Conversions of provider-based entities (i.e., hospital outpatient departments (HOPDs)) to freestanding ambulatory surgery centers (ASCs) are on the rise.
The contributing factors largely overlap with the reasons why hospitals and health systems are planning to increase their investments in ASCs in general, according to the results of the "Avanza Intelligence: 2020 ASC Joint Venture Survey." Among them: increasing outpatient surgical capacity, responding to consumer-driven trends, enhancing physician relationships, and reducing costs. Converting an HOPD rather than building a new facility also offers savings in capital and often, in places where it is a concern, can expedite state approvals.
These were significant motivating factors prior to the pandemic, and they have likely taken on greater importance over the past year. Hospitals have experienced significant revenue losses, with researchers projecting hospital outpatient revenue to contribute the most to overall revenue losses. With the way healthcare is heading, a strong argument can be made that all hospitals and health systems need at least one ASC in their portfolios if they want to be competitive with patients, payers, and physicians they want to recruit.
The ASC model that is most common and often the most successful following an HOPD-to-ASC conversion is one that includes physicians who have a meaningful ownership interest in the surgery center. When physicians and a hospital jointly own an ASC, the physicians will be more driven to grow the center, control costs, and improve efficiencies as they will reap some of the financial rewards of achieving surgery center success.
But, as the aforementioned "2020 ASC Joint Venture Survey" found, we are also seeing an increase in the development of ASCs that are 100% owned by hospitals. To facilitate a faster conversion, a hospital may start off as the sole owner throughout the development process and once the ASC is opened, physicians can be offered ownership. If a hospital decides to go this direction, it is strongly recommended that they engage potential physician users during the development process so that their opinions on things such as renovations, selection of vendors and staff, and other key decisions are taken into consideration. This will help physicians feel a sense of ownership in the surgery center, regardless of whether they eventually become actual owners.
Success with converting an HOPD to an ASC not only requires substantial work and buy-in and engagement from all parties, but also an understanding of some of the most significant ways HOPDs and ASCs differ. A poor start for an ASC can cast doubt over the future of the project and whether it can meet the short- and long-term needs of all parties.
Here are six of the central ways these outpatient surgical models differ and recommendations for how you may want to approach them in your conversion to an ASC, broken down by operational and business office factors.
3 noteworthy operational differences
Organization: HOPDs are often run like a small hospital, with individual departments and significant involvement from leadership. Carrying this organizational approach over to the ASC could cause problems.
Work to avoid "hospitalizing" the ASC by limiting involvement from hospital department leaders in the development process and beyond. Typically, they will not need to be involved with the ASC unless the surgery center specifically buys those services from the hospital. In this case, the ASC will need to have a written agreement with the hospital for the services and pay fair market value for their delivery.
An ASC should be run more like a small business than a hospital. Within an ASC, there aren't typically "departments" supporting operations. Rather, ASC staff, under the direction of the administrator and ultimately the governing board, take on operational responsibilities in addition to clinical care. If outside support is required, the hospital departments and independent third-party vendors should be invited to submit proposals to provide those services.
Clinical staffing: Hospital leaders often assume that the existing HOPD staff will move into comparable roles in the ASC. Proceeding with such a plan is unwise.
The reasons: Typically, ASCs require fewer staff due to cross-training, less complicated procedures than those performed in HOPDs, and cases and patient recovery that is often quicker. The ASC won't be operating under the hospital's license and will be structured as a separate company from the hospital — and probably a for-profit one at that. HOPD staff should be asked to apply for a position at the ASC like it is a new job. You should try to have some staff with ASC knowledge and experience, so you will want to fill some positions with external applicants.
Redundancy: An HOPD — when treated as an extension of the hospital — is often set up and organized with the mindset that the facility should be prepared to handle any outpatient care situation at any time.
When you are choosing to convert an HOPD to an ASC, ensure that all parties involved understand and remember that an ASC, by definition, only sees scheduled, non-urgent cases and is typically open "retail hours" (e.g., Monday–Friday, 7 am–5 pm). Therefore, there is no need for the same level of operational redundancies in equipment, supplies, and staffing required at a hospital that is always open and capable of delivering a wide range of care.
While not ideal, ASC cases can be postponed in rare situations, such as when a piece of equipment breaks or supplies are not delivered on time. With careful planning, which is easier in an ASC since cases are non-urgent, such postponements can usually be kept to a minimum.
3 noteworthy business office differences
Software: HOPDs typically use the same software — or software from the same family — as is used by its parent hospital. This helps with ease of integration and reporting with the hospital. The hospital will often then push for the continued usage of this hospital-designed software for its ASC. Meanwhile, physicians sometimes suggest using their office software in the ASC because it is familiar and less expensive.
However, it is imperative that the software used in the ASC is ASC-specific software. ASCs have specific requirements in business and clinical areas not necessarily provided in other platforms. Information often requested in hospital-based software is overkill for an ASC. Asking ASC staff to navigate inapplicable pages, forms, and data fields can significantly impact efficiency and productivity. Physician office platforms lack some of the essential pages, forms, and data fields required in an ASC, forcing staff to develop workarounds or manually enter information, reducing productivity and increasing the potential for errors.
A thorough investigation of ASC software options should be performed by the ASC's management team — both business and clinical — with input from all stakeholders: hospital and physicians.
Business office staffing: HOPDs are accustomed to having hospital departments perform their revenue cycle functions, including scheduling, insurance verification, patient financial counseling, upfront collections, coding, billing, and third-party and patient collections.
These functions should now be performed by ASC business office staff or an ASC revenue cycle management outsourcing company because surgery center revenue cycle management is significantly different from hospital revenue cycle management. If you choose to perform business office functions in house, this will likely necessitate employing new staff. In an optimal situation, employees will possess ASC experience to help ensure successful completion of responsibilities and allow the movement of business office staff between various roles and tasks, as needed. Such movement is commonplace in ASCs, where staff often wear or can be asked to wear "multiple hats."
If the ASC's owners choose to continue with the existing HOPD business office employees, understand that they will likely have a different perception of duties than what will be required of them for the ASC and will need to be educated on flexibility of task-sharing and ASC job descriptions and policies/procedures.
Budgeting: ASCs must work more efficiently than HOPDs as commercial payers generally reimburse surgery centers at lower rates than HOPDs for the same procedures.
When budgeting for the ASC business office, wages and benefits must be competitive. However, as already noted, ASCs typically work with a smaller staff than HOPDs and often shorter (retail) hours, so budgeting should typically account for fewer overall employees.
If you take such an approach with the ASC's business office budgeting, the staff who are hired must be capable of and willing to perform essentially all the revenue cycle tasks that hospital departments provide for HOPDs and do so in a timely manner. The inherent experience, accuracy, and timeliness required often motivates some ASCs to outsource some or all revenue cycle tasks.
Outsourcing not only helps with budgeting, but it can avoid potential stress points between a hospital and physicians. By outsourcing, there is no debate about whether to use hospital or physician office staff to perform ASC duties (the latter of which could be problematic since an ASC must be treated as a separate entity from the practice). Shared staffing can create revenue cycle changes when staff complete tasks following rules and processes for one entity when they should be following the rules and processes of the ASC. In addition, outsourcing allows a hospital and physicians to work together on behalf of the ASC in partnership with the revenue cycle management company, with both groups appreciating the value of the outsourced service, rather than one group potentially becoming unhappy with the performance of the other group.
Additional quick thoughts
Here are a several more thoughts on what can help make a hospital-owned ASC succeed:
• Dedication by both hospital and physician leaders is critical
• Listen to all stakeholders who can impact the success of the ASC
• If you are forming a joint-venture ASC, engage a third party to serve as a liaison between the hospital and physicians, preferably one with ASC joint venture experience.
• Hire an ASC-experienced administrator
• Involve the hospital's insurance department in managed care negotiations
• Leverage hospital relationships for contracted services
• Weigh the value of outsourcing services — including revenue cycle management, information technology, and physician credentialing — to reduce costs and internal management responsibilities
Keep your eyes on the right-sized prize
ASC success will be largely dependent upon the ability for the owners to acknowledge and remain focused on the significant differences between hospitals and ASCs. The difference between a hospital and an ASC can be compared to that of an aircraft carrier and a small sailboat. To change directions for an aircraft carrier, you plan far ahead, make numerous calculations, and do not see immediate results. To perform the same task for a sailboat, it often just takes one person pulling a rope. That's the way an ASC should operate: nimble, efficient, and accommodating.
ASCs are well-positioned to thrive in today's healthcare environment. Consumers and payers alike are looking for lower-acuity, less expensive sites for outpatient surgery, and ASCs fit that to a T. Hospitals have a great opportunity to partner with physicians, convert their HOPDs into ASCs, and end up with a site for surgery that is primed for success.
By bringing together the right people — internally and externally (when necessary and beneficial) — and carefully addressing the unique qualities of ASCs, hospitals and physicians will put themselves in a strong position for ASC success.
Joan Dentler (jdentler@avanzastrategies.com) is president and CEO of Avanza Healthcare Strategies, which provides healthcare organizations with strategic guidance, with a focus on outpatient services. For more than 25 years Ms. Dentler has been consulting on, developing or operating ambulatory surgery centers, hospital outpatient services and community health initiatives.
Caryl Serbin (caryl@serbinmedicalbilling.com) is president and founder of Serbin Medical Billing, an ASC revenue cycle management company. Serbin Medical Billing's primary objectives are to provide the best coding, billing, and accounts receivable management services available to ambulatory surgery centers (hospital joint-venture, corporate-owned, or independent) and anesthesia providers. Ms. Serbin has been a leader in the ASC industry for 30 years. She was the founder of the first ASC-specific billing company.