Choice of specialty is a key factor in the success of an ambulatory surgery center. While specialties such as spine, orthopedic surgery and ophthalmology are known as top money makers, specialties like plastic surgery, oral surgery and urology are often less desirable.
ASC advisors, however, caution that even undesirable specialties have a silver lining and can function well for certain ASCs. Here is a list of the five "worst" specialties for ASCs, based on a few ASC advisors' assessments as well as results from the 2010 ASC Valuation Survey by Healthcare Appraisers. (The survey was completed by 17 ASC companies representing more than 500 surgery centers throughout the country.)
Each listing here also includes advisors' thoughts on how a seemingly undesirable specialty could work. Do you agree with these rankings? Please send your thoughts and feedback to rob@beckersasc.com .
1. Plastic surgery
What makes it bad: Plastic surgery was voted the least desirable specialty by far in the Healthcare Appraisers survey, with 82 percent calling it undesirable and no one seeing it as desirable. Chris Bishop, senior vice president for acquisitions and business development at Blue Chip Surgical Center Partners in Cincinnati, agrees with this assessment. "You'd be shocked at how many centers lose money on every single plastics case they do," he says.
Plastic surgery's poor reputation has a lot to do with its payment structure. Cosmetic surgery, a big part of plastic surgery, is paid out-of-pocket. Plastic surgeons charge a global fee, which then has to be shared with the ASC. "That means you have to negotiate with your surgeon-partner, which is not something you should have to do," Mr. Bishop says. "You don't want your surgeon-partner on the other side of the table."
It's an uncomfortable negotiating position that often allows plastic surgeons to get a big chunk of the fee, he says. Mr. Bishop says many hospitals and poorly managed ASCs agree to a payment of $600 an hour for a plastic surgery case, well below his rule of thumb of at least $1,000 an hour.
Moreover, "the plastics guys tend to be artistes," Mr. Bishop says. "They're going to take a little more time on these procedures," which means even less money for the ASC. Jon Vick, president of ASCs Inc. in Valley Center, Calif., basically agrees with that assessment. "Not only are plastic surgery procedures often money losing, but they can tie up many hours of OR time," he says.
How it could work: Mr. Vick says plastic surgery could work if the center holds out for a reasonable facility fee. "The fee you negotiate has to be in line with what you get for procedures in other specialties," Mr. Vick says. He also advises picking highly regarded plastic surgeons who don't have to drive down their global fees to attract patients. "The better the plastic surgeon is, the less price-sensitive his patients will be," he says.
Mr. Vick advises choosing plastic surgeons who perform a lot of reconstructive surgery, which is covered by insurers. Mr. Bishop adds that breast reductions often are covered by insurers and can be profitable.
2. Oral surgery
What makes it bad: Oral surgery was not covered in the Healthcare Appraisers survey but it scores at the bottom in Mr. Bishop's book. "Oral surgery has very low volume," Mr. Bishop explains. A busy oral surgeon can do only 40-50 cases a year. "That can't justify the expense of the equipment," he says. Furthermore, reimbursement doesn't cover costs. He says many oral surgery patients are covered by Medicaid, and even those who are private pay represent too little volume to justify putting the ASC's negotiating clout on the line to obtain higher rates.
How it could work: Mr. Bishop insists there is no way to make money on oral surgery. His company did a 60-day trial for oral surgery. "Six cases were done and we lost money on each case," he says. "The reimbursement didn't even cover our time or supplies, much less the equipment."
3. Urology
What makes it bad: Urology was the second least desirable specialty in the Healthcare Appraisers' surgery, but with an 18 percent undesirable rate, it stood head and shoulders above plastic surgery. Mr. Vick says a lot of urology procedures can be done in the office. Urologists may be tempted to do those procedures there because the professional fee is higher. In some cases, he says, ASCs have had to force physicians who move cases to their office to sell back their shares and leave the center.
How it could work: Urologists who faithfully do their cases in the ASC should not be a drain if rates are negotiated properly. Moreover, Mr. Bishop says a urologist who also does a few cases of lithotripsy can be very profitable for the center.
4. Podiatry
What makes it bad: "I would not spend the time to recruit a podiatrist," Mr. Vick says. Due to their low volume, "they're not a good source of income for the surgery center." Mr. Bishop says a busy podiatrist does only 80-100 cases a year. Podiatry makes up an average of 4 percent of all cases in ASCs, according to VMG health.
"Podiatrists tend to be more technical than surgical," Mr. Vick adds. "They don't have an MD degree and a lot of them do things like designing orthotics inserts for shoes. In an ASC, they typically don't pull their weight."
How it can work: "If you can find a very busy podiatrist, one who does a lot of surgical cases, he might work out," Mr. Vick says. Almost 60 percent in the Healthcare Appraisers survey viewed podiatry as desirable and just 12 percent found it undesirable.
5. Gynecology
What makes it bad: With a 12 percent undesirable rate on the Healthcare Appraisers survey, gynecology ties with podiatry, GI and ophthalmology, but it has lower desirable rates than the others. Gynecologists who still do obstetrics are only part-time surgeons, so they have low surgical volume to start with, and then much of that work is done in the office and not the ASC, Mr. Bishop says.
How it can work: Many gynecologists have dropped deliveries and focus on surgery. They could be a boon to the ASC if they perform those procedures in the ASC rather than in the office.
View the Healthcare Appraisers survey (pdf).
ASC advisors, however, caution that even undesirable specialties have a silver lining and can function well for certain ASCs. Here is a list of the five "worst" specialties for ASCs, based on a few ASC advisors' assessments as well as results from the 2010 ASC Valuation Survey by Healthcare Appraisers. (The survey was completed by 17 ASC companies representing more than 500 surgery centers throughout the country.)
Each listing here also includes advisors' thoughts on how a seemingly undesirable specialty could work. Do you agree with these rankings? Please send your thoughts and feedback to rob@beckersasc.com .
1. Plastic surgery
What makes it bad: Plastic surgery was voted the least desirable specialty by far in the Healthcare Appraisers survey, with 82 percent calling it undesirable and no one seeing it as desirable. Chris Bishop, senior vice president for acquisitions and business development at Blue Chip Surgical Center Partners in Cincinnati, agrees with this assessment. "You'd be shocked at how many centers lose money on every single plastics case they do," he says.
Plastic surgery's poor reputation has a lot to do with its payment structure. Cosmetic surgery, a big part of plastic surgery, is paid out-of-pocket. Plastic surgeons charge a global fee, which then has to be shared with the ASC. "That means you have to negotiate with your surgeon-partner, which is not something you should have to do," Mr. Bishop says. "You don't want your surgeon-partner on the other side of the table."
It's an uncomfortable negotiating position that often allows plastic surgeons to get a big chunk of the fee, he says. Mr. Bishop says many hospitals and poorly managed ASCs agree to a payment of $600 an hour for a plastic surgery case, well below his rule of thumb of at least $1,000 an hour.
Moreover, "the plastics guys tend to be artistes," Mr. Bishop says. "They're going to take a little more time on these procedures," which means even less money for the ASC. Jon Vick, president of ASCs Inc. in Valley Center, Calif., basically agrees with that assessment. "Not only are plastic surgery procedures often money losing, but they can tie up many hours of OR time," he says.
How it could work: Mr. Vick says plastic surgery could work if the center holds out for a reasonable facility fee. "The fee you negotiate has to be in line with what you get for procedures in other specialties," Mr. Vick says. He also advises picking highly regarded plastic surgeons who don't have to drive down their global fees to attract patients. "The better the plastic surgeon is, the less price-sensitive his patients will be," he says.
Mr. Vick advises choosing plastic surgeons who perform a lot of reconstructive surgery, which is covered by insurers. Mr. Bishop adds that breast reductions often are covered by insurers and can be profitable.
2. Oral surgery
What makes it bad: Oral surgery was not covered in the Healthcare Appraisers survey but it scores at the bottom in Mr. Bishop's book. "Oral surgery has very low volume," Mr. Bishop explains. A busy oral surgeon can do only 40-50 cases a year. "That can't justify the expense of the equipment," he says. Furthermore, reimbursement doesn't cover costs. He says many oral surgery patients are covered by Medicaid, and even those who are private pay represent too little volume to justify putting the ASC's negotiating clout on the line to obtain higher rates.
How it could work: Mr. Bishop insists there is no way to make money on oral surgery. His company did a 60-day trial for oral surgery. "Six cases were done and we lost money on each case," he says. "The reimbursement didn't even cover our time or supplies, much less the equipment."
3. Urology
What makes it bad: Urology was the second least desirable specialty in the Healthcare Appraisers' surgery, but with an 18 percent undesirable rate, it stood head and shoulders above plastic surgery. Mr. Vick says a lot of urology procedures can be done in the office. Urologists may be tempted to do those procedures there because the professional fee is higher. In some cases, he says, ASCs have had to force physicians who move cases to their office to sell back their shares and leave the center.
How it could work: Urologists who faithfully do their cases in the ASC should not be a drain if rates are negotiated properly. Moreover, Mr. Bishop says a urologist who also does a few cases of lithotripsy can be very profitable for the center.
4. Podiatry
What makes it bad: "I would not spend the time to recruit a podiatrist," Mr. Vick says. Due to their low volume, "they're not a good source of income for the surgery center." Mr. Bishop says a busy podiatrist does only 80-100 cases a year. Podiatry makes up an average of 4 percent of all cases in ASCs, according to VMG health.
"Podiatrists tend to be more technical than surgical," Mr. Vick adds. "They don't have an MD degree and a lot of them do things like designing orthotics inserts for shoes. In an ASC, they typically don't pull their weight."
How it can work: "If you can find a very busy podiatrist, one who does a lot of surgical cases, he might work out," Mr. Vick says. Almost 60 percent in the Healthcare Appraisers survey viewed podiatry as desirable and just 12 percent found it undesirable.
5. Gynecology
What makes it bad: With a 12 percent undesirable rate on the Healthcare Appraisers survey, gynecology ties with podiatry, GI and ophthalmology, but it has lower desirable rates than the others. Gynecologists who still do obstetrics are only part-time surgeons, so they have low surgical volume to start with, and then much of that work is done in the office and not the ASC, Mr. Bishop says.
How it can work: Many gynecologists have dropped deliveries and focus on surgery. They could be a boon to the ASC if they perform those procedures in the ASC rather than in the office.
View the Healthcare Appraisers survey (pdf).