As spine, total joint and other complex procedures move into ASCs, high-acuity cases have become a growth target for centers and their investors. Implant, supply and staffing costs in those cases can quietly drain a center’s profits.
Shakeel Ahmed, MD, founder and CEO of St. Louis-based Atlas Surgical Group, has been building ASCs for about 25 years and was recently named to Becker’s list of 20 ASC leaders to know.
For Dr. Ahmed, one of the most important components in successful ASC financial management is an understanding of the relationship between volume, acuity and margins.
“I would like to pick one, for example, spine, the big case example,” Dr. Ahmed told Becker’s. “With Medicare numbers you could do an [anterior cervical discectomy and fusion], or you could do a lumbar fusion, and potentially get a gross payment of $15,000 to $20,000 per case. But after you factor in your staffing and your hardware and your instruments, your profit margin is $2,000 to $3,000. And that case takes up an OR for four hours.”
Then he set that case next to two of the shortest procedures an ASC performs.
“Now, if you extrapolated that and put it next to a simple colonoscopy or cataract surgery, the cost to do a colonoscopy is probably in single digits, and the staffing requirement is half as much, and the time consumed is 30 minutes,” he said. “Now, think about the difference in profits. A colonoscopy would net you maybe $300 to $400 in profits. A spine gives you $2,000 to $3,000, except that you could do 20 colonoscopies in the time you do one spine surgery.”
The comparison goes beyond case mix. Health systems and private equity firms are betting that scale pays off in outpatient surgery. On Oct. 26, HealthSpan Partners, an affiliate of Cincinnati-based Bon Secours Mercy Health, agreed to acquire Brentwood, Tenn.-based Surgery Partners for about $5.7 billion, including debt.
Dr. Ahmed has kept Atlas physician-owned since founding it in 2003.
“The cost of ownership changes,” he said. “There is an old law called the law of diminishing proportions, where the larger you get, the bigger your losses are.”
This dynamic is especially important for new and developing ASCs to monitor.
“I’ve started with a one-room ASC, and personally as an ASC operator, I work my way up to five or six rooms,” Dr. Ahmed said, “and we operate and we’re building ASCs in four continents currently, and I will tell you the profit margins don’t go up in a linear fashion.”
At the Becker’s 32nd Annual Meeting: The Business and Operations of ASCs, taking place October 29-31 in Chicago, ASC leaders, surgeons and healthcare executives will explore strategies to drive growth, enhance operational performance, navigate reimbursement challenges and prepare for the future of ambulatory surgery. Apply for complimentary registration now.
