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ASC Development

Hiring an ASC Clinical Director

Hiring an ASC Clinical Director

By ASC Development, ASC Management, Leadership No Comments

Recently I took some time to reflect on what I’m grateful for. The long list I came up with included my ASC clinical director.

Our clinical director does a lot for our center. She certainly makes my job as administrator easier. Concerns have never been raised about her work ethic and performance. I wouldn’t think twice about leaving the ASC under her command for an extended period of time. I know that, if an issue arises, she can effectively address it or find the resources to do so. You can’t put a price tag on that peace of mind.

An ASC clinical director is a highly important function within the facility. Finding the right person for this role can be difficult. The clinical director must possess a variety of qualifications related to both clinical and business operations. To find the optimal clinical director for your ASC, I have listed characteristics to hone in on during your search.

Clinical Director Characteristics

Several characteristics clinical directors should possess to help them succeed in their role are outlined below.

Relevant clinical background. The clinical director should have a solid understanding of their center’s specialty(ies). For example, at an endoscopy center such as ours, our clinical director’s gastroenterology background is valuable. If you work in a multi-specialty center, the clinical director should possess a broad surgical and PACU background.

The appropriate clinical background allows the clinical director to:

  • Understand the roles and responsibilities of their staff;
  • Fill in for clinical staff members if someone calls in sick or needs to take a break;
  • Understand how to meet the needs and requirements of physicians in their respective specialties;
  • Earn respect from staff and physicians because of a demonstrated knowledge and experience with the specialty(ies);
  • Support the delivery of high-quality care; and
  • Help the center meet accreditation and regulatory requirements.

Eagerness to learn. ASC clinical directors typically work their way into the position by ascending the ranks of the clinical staff. Clinical directors often do not possess a strong business background as they move into this leadership position. To perform successfully as a clinical director, though, one must understand the business side of running an ASC. This includes budgeting, expense monitoring, and third-party payer contracting and reimbursement.

A clinical director must embrace learning. Your ASC will benefit as your clinical director learns the ASC business and incorporates new knowledge into his or her approach to clinical responsibilities. A clinical director who is motivated to go outside of his or her comfort zone in the learning process contributes to the ASC’s success and is worth his or her weight in gold.

Responsiveness. ASC clinical directors should be responsive to their physicians and staff. They must know how to recognize when issues are developing, such as a dissatisfied physician or poorly performing staff member. They must also know how to deal with these issues in a timely fashion to avoid them becoming more significant problems.

For example, a clinical director should recognize when a physician is becoming busier and adding cases. Such a development touches on many aspects of an ASC’s operations. It may require hiring more staff, allocating more block time, and/or purchasing more supplies. The clinical director is not expected to address these potential developments independently. Rather, they may research the development and speak with other members of the ASC team about actions to effectively accommodate the growth.

Proactiveness. Strong clinical directors can foresee future challenges and know how to act in advance. When a clinical director is new to the position, these challenges may primarily be clinical in nature. The longer the clinical director is in the position, the more he or she should consider business and operational issues as well.

Effective communicator. Clinical directors should be strong communicators, an important ability for effective leaders. They must know how to engage in clear communication with everyone in the center, including physicians, staff, vendors, patients and their families.

Remember, effective communication is a two-way street. A clinical director should feel comfortable approaching others and promote an environment where others feel comfortable approaching the clinical director.

Giving Thanks for My Clinical Director

Our center recently went through an unannounced CMS survey. We were understandably stressed when it occurred, but no one panicked. The staff performed their job duties and provided the high-quality care that they do every day of the year. The physicians expressed complete confidence in the performance of the staff and the leadership of the clinical director. We passed the survey with no deficiencies.

This experience demonstrates how well our clinical director performs. ASCs typically have a small group of physician owners. The physician owners are likely to be critical of the clinical director because it is a clinical role. A successful ASC needs its physician owners to be confident in the clinical director’s leadership and ability to help run the center. If staff members feel the same way, employee turnover rates tend to be low. When staff members like their leaders and work environment, they’re not going to leave.

Patients notice this dynamic. They often comment, “You all seem to like your jobs and have fun here.” That speaks to how the center is managed and how ASC staff members feel about their culture and work environment. Much of this hinges on the presence of a strong clinical director.

Catherine Sayers, Director of Operations

ASC Lifecycle

The Lifecycles of an ASC

By ASC Development, ASC Management, Leadership No Comments

ASCs, like any other entity or organization, have lifecycles. I’ve found each stage in a typical ASC’s lifecycle lasts about ten years, give or take a year. As each stage of the ASC lifecycle draws to a close, a variety of issues generally begin to appear. Each of these issues need to be dealt with to prepare the ASC to enter into and thrive in its next lifecycle stage.

The Physical Plant

Diane Lampron, Director of Operations at Pinnacle III, recently posted a blog about the physical challenges of an aging ASC. The physical challenges include issues that arise with outdated and aging medical equipment, IT equipment and systems, facility design/aesthetics, etc. I won’t rehash the details; however, I encourage you to access her insights

The bottom line? ASC administrators and governing boards need to proactively consider how they will deal with looming physical plant issues, both logistically and financially, before they become insurmountable nightmares.


Most new ASCs located in leased space begin with a ten-year lease with options to renew lease terms at a later date. As the ten-year mark approaches, it behooves the facility’s investors and board of managers to begin considering whether their existing space meets the partnership’s current and expected needs. Much may have changed over the ASC’s initial ten years of operations. An ASC re-examining its space and lease agreement might consider the following –

  • Is the current space too small or too large based on case volume and OR utilization?
  • Is the current geographic location still desirable?
  • Are there physical plant issues?
  • Are the physical plant issues such that moving (rather than repairing or renovating) is a better option?
  • What is the cost of relocation?

Any tenant improvement dollars provided by the landlord should be fully amortized – a fact that should be reflected in a new lease. For facilities located in space owned by the ASC’s members, the question is likely more focused on renovation or expansion. In some cases, the members may consider selling the building.

One size does not fit all. Different scenarios require different solutions. Here are three examples.

In 2016, the governing board of an ASC that was poorly designed, unattractive, and inefficient in its use of leased space, decided to move into a state of the art, investor-owned facility, despite the substantially higher cost. The new location was a new build, custom-designed for the ASC and one of its partnered physician practices. The reasons for the move included physical plant issues at the old site, improved efficiency at the new site, investment opportunities for partnered physicians, and aesthetic factors.

A facility owned by a physician partnership experienced considerable volume growth. In addition, its case mix significantly changed within a short period of time. The partnership anticipated these trends would continue. It elected to pursue a large expansion of its existing location to accommodate the ASC’s changing needs.

Finally, a leased facility used the option of relocating or downsizing its existing space as leverage to dramatically renegotiate its lease renewal.


There are numerous financial situations to consider as an ASC reaches the end of the first stage of its lifecycle. Generally, near the ten-year mark, the center’s original loans will be fully amortized and retired. Consideration now shifts to what to do with the additional cash that typically becomes available. Will extra revenue contribute to additional partnership distributions? Will funds be used to pay for some of the identified physical plant or space issues? Will future plans to address physical plant and space issues incur additional debt for the partners?

As was true with space considerations, a variety of situations can influence finance decisions at the end of an ASC lifecycle. A partnership may elect to take on the financial responsibility of a complete relocation at the time of their debt retirement. Or, the board, proceeding within its rights determined by their operating agreement, may opt to open a line of credit for the facility to handle larger unforeseen expenses so they can add the additional cash flow from the loan retirement to partnership distributions. Their plan may be to use the line of credit as a bridge if a need arises and address any draws on the line of credit with the additional cash flow.

Membership & Recruitment

ASC physician membership is one of the most serious issues a partnership may have to deal as it approaches the end of each lifecycle. At these junctures, many of the partnership’s original members may also be reaching a new stage in their personal lifecycle – considering retirement or moving, for example. The crisis level associated with physician membership is dependent on how successful the partnership has been with recruitment during the previous ten years. The manner in which an ASC and its board of managers deals with potential membership changes is critical to its longevity and its next lifecycle.

The most effective approach to the ASC lifecycle membership challenge is multi-faceted. It begins with continuous recruitment efforts throughout the entirety of the ASC’s business operations. It seeks physician and case volume recruitment targets from a variety of sources, including individual “free-agent” physicians, physician groups, and the introduction of new product lines.

Ideally, the physician retirement process begins with a review of, and familiarity with, the partnership’s operating agreement. Know the retirement requirements related to notice, investment buy out, etc. By staying well informed, the board will be prepared to act as it should. Conduct regular reviews of the ASC’s physician partnership roster. Begin communication with physician partners who may be indirectly mentioning retirement as well as those who appear close to retirement. Determine the impact their retirement will have on your ASC and develop an appropriate succession plan. Will their practice recruit an additional physician to make-up for the retiring physician’s case volumes? Is it possible for you to collaborate in that effort?


ASCs are governed by their operating agreements. And, like ASCs, the partnership’s operating agreement has its own lifecycle. A review of the agreement by the board of managers, the management company, and, in most cases, the ASC’s healthcare attorney is probably in order when a center begins to approach the end of one stage in its lifecycle and the beginning of another.

Questions to consider include: Are the provisions that made sense ten years ago when the ASC was newly launched still applicable now? Can the agreement be modified or re-written to better serve the ASC’s partners over the next ten years?

Examples of operating agreement and governance changes that occur during an ASC’s lifecycle are varied. Some centers adjust their non-compete radius to respond to growth in their community. Some facilities, with the assistance of legal counsel, adjust market value formulas to reflect changes in the market place. Partnerships who originally did not allow for entity physician investment may adopt investment concessions to accommodate the increased prevalence of physician group practices or LLCs. Partnerships may opt to allow management company membership by altering agreements that originally excluded these entities. Some ASCs that once had multiple classes of membership may alter their agreements in favor of greater equity recognizing that physicians have multiple ASC ownership options in their communities. Lastly, board of manager structures may need to change to allow for additional members or appropriate representation.

Be Proactive!

Change in life is inevitable. Change in business is expected. The end of a ten-year stage in an ASC’s lifecycle can signify a make or break moment. ASC lifecycle changes are best dealt with through anticipation and planning. The key to making it is to remain mindful of the many moving parts that require attention. Important areas to monitor include your ASC’s physical plant & space, finances, governance, and physician membership.

Plan ahead! In the ASC industry, it is better to be proactive than reactive. You will thank yourself in the long run if you are able to avoid and mitigate foreseeable issues at your aging ASC.

Robert Carrera, President/CEO

Matchmaker, Matchmaker: Finding the "Perfect" Surgery Center Team

Matchmaker, Matchmaker: Finding the “Perfect” Surgery Center Team

By ASC Development, ASC Management, Leadership No Comments

In the classic “Fiddler on the Roof” song “Matchmaker, Matchmaker,” Tevye and Golde’s daughters sing about a matchmaker finding husbands for them. The lyrics include the following line: “Matchmaker, matchmaker, look through your book, and make me a perfect match.” When tasked with building a new surgery center team, I play the matchmaker role.

My “book” is comprised of information on job seekers – a collection of resumes/CVs, interview notes, and insight from the candidates’ references. With this information, the pressure is on me to accomplish what those daughters ask for – perfect matches. I cannot simply choose who I think is the best clinical director, administrator, materials coordinator, operating room nurse, recovery nurse, and business office person on paper. These selections cannot happen in a bubble. Instead, I must do my best to ensure this initial set of team members will work well together. They will jointly create the desired culture for the ASC. And they will instill this culture in the staff members hired and trained after them, helping attract more likeminded individuals.

There’s a lot of pressure to get these initial hires right. I hope they will remain with the ASC for years, forming the foundation for the facility. When building a surgery center team, I focus on the following to increase the likelihood that I make the correct selections.

Ownership Expectations

During meetings with the ASC’s owners, I seek first to understand their expectations of the new facility. What does their optimal surgery center team look like? How do they envision the facility’s culture? What type of employees are they looking for to support that culture?

When PINNACLE III is the manager of the facility, I factor in our culture expectations as well. Defining an ASC’s culture isn’t easy. In my experience, if I take the time to understand expectations, I’ll gain the insight required to create the anticipated culture. In an ASC, it will likely include expectations of delivering the highest quality care via a skilled, efficient team who perform their respective roles with integrity.

Surgery Center Team Interviews

A resume or CV tells me about a prospective employee’s background. That background information is important – I want to hire competent, qualified staff. However, resume review is not the most important step in the hiring process. Candidates can appear quite impressive on paper but fall short of expectations in person. The interview process is the best opportunity to assess whether candidates fit the mold for the new surgery center team.

My interview questions aim to accomplish several objectives. I dig deep to truly understand how an interviewee will work for the ASC. My focus isn’t just be on short-term performance but the candidate’s potential longevity and adaptability as the center grows. What are their values? Do they place importance on honesty and integrity? Are they lifelong learners? How do they envision positively impacting the business? I’m looking for positive signs as well as potential warning signs.

I inquire about their previous employer’s culture. Coming from an organization with a different culture than the new ASC isn’t necessarily problematic. Depending upon the situation, it’s important to recognize that I may need to do a little work to address the effects of that culture, particularly if the candidate was not valued in their previous work setting.

I like to ask interviewees how they would act when faced with difficult situations I’ve witnessed firsthand in ASCs. For example, what would they do if they encountered a disruptive physician? What if the narcotic count was off at day’s end? What if a daily deposit didn’t match the books? I want to obtain an understanding of how they are going to respond during stressful events.

These types of questions serve two purposes, First, I hope their responses give me confidence that they will act responsibly. Second, I learn if they will respond differently than I would in a similar situation. If they turn out to be the right fit for the surgery center team, I have identified an area where this person may require some guidance.

My Presentation

When interviewing job candidates, I am typically the first, personal representation of the ASC. I am the face of its culture or, in the case of a new or developing ASC, its desired culture. I am likely all the candidates know of the surgery center team. If I want the ability to hire the candidates I determine are right for the ASC, I need to ensure these candidates view the ASC as a good fit as well.

With the low unemployment rate, health care professionals typically have at least a few, if not many, job options. Hiring is a two-way street. I need to ensure the way I present during the interview process reflects the way I want the ASC to be perceived. I believe it’s best to be clear and concise when interviewing. If I adopt an overly laid-back approach, I risk alienating individuals looking for structure. More laid-back candidates will still appreciate the professional manner through which I conducted their interview.

Achieving Surgery Center Team “Perfection”

While finding “perfect” matches may prove difficult, I want to come as close as possible with my initial hires. I would rather hold off on filling a position than make a “bad” hire. With bad hires, I often spend extra time and effort bringing them on, only to lose them after a short period. In a worst-case scenario, a bad hire can create untoward results in the ASC’s culture – gossiping, not focusing on personalized service, or not treating physicians as customers, for example.

That’s why the key for me is never to hire out of desperation. There’s no better way to find an imperfect match. Remember: When playing matchmaker for an ASC, the task is finding matches for the owners, other staff, and patients. And like that of a matchmaker, this is a responsibility not to be taken lightly.

Lisa Austin, VP of Facility Development

Why a Strategic Plan is a Good Idea for Your ASC

Why a Strategic Plan is a Good Idea for Your ASC

By ASC Development, ASC Management, Leadership No Comments

A strategic plan is a valuable resource for every business. Ambulatory surgery centers are no exception. A business strategic plan is a tool that outlines the organization’s progress to date, the current market landscape including information on competitors, the strategic priorities for the future, and plans for addressing challenges and opportunities. In each of these assessment areas, the business is viewed from a multi-faceted perspective, focusing on elements such as sales, consumer behavior, finances, quality, and business development. In an ASC, these elements may translate as physician alignment/recruitment, patient satisfaction, finances, quality, and new service lines.

Developing a strategic plan requires an investment of resources. Most notably, the time and commitment of some of the most highly skilled people in your organization. It is important for team members working on the plan to invest the time required to examine the organization and make informed decisions about its focus and direction.

Here are some of the benefits that come with creating a strategic plan for your ASC.

Charting the Course

A strategic plan sets a direction or course for the ASC’s leaders. It allows for the prioritization of growth initiatives and defines how success will be measured. In a sense, it helps people throughout the organization understand what they should be working on and in what order. Without a clearly defined plan, you may find your priority initiatives, the ones that drive the highest success, are being given secondary treatment. For example, if cost containment is a high priority for your ASC, your strategic plan might state you will create awareness of and movement toward achievement of that goal through employee education. Specifying how often employee education will focus on and reinforce cost containment initiatives allows your team to track their progress on the goal throughout the year. The focus shifts from “educating employees” to “cost containment through employee education.”

Maintaining Alignment

A strategic plan can place every member of your ASC on the same page. It is common to find departments within an organization headed in different directions. While they each may be accomplishing their departmental goals, the organization itself may struggle to achieve its primary strategic objectives. With the creation of a strategic plan, it’s possible for operations, finance, clinical, human resources, marketing, business development, and all the other departments in your business to align their efforts towards the same desired goals.

Sustaining Focus

A strategic plan offers an opportunity for ASC leaders to formally incorporate input from key members of the organization into business operations. Business leaders often receive insightful suggestions for improving business processes from internal team members. However, they may find it difficult to incorporate these suggestions in meaningful ways. A strategic plan offers the opportunity to integrate “good ideas” into the organization’s key initiatives and communicate them throughout the organization.

It also assists leaders curb unnecessary projects that consume the valuable time and energy of team members. Sometimes, it can be hard to say no to innovative ideas or initiatives. If there is no clear direction, these suggestions can create a lot of distraction. By prioritizing the activities necessary for success, each member of your leadership team can sustain focus on the agreed-upon objectives. Priorities make it easier to say no to distracting initiatives.

Creating Buy-In

As you create your ASC strategic plan, seek input from all leaders within your organization. Synthesize their input and communicate your message back to every member of your organization. Employees should know where their organization needs to be and the ways it will get there. Ensure your strategy is written down, finalized, and communicated to everyone acting on it.

Create a strategy for your business that incorporates your vision, mission, and outside the box thinking. Treat your strategic plan as a map that charts the course of your ASC, defining where you want your business to go. And, don’t be surprised when your guide helps you end up exactly where you wanted your business to be!

Extra Resources:

Jovanna Grissom, VP of Operations

Overcoming ASC Management Nightmares: Finding OR Nurses

Overcoming ASC Management Nightmares: Finding OR Nurses

By ASC Development, ASC Management No Comments

First installment in the “Overcoming ASC Management Nightmares” blog series. Click here for Part 2 and Part 3.

One thing I’ve learned over the years is that if you hold an ASC management position, there’s always something that will keep you up at night. Whether your ASC has been open one day or 10 years, dealing with challenges is the norm. How you address those issues is what really matters.

This is the first installment in my “Overcoming ASC Management Nightmares” blog series which will explore the challenges robbing me of precious sleep. Fortunately, I’ve been successful in taking steps to keep these nightmares at bay. I suspect other ASC managers are experiencing these nightmares too. Hopefully my solutions can help put your mind at ease.

ASC Management Nightmare #1: Finding OR Nurses

The motto “If you build it, they will come” may have served Kevin Costner’s character in Field of Dreams well, but it typically doesn’t help ASCs when it comes to attracting staff. I recently helped build a new ASC. The first question each of the prospective administrators asked was, “How are you going to find staff?”

Nearly everyone I encounter is trying to figure out the answer to this question, particularly when it comes to hiring OR nurses. You can be in an area oversaturated or under-saturated with ASCs. In either case, you likely won’t find a large pool of good quality OR nurses to choose from.

How did we get here? Formalized educational forums for non-OR nurses to receive OR training is lacking. New nurses coming out of nursing school often feel they have received enough clinical education to justify a management position. The OR setting is heavy on mature nurses who are likely to retire in the coming years.

If you want to recruit high-quality OR nurses away from existing employment, prepare to pay them more than you pay your current pre-op and PACU nurses. You may need to offer OR nurses a different tier of benefits to entice them to join your ASC. Successful recruitment may even require you provide a substantial hiring bonus and cover relocation costs.

Adding OR nurses can affect many different layers of your business and operations, including physician/owner satisfaction, financials, and morale. Unfortunately, there is a lack of resources to help address this nightmare without breaking the bank.


Rather than look outside of our ASCs for OR nurses, we are looking within. We are implementing training programs that afford non-OR nurses the opportunity to become OR nurses. The Association of Registered Nurses (AORN) develops and sells the program’s infrastructure. It is comprised of a syllabus and criteria for staff to meet.

If a staff member expresses an interest in becoming an OR nurse, ASC management assesses the individual’s qualifications. When the nurse is in good standing and possesses the appropriate skill level, we purchase the AORN program on their behalf.

Once in the program, nurses in training work and are paid for their regular shifts. However, they do not perform their normal pre-op or post-op functions. Instead, they shadow a current OR nurse who serves as their mentor and helps provide on-the-job training. The trainees must complete homework and take tests on their own time. When they successfully complete the program, they transition into the OR.

We make a substantial investment in these nurses. Not only do we cover the cost of the program, we also pay another nurse to cover their responsibilities during their training. To enter the program, nurses sign an agreement with the ASC. They must remain with the ASC for an agreed-upon length of time that allows the facility to recoup its investment. If the nurses fail to complete the program, a payback mechanism in place.

Our use of the program is in its infancy, but the results are encouraging. Knowing we have a mechanism to help us groom our own OR nurses provides great comfort.

Putting Your ASC Management Nightmares to Bed

As long as you are in an ASC management position, don’t expect many anxiety-free evenings. That’s not unusual when you directly impact the success of a business and safety of people.

But try not to feel like you need to come up with all the answers to the challenges your ASC faces on your own. Brainstorm with people inside and outside of your organization. If you’re experiencing a challenging situation, chances are that others in ASC management are as well. When you connect with likeminded people working in the same industry, you can problem solve together.

And try not to be afraid to talk about the issues that are keeping you up at night for fear that it makes you appear vulnerable. I believe it does just the opposite: When you identify an issue and attack it head-on, you appear stronger. After all, no one has all the answers. Simply acknowledging there is a problem oftentimes makes it easier to develop a solution.

Lisa Austin, VP, Facility Development

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;

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

outpatient total joint replacement program

Starting an Outpatient Total Joint Replacement Program at Your ASC: 5 Key Questions

By ASC Development, ASC Governance, ASC Management No Comments

Advances to minimally invasive surgical techniques, blood loss management, and anesthetics have led to a rise in total joint arthroplasties (TJA) being performed at ambulatory surgery centers (ASCs). Orthopaedic specialists and patients nationwide are increasingly well-served with the same-day model, in which patients receive their total joint replacement and return home for recovery within 24 hours, typically on the same day as surgery. Many orthopaedic-focused and multidisciplinary ASCs are preparing to offer a same-day TJA program, if they do not already. For ASCs working to initiate a credible total joint program, there are key clinical, business, and marketing elements of a well-developed program to consider.

Five questions ASC board members and investors will want to ask before approving a TJA program follow.

1. How does the ASC determine TJA patient selection criteria?

Well-formed patient selection criteria are important components of a successful TJA program. Key stakeholders will likely query, is there a national standard for outpatient TJA patient selection criteria? Unfortunately, the current answer is no. Outpatient total joints do not have as much history as that of outpatient surgery in general. And few professional societies have yet to publish specific criteria for outpatient total joint replacements. However, publications from institutions doing TJA successfully on an outpatient basis are available.

To form a TJA patient selection criteria that is safe for your patients, lean on your clinical leaders. This includes your clinical nurse manager and head anesthesiologist. Begin with your center’s current patient selection criteria for all patients. Then, consider American College of Surgeons National Surgical Quality Improvement Program (NSQIP) standards and American Society of Anesthesiologists (ASA) standards. Do this before reviewing accepted standards from peer-reviewed publications and other ASCs with successful TJA programs.

2. What is the ASC’s clinical plan for performing total joints?

A thorough clinical plan includes patient selection criteria, pre-operative screening protocols, anesthesia plans (pre-operative, intra-operative, and post-operative), clinical guidelines, discharge guidelines/criteria, and follow-up guidelines. Once again, rely on your clinical leaders to formulate the guidelines. If you are having trouble determining some of the clinical plan components, contact a qualified total joint program consultant and/or your ASC association. You can also perform an internet search to look at what other ASCs are doing. Finally, the clinical plan should also incorporate physical therapy, which many ASCs are arranging for patients to complete at the ASC both pre-operatively and post-operatively on the day of surgery.

3. Is the ASC’s nursing staff prepared for the first TJA case?

The beauty of working with skilled nurses in an ASC is their wide-ranging experience. Their experience often includes total and partial joint surgeries at hospitals and other surgery centers. Still, you will want to work with your Clinical Nurse Manager to prepare your ASC’s nursing staff for the TJA program. Identify individuals on your team with the most experience in orthopaedic surgery and in performing total joint surgeries. If you are lucky, you may even have nurses on staff who have worked on TJA cases with the physicians who will be performing them at your center. Rely on these individuals to serve as your skilled TJA nurses and teachers for the other nurses.

In advance of your first patients, prepare your operating room nurses. Arrange for a TJA walk-through with your device representatives. Prepare your pre-op/PACU recovery nurses by arranging for a lesson with a physical therapist who can teach them safe post-surgery movement and ambulation techniques that will prepare TJA patients for discharge. If overnight patient stays are part of your clinical plan, ensure nursing staff members understand patient care expectations during this extended recovery time.

4. What will be the fiscal impact on the ASC?

If you are projecting a certain number of total joint cases in your first year, identify the market and physicians who you expect will deliver these cases. For example, is there a patient population you are not treating because an outpatient total joint program isn’t currently in place? Or, will your physicians be moving a sector of their current patient population to your ASC? Is there another way to capture market share? Combine projected case counts with information on reimbursements and costs to identify the potential fiscal impact on your ASC.

5. What is the marketing strategy and plan for your TJA program?

To answer this question, one must first gain direction from the ASC’s governing body. Determine their interest in working collaboratively with key stakeholders such as the hospital partner to market a comprehensive total joint program. In some cases, collaborative marketing may be a strong desire of your board. Regardless, it will behoove you to create a marketing plan that divides marketing efforts into consecutive stages.

For example, the initial stage might aim to maintain the current customer base. This can include efforts like marketing to referral sources and direct-to-consumers through patient education, media/public relations, and website enhancements. The next stage could then focus on expanding the customer base by exploring new market areas and referral sources. At each stage, marketing efforts and metrics should be evaluated to determine if program goals are being met. This analysis will help determine future growth opportunities and identify further initiatives for enhancing the TJA program.

One of the key components of a successful outpatient total joint replacement program is early preparation. Completing a clear and concise clinical, business, and marketing plan will not only demonstrate to surgery center board members the ASC is ready for total joint approval, it will also deliver a safe environment for total joint replacements performed in your facility.

Jack Mast – Physician Liaison

Patients Overnight

Can I Keep Patients Overnight at My ASC?

By ASC Development No Comments

The short answer is, it depends.

The CMS interpretive guideline 416.2 defines an ASC as “any distinct entity that operates exclusively for providing surgical services to patients not requiring hospitalization and in which the expected duration of services would not exceed 24hours following an admission.” [1]  Therefore, not all state ASC regulations allow for overnight recovery observation.  However, several states allow for a prolonged recovery period for observation of patients.  It is important to know your state regulations to maintain compliance.  Some states allow for 23-hour observation.  Some allow for 23-hour and 59 minutes of observation. 

Understand ahead of time when the observation clock starts ticking.  CMS, and most states, start the clock at admission.  Therefore, if you are admitting a patient at 7:00 a.m., you must discharge them at either 6:00 a.m. or 6:59 a.m. the next day, depending on your state regulations.   

Be aware of the regulations regarding limitations of ambulatory surgical procedure operating room time and direct supervised recovery time.  Common regulations indicate operating room time and supervised recovery time should not exceed four hours.  If these regulations apply to you, patients would also need to meet the criteria for discharge from PACU.

If you do keep your patients “overnight,” ensure policies are in place for their prolonged care.  Include provisions for an available shower, food preparation, nutrition, and dietary consultations.  Additionally, develop an appropriate staffing plan to ensure quality care is provided throughout the stay.  If you are prepping patients at 6:00 a.m. and simultaneously discharging 23-hour patients, a flurry of activity can occur.  Have a plan to keep things calm and orderly.

Another vital component to consider is your managed care contracts.   Do they include reimbursement for the observation stay?  There are no financial gains to be made by providing this care.  Some payors do not cover this option.  If they do reimburse you, it may only be $400-500/night.  With staffing costs, you may break even.  The important thing is to have knowledgeable expectations.   

Lisa Austin – Vice President of Facility Development   



Convalescent Care Center

Value Proposition: Adding a Convalescent Care Center to Your ASC

By ASC Development, ASC Governance, ASC Management, Leadership 2 Comments

If your ASC operates in a state that allows convalescent care centers, there are numerous benefits of adding one to your existing continuum of care.  We outline some of those benefits in this value proposition.  

Convalescent Center Value Proposition

In some states, an ASC may maintain a separately licensed convalescent care center as part of its service offering.  This separate licensure provides an ASC with the opportunity to keep most commercial patients beyond the standard 23-hour stay of a regularly licensed ASC.  The extended stay is granted for observation and pain control for more extensive outpatient procedures.  

The ASC is generally directly compensated for the additional recovery time in the convalescent center.  Compensation occurs in a variety of ways including hourly rates, per day rates, or increased consideration in global or bundled fee arrangements.  In addition, the ASC may be indirectly compensated by securing greater reimbursement from commercial payers on lower acuity cases.  This is because payors recognize cost savings occur when higher acuity cases safely move from a hospital to an ASC with extended stay capability.  

The primary advantage for an ASC with a licensed convalescent center is the potential to provide services to higher acuity surgical patients.  Orthopaedics and neurosurgery specialties benefit most from this advantage, specifically in total joint replacement and spinal surgery.

The types of orthopaedic cases requiring extended stay that are well-suited for an ASC connected to a convalescent care center are: 

  • Patella femoral arthroplasty
  • Total hip arthroplasty
  • Total knee arthroplasty
  • Total shoulder arthroplasty
  • Total ankle arthroplasty

These cases traditionally restricted both physicians and patients to an inpatient setting.  Although moving them to an outpatient setting represents significant savings for insurance carriers and patients alike, these higher acuity cases can provide a net revenue per case increase of 300-400% over traditional ASC orthopaedic cases.

Other types of extended stay cases well-suited for this arrangement are orthopaedic-spine and neuro-spine.  Specifically, the following:

  • Single and multi-level anterior and/or posterior cervical and lumbar fusions
  • Cervical and lumbar disc arthroplasty

Again, these spine cases may have traditionally restricted physicians and patients to inpatient settings.   Cost-savings for both insurance carriers and patients also occur when these cases move to ASCs with separately licensed convalescent centers.  The result for ASCs can be a net revenue per case increase of 600-700% over traditional orthopaedic cases and 250% above traditional spine cases.

Another advantage of these separately licensed facilities over inpatient hospitals and orthopaedic specialty hospitals occurs in payor contracting.  The value proposition for commercial payors, workers’ compensation, auto insurers, and the general public is significant.  A contracting advantage for surgeons in terms of future health care reimbursement may also be realized.  Future reimbursement will likely include, but not be limited to:  bundled payments, pay-for-performance, at risk contracting, clinically integrated networks, consumer-driven care, and price transparency.

Finally, having the capacity to accommodate higher acuity and higher paying surgical cases enhances surgeon and partner recruitment. With the saturation of “commodity” ASCs, an ASC with an adjoining convalescent care center offers the benefits of a mini-hospital. This is attractive to surgeons who may not otherwise be interested in using your facility, much less investing in it. 

What Value Does a Convalescent Center Represent for You?

Investigating convalescent care center licensure requirements in your state is a worthwhile endeavor if your facility is interested in performing higher acuity cases.  If your state allows these types of centers, conduct a thorough cost-benefit analysis to determine the feasibility of establishing one in conjunction with your ASC. 

If your state does not currently afford ASCs the opportunity to establish an adjoining convalescent center, consider these benefits, network with other facilities, then work together to rally legislative support for them in your locale.

Pinnacle III Leadership Team