Same-Day Surgery Manager: Expand your operations via satellite locations
Same-Day Surgery Manager
Expand your operations via satellite locations
By Stephen W. Earnhart, MS
President and CEO
Earnhart & Associates
Dallas
(Editor’s note: In this first part of a two-part series on developing satellite centers, Earnhart discusses the reasons and advantages of opening a satellite facility. In next month’s issue, he tells you how to develop a second site, what happens to case loads at each facility, and how income changes. Earnhart and 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.)
Surgery is booming. There are more ambulatory surgery procedures being performed now than ever. According to SMG Marketing Group in Chicago, the trend is for further, rapid expansion of ambulatory surgery facilities. Don’t you just love it? You and I picked the right industry in which to work. We are so smart!
The reasons for the growth are obvious:
- reimbursement changes causing hospitals to shift cases to a lower cost provider of surgical services;
- more surgeons wanting to get on the facility fee bandwagon and develop their own facilities;
- better anesthesia agents allowing for smoother and faster recovery;
- big business pressuring insurance companies for lower cost health insurance premiums;
- more people (of course!).
This growth however, is causing some interesting opportunities for many, especially those freestanding ambulatory surgery centers (ASCs) that have limited space and/or are out of room to expand.
So, what do you do when you are "maxed" out? Many sit back and enjoy the ride. It is the equivalent of owning a restaurant that is booked full every night. There is absolutely nothing wrong with that mentality. Others are expanding their hours of operations, adding an evening here and there and, of course, opening partially on Saturday. Good strategy. But what if you have already taken those steps? I know many facilities that are completely full! There’s no block time, they are open Saturday and two evenings per week, they are turning away investors and users, the staff don’t wish to add more evenings, anesthesia is already aggravated regarding the Saturday schedule, etc.
Here is one idea that we are doing with a number of our clients: Expand your ASC by developing a new satellite location. This is a perfect time to move a facility to the growing part of town or to that parcel of property that your surgeons own. (Smart move!) This step also gives you the options of adding new services and investors to the facility that you haven’t been able to add before. I know; I know. The cost. Always the cost. A satellite usually is not as expensive as the original facility because many of the startup expenses don’t have to be repeated, such as partnership agreements, policies and procedures, quality assurance plans, etc. You probably will need to perform a feasibility study or business plan, but even that plan will be abbreviated because you have a true operating history that you didn’t have before.
Noncompete issues for physicians and hospital partnerships, which really are an issue in ASCs, are easily accommodated by careful restructuring of the agreements to allow the existing investors in the original facility to have at least a minority position in the new center. However, avoid the "greed trap" by offering so little equity to the new investors that they would be better off opening their own satellite center.
Once you start the "franchising" of your original center, enormous economies of scale become available to you and should have a significant effect on your operations, defraying the startup cost of the satellite facility. For example:
- Staffing can "float" between the two facilities as long as you keep the records straight for allocation of cost.
- Equipment and supplies can be transferred back and forth (within reason of course).
- Your current vendors can automatically pick up the new facility.
- Increased purchasing quantity allows you to reduce the cost of disposables.
- Payer contracts should be enhanced due to a broad range of services, population, and historic profile.
- There is the ability to joint venture the new center with other partnership arrangements; i.e., hospital, physician group, insurance company, etc.
- There is the opportunity to "sell" one center in the future and still have the income stream from center No. 2.
- There is money and efficiency saved from avoiding physical renovations of the existing center and the potential downtime cost from construction.
- You have the opportunity to build center No. 2 the way you wish you had done the original.
There are other opportunities too numerous to cover here.
Developing satellite ASC facilities is going to be done by someone. It might as well be you. We have one client that we are working with on satellite No. 3, and we have had as many as six in one town — so it does work and work well. Don’t wait and find someone else’s satellite center in your backyard. Why do you think the fast-food restaurants have done so well? They franchised!
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