Same-Day Surgery Manager: 2nd-generation ASCs face increased risk of failure
2nd-generation ASCs face increased risk of failure
By Stephen W. Earnhart, MS
President and CEO
Earnhart & Associates, Dallas
|
Many surgery centers have come full circle. The ambulatory surgery centers (ASCs) that started in the ’80s have matured, and many of these original facilities are struggling. It isn’t what you would expect, and it doesn’t occur all the time. However, many of the facilities we are "trouble shooting" lately are exhibiting common symptoms of impending financial and operational doom. These ASCs usually have a 20+ year history of operations. So, my associates and I thought it would be helpful to outline some of the reasons why these centers are in trouble. They include:
• Original investors winding down their practice. We all want to retire someday, and this group already has started. Back in the early days, it was the younger groups of surgeons who started surgery centers, not the more mature surgeons who could see their retirement coming. As a result, surgical volume is decreasing as these surgeons head for the beach. The high-volume surgeons now are (we hope) enjoying the fruits of their labors and taking time off or are retiring. The younger surgeons are busy developing their own surgery centers.
• Many passive investors. In many cases, the original surgery-center investors were not practicing surgeons. Many were and still are nonpracticing radiologists, pharmacists, internists, and the like.
Twenty-some years ago, it was very difficult to find someone who would invest in a surgery center — the concept was radical — so whoever in the medical circle of friends had money could invest. Over the years, this group has held onto their stock and, in many cases, prevented other active users of the center from becoming investors or has created a feeling of hostility from surgery-center doctors, but not investors, that their hard-earned efforts are lining the pockets of these nonsurgeons.
• Neglect of physical plant. As centers become older and cases start to shrink, physical plant upgrades are not where investors are putting their money. As a result, carpets become threadbare, wall colors wash out, repairs are not made, and the dwelling profits go into the pocket and not the center.
• Old equipment. This follows the physical plant scenario. Equipment is not upgraded or kept current, and this results in almost daily equipment failure. Or cases are no longer performed that require sophisticated equipment.
• Less-than-enthusiastic staff. We all can become burned out and less excited about coming to work everyday. Combine those feelings with a drab work environment, daily equipment problems, and surgeons who don’t seem to care anymore, and you are ripe for high job dissatisfaction.
• Increased competition. Surgery centers continue to increase and be successful — usually at the expense of other (older) facilities.
• Code violations. Many centers were "grandfathered" on new surgery center requirements and physical plant construction. As a result, many are ill equipped to handle the faster pace of an active surgery center due to small operating rooms, not enough waiting room space, and inadequate pre-and post-op beds.
So, these are the realities of some of our second-generation surgery centers. Conversely, many have expanded, re-syndicated, and taken their profits into refurbishing of the business, but alas, not enough.
This gives us a "good news/bad news" scenario. The bad news is that we will start to see more centers fail as a result of operational neglect and profit taking by original investors. The good news is that these centers will become available for sale and purchased by those willing to put capital into the centers again and, we hope, to have them thrive once again.
What is the solution? Unfortunately there is no one approach that works for each center. Most of the centers we receive calls from have all of the above issues, and the solutions take time, money, and much strategizing.
The best way to deal with your situation is to first recognize some of the warning signs. Any one of them quickly can kill a good, functioning center. Second, discuss problems with the physicians, owners, and staff. Don’t wait until it is too late. If you are going to let your center "wind down," you might want to think about selling it first. There are many buyers out there who could be interested in the good will your facility has generated in the community. The most obvious purchaser might be the local hospital.
This summer might be a good time to take an honest look at your operations and develop an exit strategy.
(Editor’s note: Earnhart & Associates is an ambulatory surgery consulting firm specializing in all aspects of surgery center development and management. Earnhart can be reached at 5905 Tree Shadow Place, Suite 1200, Dallas, TX 75252. E-mail: [email protected]. Web: www.earnhart.com.)
Subscribe Now for Access
You have reached your article limit for the month. We hope you found our articles both enjoyable and insightful. For information on new subscriptions, product trials, alternative billing arrangements or group and site discounts please call 800-688-2421. We look forward to having you as a long-term member of the Relias Media community.