When the Lutheran Campus Ambulatory Surgery Center (LCASC) opened in Wheat Ridge, Colorado in late 2005, it appeared poised for success. Having interviewed several management companies, the joint-venture ASC selected the one it believed would maximize returns for the facility’s investors. It didn’t take long for visions of a successful ASC to fade. “We opened the ASC and the management was horrible,” recalls orthopedic surgeon Thomas Fry, M.D. LCASC experienced losses of more than $1 million in 2006 and more than $1.4 million in 2007.
What Went Wrong
With LCASC heading toward bankruptcy, Pinnacle III was brought in to conduct an operational audit. “The center never realized the volume they projected in their pro forma. Their staffing didn’t meet the needs of their physicians. They had a difficult time collecting revenue on the cases that were being performed. They were paying way too much for supplies. With all of these problems, they dug themselves into a hole and were unable to pay their bills,” says Pinnacle III President & CEO, Robert Carrera.
After reviewing Pinnacle III’s recommendations for change, the leaders of LCASC elected to remove the existing management company and enter into a six-month agreement with Pinnacle III. When Pinnacle III assumed management in 2008, the center projected a loss of nearly $2 million.
Pinnacle III Quickly Got to Work
“We went out and heavily marketed to physicians,” Carrera says. “We evaluated existing staff and worked on growing the physicians’ confidence in their team while simultaneously building the staff’s confidence in the ASC’s leadership. We focused on improvements in a number of other areas as well, including customer service, policies and procedures, materials management, and the facility’s overall culture.”
To address its revenue cycle problems, LCASC contracted with Pinnacle III’s centralized billing office, Specialty Billing Solutions (SBS). SBS trained LCASC’s staff to adhere to defined collection parameters on new accounts. Their trained ASC coding and billing staff performed “forensic collections” on existing accounts including re-evaluating all write-offs and reprocessing claims that had not been properly processed to ensure as much money was collected as quickly as possible.
Building on Success
Due to the renewed focus on facility operations and revenue cycle management, the center ended up cutting its projected 2008 loss by 75 percent. “We still had some problems to overcome, but the hemorrhaging had stopped,” Dr. Fry noted. After six months had passed, LCASC extended their management agreement with Pinnacle III who continued to implement improvement measures.
Turnaround efforts continued with LCASC undergoing refinancing and re-syndication in the years that followed. In 2012, more than $1 million was distributed to the investors. Similar distributions have continued through the present day.*
“We went from a cash call to paying dividends for four straight quarters and showing a profit,” stated Dr. Fry. “I relate that totally to the changes that Pinnacle III identified and put into practice. Specialty Billing Solutions has made a tremendous difference as well. Their expertise and hard work really turned things around for us. It’s hard not to be happy with the difference between a cash call and a dividend payment.”
*From 2012-2016, distributions to investors have topped $1 million each year.
Pinnacle III has managed The Lutheran Campus Ambulatory Surgery Center for 8 years. For the full white paper, “ASC Turnaround: Lutheran Campus Case Study,” visit www.pinnacleiii.com/white-paper.