4 Key Factors for Maintaining Orthopedic Surgery Center ProfitabilityWritten by Laura Miller | January 28, 2011
Here are four key factors in maintaining a profitable orthopedic surgery center.
1. Consider case contribution margin, not volume. When asked how to improve ASC profits, many ASC administrators refer to an old stand-by: increasing case volume, says Thomas Wherry, principal for Total Anesthesia Solutions and medical director for Health Inventures. But Dr. Wherry says surgeons should be careful about bringing more cases to the center if those cases are not profitable. "When surgeons look at their own practices, they should work with the administrator and management company on identifying cases that provide a good contribution margin," he says. For example, some orthopedic cases have very high supply costs and can be performed at a loss if a center receives inadequate reimbursement. "It might be more prudent to take that case somewhere else," Dr. Wherry says. Surgeons should look at case costs and reimbursement rates to determine profitability and make sure case volume increases are worthwhile.
2. Update practice technology. There are several technologies orthopedic practices can adopt to improve billing and collections, according to Monty Miller, president and co-founder of Momentum Billing. Invest in web-based programs that standardize the workflow and check the claims for errors before they are billed because the web-based programs are constantly updated. "You want to find something that is fully integrated and has the modules to run the practice," he says. These functions should include billing and collections, patient information modules, charting capabilities and a scheduling module. "You want a core technology that is really solid and then you wrap coordinated processes around it."
Practice administrators should also pay close attention to accounts receivable. If a practice has a high percentage of claims not billed or on file, the surgeons are losing money on those visits. The appropriate technology can ensure all claims are accounted for and then make sure the claims are correctly coded before leaving the office. As a technology platform for Momentum Billing and their clients, Mr. Miller uses AdvancedMD, which, in addition to the modules stated above, contains a web-based claims scrubber that checks for faulty coding combinations and incorrect data fields before the claim goes out the door.
3. Reduce supply costs by actively comparing vendors. One way that ASCs can reduce case costs fairly easily is to reduce supply costs. Administrators or purchasing managers must actively compare vendor pricing to ensure that the center is getting the best deal on its supplies. Becky Mann, director of Houston Orthopedic Surgery Center in Warner Robins, Ga., recommends using a group purchasing organization to further reduce costs but recommends that purchasers continue to compare costs of the GPO with outside vendors rather than assume the GPO's contract brings the best price.
Administrators should also encourage physicians to use the same brand and type of supplies, such as plates, screws and anchors, for similar cases, which reduces supply costs by reducing the number of vendors that an ASC uses. Showing physician-owners the savings of such uniformity is a fairly easy and often successful way to convince them to agree to a single supply set.
Administrators must also be aware of and prepare for possible fluctuations in supply costs. For example, in 2010, ASCs can expect to see increases in the cost of face masks due to increasing demand for them brought on by the swine flu, says Ms. Mann.
4. Pursue workers' compensation cases. Worker's compensation cases traditionally reimburse well for spine in the ASC setting, so physician-owners should consider performing these cases in the ASC, when appropriate. Kamshad Raiszadeh, MD, director of the Advanced Spine Institute of Alvarado Hospital in San Diego and a physician-owner of the recently-opened Physicians Surgery Center in San Diego, says many of his workers' compensation cases, including most anterior cervical and lumbar discectomies and some fusions, can be performed in the outpatient setting. These cases bring additional revenue to an ASC, and building relationships with workers' compensation representatives can be beneficial.
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