes, and a staff that can execute decisions and operational improvement plans more effectively than in the past. This window for improvement is now. Soon, expanded medical insurance may make places like ASC's so busy they will not have the time to do the studies and undertake the changes they need to get ahead of the curve. If ASC's do not become more effective and more efficient, surely another form of service provider will come along and sweep them away. These new potential competitors to ASC's may be much larger than current ASC's, take advantage of economies of scale, run around the clock, and be more transparent in their ownership and financial performance. While it is too early to tell what type of service provider might challenge ASC's in our future health care market, it is clear that the only way ASC's can put off this broad scale challenge to the niche they have created in the marketplace is to improve their operations dramatically.
About the Authors
Herb Rubenstein is the President of Herb Rubenstein Consulting, a consulting firm to businesses. The headquarters of the Herb Rubenstein Consulting is Brooklyn, NY. He is co-author of Breakthrough, Inc. High Growth Strategies for Entrepreneurial Organizations (Prentice Hall/Financial Times, 1999). He also serves as an Adjunct Professor of Strategic Planning George Washington University, and has been an Adjunct Professor of Entrepreneurism at George Mason University and Colorado State University. He has his law degree from Georgetown University, his Master of Public Affairs from the LBJ School of Public Affairs, a graduate degree in sociology from the University of Bristol in Bristol, England and was a Phi Beta Kappa/Omicron Delta Kappa graduate from Washington and Lee University in 1974. His email address is herb@sbizgroup.com. and he can be reached at (303) 910-7961. For more information about the Herb Rubenstein Consulting, see www.herbrubenstein.com.
Cher Pascoe is a Medical Marketing Professional and President of her own strategic consulting firm, Pascoe Professional, Inc. Cher has over 23 years specializing in all aspects of medical marketing and serves as Senior Advisor to The White House Health Project, a 12 year project developing and measuring ROI of employer-based health education, wellness and prevention programs. She can be reached at (303) 232-8161 or cher@pascoeprofessional.com.
