A Guide for Ophthalmology Groups Considering Surgery Center Development
Developing a surgery center is a significant undertaking for an ophthalmology group. Careful planning, consideration of risks specific to your specialty, financial analysis, and ongoing operational and strategic management is needed. Here's a general guide to help you navigate this process:
1. Specialty-Ophthalmology Specific Considerations:
Patient Volume and Demand: Ophthalmology case volume, patient mix (Medicare/Medicaid vs High upgrade mix), payer mix and surgeon preference (1 vs. +2 OR, Femtosecond laser) should be clearly factored in the viability of the center. Also, the layout of the center should accommodate the unique patient waiting and preop/pacu requirements to handle high volume ophthalmology surgery days. Cataract focused centers will need significant volume to sustain a free-standing center. The practice’s ability to affect subspecialty (Retina, Oculoplastic) care coordination should also be considered.
Advanced Technology: Evaluate the need for specialized equipment and technology (what the practice wants vs. what may help attract additional surgeons). What type of microscope and phacoemulsification system do you and your partners need vs. what microscope and phacoemulsification system are attractive to other utilizers? Does your practice provide femtosecond laser cataract surgery or Optiwave Refractive Analysis? If the practice is very close to the center, you may want to consider taking certain clinic based procedures to the center or branding the center in a way that minimizes competitive pressure from dissuading your competitors from using your center. Weigh these opportunity costs carefully as they can change over the life of your surgery center.
Qualified Staff: Prepare and recruit early to access skilled ophthalmic nurses, technicians, and support staff experienced in ophthalmic surgery. The leadership of the center will help establish the work culture, safety protocols, and values of the center. Your Director of Nursing and or Administrator will be key to setting that structure. An experienced management group will help establish this structure to set it in stone.
2. Risk Assessment:
Regulatory Compliance: Understanding the regulatory requirements for compliance with state and federal regulations is crucial. If the design of the center for whatever reasons doesn’t align correctly with federal or state compliance standards, you may be in a heap of unexpected additional development costs. Plumbing, HVAC, and spacing requirements tend to be the biggest concerns.
Contracting: The reimbursement landscape is by design, a murky landscape. Information is imperfect with Payors having significant leverage over Providers. The two most common mistakes we see centers make are 1. Not knowing your worth. Engaging with a contracting specialist will help you negotiate the best rates possible for your center. A good Management company will engage with your practice to understand what types of procedures you perform, where you are currently doing those procedures, the cost inputs to performing those procedures and how you will save the Payor money by migrating those cases to your center. 2. Rushing to sign a bad contract. A great contract may take 3-6 months AFTER accreditation to negotiate and another 1-2 months before funds from completed cases start to flow. Counting on that cashflow before your contracts are in place forces many centers into signing bad contracts.
Market Competition: Analyze the competitive landscape. Determine if there are existing surgery centers or hospitals offering similar services and assess their impact on your patient base. Are there technology gaps, block time capacity constraints, unpulled payer contract levers? What is the expected competitive response to you as a new entrant to your area?
3. Single Specialty vs. Multi-Specialty:
Single Specialty: A single specialty center focuses exclusively on ophthalmic procedures; your center’s architecture can be optimized for efficiency and efficacy of your specialty. Downsides include lack of future growth, limited flexibility, and contract reimbursement pressure on a narrow specialty. An ophthalmic focused single specialty surgery center will always have weaker rates than most multi-specialty surgery centers.
Multi-Specialty: Consider the benefits of offering multiple specialties. While it will diversify revenue streams and expand contract negotiations, it also requires additional coordination (staffing availability / expertise, drugs & supplies and vendor relations, etc.) and will dilute your focus. Outside of certain specialties (Gastroenterology), the benefits of being a multi-specialty surgery center typically outweigh any theoretical downside risk.
4. Financial Analysis:
Cash Flow Analysis: Create a detailed financial model (pro-forma) that includes revenue projections, operational costs, expected profits and cash flow estimates. Ensure that your group can cover initial investment and ongoing expenses. More importantly, factor for inevitable hiccups in the center operations (Covid/partner departures/billing audits) with an appropriate cash reserve or line of credit. Establish healthy partnership protocols that define the parameters for distributions when factoring for growth as well as when there are gaps in reimbursement.
ROI Expectations: Define your return on investment (ROI) expectations. Consider how long it will take to recoup your initial investment and achieve profitability. Compare and contrast those expectations against your expectations with an existing surgery center that you may already be invested in. Finally, considering the terminal value of the center may help you better plan for the scale and scope of your center during development.
5. Consultation and Management Considerations:
Who to ask for help? Understand the pros and cons of engaging in a Healthcare Consultant vs. ASC Manager partner.
Healthcare Consultancy Services: Healthcare consultancies specialize in all facets of surgery center development and operations. They can provide expertise in regulatory compliance, financial planning, and operational efficiency. If your questions are broad or narrow in scope, Consultancies typically address your questions on an hourly basis or project completion basis. While Consultancies generally want to see you successful, Consultancies are focused around billable hours and project deliverables within a specific scope of work. Anything beyond that scope is a new project or billable event.
ASC Management Partners: Management entities that are highly experienced with developing, managing and growing a surgery center can be tremendously helpful in optimizing the full potential of an ophthalmic focused surgery center and generate tremendous value with their contributions. That said, it comes down to choosing the right management partner. Do they understand your practice needs, do they understand ophthalmology, and are they able to create value beyond what the consultancy services that are provided. Is the ASC Manager on a flat fee basis or does the ASC Manager have direct risk alignment with the center? Is the ASC Manager working for you (when you have control of the Center) or are you working for the ASC Manager (when you have minority interest).
Self-Management: Assess whether your group has the expertise and resources to manage the center independently. The dynamics of the surgery center can vary drastically from a practice. There may be some overlapping skillsets that can be used, but establish a church/state protocol may be the safest way to ensure a successful operation on both front.
6. Pitfalls to Avoid:
Underestimating Costs: Be cautious of underestimating the costs associated with construction, equipment, staff, and ongoing cash flow operations. Budget for contingencies.
Regulatory Non-Compliance: Ensure strict adherence to all healthcare regulations. Non-compliance can lead to costly fines and legal issues.
Overexpansion: Avoid overextending your group by opening multiple centers too quickly. Focus on the success of your first center before considering expansion.
Lack of Physician Buy-In: Ensure that all ophthalmologists in your group are on board with the project and share a unified vision for the surgery center. Not only ensuring that but maintaining buying is an essential part of managing surgery center health.
Inadequate Staffing: Hiring and retaining skilled staff is crucial. Inadequate staffing can lead to delays, inefficiencies, and patient dissatisfaction.
Contracting: Engaging in a contracting specialist early to understand the payor landscape as it pertains to any ASC denovo but also how it may impact your practice. While heavy negotiations will occur as you near accreditation, knowing the payor landscape ahead of any development plans will help you avoid over or under building your ASCNon-Compete:
A non-compete is a common consideration that surgeon have factored when they are planning a new surgery center while being an existing partner at another location. Although there isn’t a definitive guideline, the writing on wall suggests that non-competes in medical arena have limited to no ability to be enforced.
A non-compete has to serve a business purpose. Selective enforcement makes it hard to make a case its business related and not punitive.
In general, a non-compete needs to be universally enforced to be effective.
Developing an ophthalmology focused surgery center can offer many benefits, including increased control, improved patient care, and potential financial rewards. However, it also comes with significant responsibilities and risks. Careful planning, thorough financial analysis, and compliance with regulatory requirements are key to success. Engaging experts and seeking consultation can help mitigate risks and ensure a smooth transition into surgery center ownership for your ophthalmologist group.
Mosaic Healthcare Solutions is a surgery center management group with over 20 years of surgery center development, management and growth experience. Our mission is to protect and enhance the ASC landscape for those centers owned and operated by independent physician practices.
Reach out to us if you are considering new surgery center development, looking to take over an existing surgery center, or looking to optimize your current surgery center operations. CONTACT US HERE.
