Monthly Archives

October 2017

ASC Vendor Contracts – How to Track Service and Save Time!

ASC Vendor Contracts – How to Track Service and Save Time!

By | ASC Management | No Comments

Surgery center stakeholders expect administrators to proactively evaluate ASC vendor contracts and continually assess vendor performance to ensure their ASC is receiving high-quality services. These tasks not only ensure ASC operations run smoothly and cost effectively but maintain compliance with expected quality metrics.

ASC vendor contracts are defined as services obtained from an agency or vendor external to the facility. Examples of vendor contracts your surgery center may hold include laundry, environmental services, transcription, medical waste disposal, lab/pathology, etc. Your medical supply distributors also fall under the vendor classification.

While this task may seem time-consuming and onerous, here are some ideas on how to streamline the process of regularly assessing if your vendors are meeting your needs.

First, get organized. A best practice is keeping all your ASC vendor contracts in one location where they can easily be accessed. A hard copy contract binder or an electronic folder with multi-user access may meet this need. Establish a master list or spreadsheet of all the service contracts held by your facility. Include information for each vendor – contact information, expiration dates, billing cycles, and service(s) provided. File the master list at the front of your contract binder or on your computer desktop for frequent reference. This list will come in handy for monthly OIG verifications and periodic quality reviews.

Your facility’s quality plan should include an annual review of your ASC vendor contracts. Tracking the quality of the services provided by external vendors is essential. This is because the facility holds ultimate responsibility for the provision of quality services regardless of who is supplying them.

To assess ASC vendor quality, set up one or two measurable, mutually-agreed upon benchmarks or goals. For example, you might establish a benchmark with your laundry service to send no more than ten pieces of torn or unusable linen items to your facility per quarter. Or, you may want to track the return rate of your pathology reports to determine if they are received within the contracted terms. You could track your medical supply distributor’s fill rates to determine if they are meeting your expectations. Tracking controlled variables may prompt you to establish other benchmarks and formalize them in your service contracts. Schedule periodic meetings with your vendors to share measurable results and any new expectations.

Once quality measures are established, add them to your master list. Leave extra space to record the status of each quality measure and a section for comments regarding quality or service. Make sure any poor or unsatisfactory ratings are backed up with specific comments. Explain any non-compliance issues by comparing them to your set standards. Remember to document positive comments for excellent service.

Review poor ratings to determine if there are any trends in declining service. The service review process and subsequent actions taken may lend itself to a quality improvement study. You can use these trends to decide if you need to meet with vendors for corrective action or if it’s time to vet out other vendors for a possible change in service. Be careful not to jump to conclusions. Give vendors a reasonable amount of time to address identified issues.

Combining quality indicators and service assessment into an ASC vendor spreadsheet makes annual presentations to your governing body organized, concise, and relative. This tool also serves as a tremendous time saver because you can proactively address ASC vendor contract expirations, quality assessments, and service expectations. Last, but certainly not least, this system allows you to identify problems early and establish improvement plans with your vendors. If efforts to improve fall short, recommendations to the governing board to change vendors are more likely to be met with support and buy-in due to your continuous documentation, due diligence, and assessment.

Implementing this process will earn you a pat on the back for saving time, while simultaneously addressing quality, due to your strong planning and organizational skills. That’s a win-win for everybody!


Kelli McMahan, VP of Operations

Outpatient Care: The New Business Model for Hospitals

Outpatient Care: The New Business Model for Hospitals

By | ASC Development | No Comments

The September 25th addition of the Wall Street Journal published a thought-provoking article about large hospital corporations developing outpatient facilities. The article, “Warding off Decline, Hospitals Invest in Outpatient Clinics” by Melanie Evans, indicates this outpatient migration includes ambulatory surgery centers (ASCs), urgent care clinics, and freestanding emergency rooms (ERs).

There are several interesting points raised in the article for hospital executives, physicians, and current operators of ASCs to consider.

The increase in patient responsibility

The patient’s role in controlling health care costs is increasing. It can be seen in the proliferation of high deductible insurance plans and the push to make consumers more aware of the cost of their care. The article cites RBC Capital Markets’ managing director, Frank Morgan, and the California Employees’ Retirement System (Calpers) as sources touting the responsive move by hospital operators toward providing more care in the outpatient setting. This trend has presented both challenges and opportunities for Pinnacle III’s clients. Several years ago, as patients quickly became the second most prevalent health care payer behind the federal government, we focused our partnered ASCs on the need to effectively collect patient deductibles and copays. Doing so preserved the cash flow necessary to sustain ASC operations. We also worked with our clients to improve their outbound messaging to educate the public about the cost-effective options offered by ambulatory surgery centers.

ASCs fill the need for additional options for access

While ASC development dipped a few years ago, as noted in our previous blog publications and identified in Ms. Evans’ article, this sector is growing again. The increase in patient responsibility has led many patients to actively seek out lower cost options for care. Ambulatory surgery centers address that need. Additionally, payers are encouraging patients to utilize ASCs and other outpatient venues to reduce their costs. Hospital systems and physicians witnessing this transition are identifying needs in underserved area as opportunities to grow their market share. As Ms. Evans states, this is all done, “In an effort to strengthen their hold on their market and prevent rivals from siphoning off patients.” For these reasons, we continue to experience robust de novo growth of ASCs throughout the country.

Improved technology

The article briefly acknowledges that technological improvements are driving some of this change. This point is not taken lightly by Pinnacle III. The migration of high acuity cases from the inpatient setting to the outpatient arena is a significant driver in both the growth of ASC volume and the increase in de novo activity. To move high acuity cases safely to the outpatient setting, advancements in medical technology are a necessity. Technological improvements also increase time effectiveness for physicians and provide enhanced convenience and comfort for patients. The types of care offered in outpatient settings will continue to grow as more states evaluate the efficacy of convalescent care or recovery centers as optional add-ons for ASCs. Finally, significant growth will occur once CMS begins to encourage the transition of total joints to the ambulatory setting.

While several factors are at play, one thing is clear – the health care industry is experiencing rapid growth in outpatient care, driven by hospitals, physicians, patients, and payers alike. Ms. Evans’ article provides a wakeup call to some, and validation to others, of the need to clearly define the outpatient strategy for their practice or system.


Robert Carrera, President/CEO

1Wall Street Journal article March 29, 2017 Warding Off Decline, Hospitals Invest in Outpatient Clinics; https://www.wsj.com/articles/warding-off-decline-hospitals-invest-in-outpatient-clinics-1506331804

ASC Real Estate Ownership v. Leasing – What’s Best for Your Business?

ASC Real Estate Ownership v. Leasing – What’s Best for Your Business?

By | ASC Development, ASC Governance | No Comments

Surgery center investors, like other business owners, must weigh the pros and cons of leasing or buying the space in which an ambulatory surgery center (ASC) resides. How does one decide which option is best? Investors who understand the financial impact ASC real estate ownership or leasing is likely to have on the short- and long-term development of their business project are better equipped to make sound decisions. Only then can investors thoughtfully examine other reasons for either leasing or owning their ASC space. Let’s explore the considerations of both options.

Leased ASC Space

Leasing space for an ASC from an unrelated third party is typically the most straightforward option. It avoids many of the additional steps required in the ASC real estate ownership model described below. Best practice allows the prospective owners to determine a geographic location that ensures the greatest potential for physician partner participation. The ownership partnership then locates a space that will meet its needs – no more, no less. The ASC partnership evaluates the lease rate of the space as well as the construction costs required to convert it to an operating ASC. Costs are then evaluated against the project pro forma to determine if the space best meets the identified needs and desired financial outcome.

Owned ASC Space

The second option is an ASC real estate ownership model in which the ASC LLC, or some portion of its members, own the space where the facility will be located. This model, while providing equity, presents a few challenges and considerations for the ASC investor group.

  1. Fair market value: Regardless of who owns the space, the terms of the lease must represent fair market value for like-space in the area to ensure the entity does not run afoul of federal Anti-Kickback laws. The health system partner cannot subsidize the ASC partnership with artificially low rent; nor can the ASC partnership pay an inflated rental rate in space owned by some, or all, of its physician investors or a potential referral source.
  2. Location, Location, Location: The old real estate adage holds true in our business as well. The location of the facility is the most important factor when considering ASC real estate ownership. I have seen some centers struggle, and others fail, because fifteen minutes is too far for the partners to drive. I have also worked with partnerships who are convinced a location twenty minutes away is the better option because the ASC real estate ownership deal makes more sense for those physicians. The bottom-line? The best location is the one that will be consistently utilized.
  3. The ASC is the primary business: A business owner once told me he would have been more successful if he had made fewer of his business decisions based on the fact that he owned the building. While real estate ownership may be attractive, if the ASC meets the expectations of a well-vetted pro forma, its returns should far outpace that of the real estate investment. Thus, the primary concern for the ASC LLC partnership should be the location and lease terms that make the most financial and operational sense for the ASC.
  4. Ownership structure: Many times, ASCs include the ASC real estate ownership in the ASC LLC partnership. In every one of these instances, problems arise down the road. Our advice, while not always accepted, is to have a separate LLC own the real estate. The real estate partnership can then lease space to the ASC LLC at fair market value. The real estate entity can be structured in a number of ways – owned by the ASC LLC partners, a subgroup of partners, an individual partner, or another similar arrangement. The benefit is this structure will allow the real estate to be dealt with separately from the ASC.

Owning versus leasing the real estate in which your business operates is never an easy decision. ASC owners must consider a variety of factors, including which option makes most financial sense and what will best serve its customers, physician partners, and patients. Carefully weighing all options will yield the best outcome when deciding if you should lease or buy space for your surgery center.


Robert Carrera, President/CEO

Safe Medication Practices: Understanding CMS' Standard for ASCs

Safe Medication Practices: Understanding CMS’ Standard for ASCs

By | ASC Management | No Comments

Highly publicized instances of patient complications associated with compounded sterile preparations (CSPs) have increased scrutiny of safe medication practices in ambulatory surgery centers. Citations are being issued related to safe medication preparation and administration. There is confusion, even among surveyors, on the use of some multi-dose medications, such as eye drops.

In CfC 416.48, Centers for Medicare and Medicaid Services (CMS) clarifies that ASCs must provide drugs and biologicals in a safe and effective manner, in accordance with accepted professional practice, and under the direction of an individual the ASC has designated responsible for provision of the ASC’s pharmaceutical services. In the same CfC, CMS indicates drugs must be prepared and administered according to established policies and acceptable standards of practice. To meet the standard set forth in CfC 416.48, ASC Clinical Directors will want to consider this list of safe medication practice guidelines.

Safe Medication Standards of Practice

  1. Designate a licensed staff member to oversee your pharmacy program. Make sure this individual is routinely present in your facility. Follow your state regulations as they relate to the need for a registered pharmacist. Regulations vary from state to state. Some states do not require a registered pharmacist and some, like Texas, require a weekly consult.
  2. Maintain appropriate records for the ordering, receipt, and disposition of scheduled II, III, IV, and V drugs.
  3. Understand that single-dose medications/vials (SDV) are to be used immediately upon opening, on one patient only, and then discarded. Once opened, they cannot be stored for any period of time.
  4. Date multiple-dose medications/vials (MDV) upon opening with the beyond use date. Do not take a MDV into an immediate patient care area. If this occurs, that MDV becomes a SDV for that particular patient.
  5. Ensure staff are aware of the definition of a MDV – “A vial of liquid medication intended for parenteral administration that contains more than one dose of medication.”This does not apply to eye drops. Adherence to this guideline will prevent confusion in a survey.
  6. Create a policy and procedure for the administration of eye drops. Conduct staff training on the process.
  7. Review and be knowledgeable of the questions on the CMS infection control surveyor worksheet found in Exhibit 351.

United States Pharmacopeia Chapter 797 (USP 797) provides guidelines on compounding sterile preparations in ASCs. It is acceptable for a center to compound for immediate use, but the following rules apply:

  1. The compound sterile product (CSP) must be intended for immediate use or an emergency.
  2. The CSP cannot be stored for the purpose of anticipated need or batch compounding.
  3. No more than three (3) commercially available sterile products in original container and no more than two (2) entries into any container/package/device can occur.
  4. Continuous process must be completed within one (1) hour.
  5. Adhere to aseptic technique.
  6. Administer within one (1) hour, or discard CSP.

Examples of immediate use CSPs are antibiotic solutions, blocks, and irrigating solutions. Dilating solutions may also fall into this category. The development of best practices for immediate use CSPs is important and should be included in training and competencies for licensed staff involved in the preparation, transportation, and/or administration of CSPs.

The area where CSP preparation takes place should be quiet and free from distractions. The designated staff member should disinfect the area, complete proper hand hygiene, and wear appropriate personal protective equipment (PPE). The entry ports must be disinfected. Calculations should be verified to ensure accurate mixing takes place. Proper labeling must occur prior to removing the CSP from the preparation area and administering it to the patient.

To ensure safe medication practices and compound sterile preparations are compliant with CMS regulations, ASC clinical leaders may find it helpful to refer to the lists above. Additional information on CMS guidelines is available via the CMS infection control surveyor worksheet and the CMS website.


Jovanna Grissom, Vice President of Operations