Can’t afford a new surgery center? Maybe your competitors can help you
3 healthcare organizations create joint facility and report efficiencies
Executive Summary
Rather than having the expense of each opening an outpatient surgery center, three healthcare organization in Nashua, NH, created a joint-venture center.
• Leaders reduced expenses by creating one facility and sharing ongoing services. The center uses the healthcare systems for credentialing, financial reporting, and administrative services.
• The project was more time-consuming than originally thought, as policies and procedures and payer/accreditation applications had to be handled from scratch.
Faced with significant changes in insurance plans, reduced reimbursements for services, the desire to achieve economies of scale, and a growing patient population, three Nashua, NH, hospitals teamed up to build an ambulatory surgery center (ASC).
St. Joseph Healthcare, Southern New Hampshire Health System, and Dartmouth-Hitchcock Nashua, a physician group practice employed by Dartmouth-Hitchcock health system, chipped in a total of $1.6 million to create a non-profit three-OR outpatient surgery center on the first floor of an existing medical building. The center is applying to be a Medicare-deemed ASC, according to Craig Beck, Dartmouth-Hitchcock Nashua administrative director. The results from the center have been positive, Beck says.
"Certainly, with the case volume we have been able to shift to the ASC, we are getting the typical efficiencies you see in an ASC setting: faster turnover of similar cases, staff geared toward these cases, focused workflows, etc.," Beck says.
The organization has even higher expectations for the future as it obtains more payer contracts and Medicare deemed status, he says. "The organizations are in it for the long haul and feel comfortable in having a collaborative plan on a cost-effective space for the community as focus continues to move toward outpatient settings," Beck says.
Each of the three healthcare organizations has an equal ownership in Surgery Center of Greater Nashua. Each organization appoints two people to the six-person board. And this isn’t the first joint venture of the group. Twenty years ago, the three organizations joined to create the Radiation Center of Greater Nashua.
Sanders Burstein, MD, Dartmouth-Hitchcock Nashua medical director, says, "The collaboration between our three organizations is an important step toward creating a sustainable health system in the greater Nashua community. We are able to offer a surgical service of great value to the community by providing high quality surgical care, as efficiently as possible in the outpatient setting. We can only do that if we work together."
Such joint ventures should fit well in the new healthcare environment of accountable care organizations (ACOs) and the growing emphasis on cost containment.
Beck says, "At the end of the day, an outpatient setting is a better value for the patient than being in the hospital. When you’re looking at utilization or expenses or equality, it matches what we’re trying to do for an ACO or site-of-service plan and changes in reimbursement." Consider these advantages they say they’ve found:
• Cheaper to establish.
The healthcare organizations spent roughly $1.6 million to convert space into an outpatient surgery center. "We utilized existing space that was going unutilized," Beck says. The cost was evenly split to create a three-way joint venture.
"The cost might have been slightly less with one or two rooms, but you lose economies of scale," Beck says.
• Cost-saving opportunities.
The surgery center uses the health systems’ resources for services such as credentialing, central sterile supply, and administration, Burstein says. Also, the center uses the systems’ financial reporting resources, Beck adds, "so we’re not replicating services where we can avoid it."
For employee benefits, the center used the same structure as the jointly owned radiology center. "In terms of collaboration, we use it where we can to minimize the expense exposure rather than doing everything from scratch on our own."
Consider these lessons learned
The project wasn’t without challenges, Beck says.
"We had to work through the CON [certificate of need] process, apply for Medicare deemed status, work through The Joint Commission, and work through operational needs," he says.
For example, the Medicare deemed status application and contracting with insurance plans was time-consuming, Beck says. "You want to assume they know you — they’ve worked with all three hospitals — but the nuts and bolts of getting up and running a joint venture was a little more cumbersome than I would have expected," he says.
Because physician groups of all three health systems will use the surgery center, the center developed a clinical committee that had representatives from each organization. Each group can have different opinions on topics such as credentialing, equipment, and clinical guidelines, Beck says. "You have to set up processes so they’re coming to the same page," he says.
Another challenge was that one of the health systems is Catholic, which meant it had different policies on sexual health and reproductive concerns than the other two. Anything that would violate the religious or ethical direction of that institution will not be done at the surgery center, Beck says.
A nurse director was hired to come up with policies and procedures. She had to identify the staff members that were needed, time the hiring, develop criteria for an anesthesia group and determine which group to use, and work on approval from Medicare and insurance companies. Burstein said, "Despite working her tail off, and she worked hard, it takes longer than she anticipated."
In areas such as Medicare approval, hospitals are accustomed to already having those arrangements. "With a brand-new entity, we had to start from scratch," Burstein says. "You couldn’t begin until you had the entity created, with policies and procedures." Even with The Joint Commission, every rule had to be satisfied. "The application takes months."
