Developing an Ambulatory Surgery Center

Introduction

This article was prepared for the purpose of documenting the process we went through in the development of a freestanding ambulatory surgery center for ophthalmic practice. We wanted to share our experience so that others might be encouraged to take this process on. We based this on the actual development process of our center in Little Rock, Arkansas. The process we followed was dictated in part by the rules and regulations of the Department of Health in this state. Be sure to check the rules and regulations in your own state, as they can vary considerably.

Overview

The development of an ambulatory surgery center can be a great addition to the physician’s practice. An ASC can improve a physician’s lifestyle, dramatically effect the quality of patient care and the patient experience, and provide and ancillary income stream for the practice.

This article will break the ambulatory surgery center development process into five phases. This will make it easier to categorize what needs to be accomplished at each step of the development process.

Phase I Feasibility Analysis

The first step in considering the development of an ambulatory surgery center is understanding if it is economically feasible to develop one in the first place. This process begins with the collection of data. You will need to know the number and type of cases you expect to perform in your ASC. If you have a practice computer system you can request a report of all surgical procedures for the last twelve months by CPT Code and annual volume. The next step is to identify which ASC facility payment group each of these procedures falls into. Once this is completed a simple calculation can be made to determine what the total value of the procedure to be performed in the proposed center will be.

Here is an example:

CPT Code Description Volume Facility Group Payment Annual Revenue
66984 Cataract 500 8 $953 $476,500
66821 YAG 125 4 $423 $52,875
Total Revenue $524, 400

Once we have estimated the ASC revenue the next step is to calculate the cost of building the ASC. If you are going to construct a new building from the ground up you will need to add the cost of the land plus the cost of the building shell which will run about $60 per square foot. You can feel comfortable using a cost of $ 138 per square foot for the cost of the build out of the ASC if you include architectural fees, engineering and consulting fees. I would also figure on a 10% reserve for contingencies.

If you are building a two operating room ASC a budget of $305,000 for equipment and $28,000 for furnishings will be sufficient to meet your needs. This cost may vary some but if you use two phaco machines and two refurbished microscopes this amount will meet your needs.

You will also need to consider variable costs in your feasibility analysis. The following sample feasibility analysis demonstrates these costs and is based on the projections for our own center.

Phase II Development and Design

Now that we know we have a viable project it is time to turn our attention towards the next step, which is to contact the State where the facility will be constructed to determine the steps necessary to complete the project and comply with the necessary state and federal requirements. Most states will send you a packet of information detailing this process and advising you of the significant building requirements.

This is also the point where interviews should take place to hire an architect. In the process of interviewing candidates be sure to qualify each one based on their experience designing ASC’s in the state you intend to build in. ASC’s can be complex structures with significant engineering required. Do not proceed without a qualified architect and engineer who commit to providing you with a fully engineered plan. If an architect advises you to proceed on a “design build basis” where the contractor and his subcontractors provide the engineering you will be inviting many delays and problems in getting your center built.

The basic decision of what is to be built is largely based on what procedures will be performed at the ASC. Will it be a single specialty ASC for ophthalmology or a multi specialty center? How many operating rooms or procedure rooms do you want? The answer to these questions will provide direction for the layout of the ASC. Certain spaces are required inside the ASC to support the surgical procedures you intend to provide. The list of all of this space is called the program. Once a program has been developed the floor plan layout can be done.

Most states but not all states either offer or require floor plan review prior to proceeding with the final construction plans and start of construction. It is wise to check early with the appropriate state agency to determine if an appointment is required as this can delay the process up to 60 days in some cases. Once the floor plan has been approved by the state agency your architect can proceed with the construction drawings.

Phase II of the project is the point in the project where significant amounts of time can be gained or lost. This process can be completed in les than 90 days. Unfortunately if this process is not managed it can take six months so be careful.

Phase III Bidding and Beginning Construction

Most owners are not comfortable if they do not bid out their projects. However, the industry is seeing some increase in the number of projects, which are being done under a construction management agreement. The advantage to construction management is that if you have a general contractor you want to use on your project he can sometimes save you money by being involved in the design process. The contractor can provide a value engineering function, which may save you money in the long run by recommending less expensive ways to construct the building or by recommending less expensive materials for the project. This is the route we decided to take.

If you decide to bid out the ASC project we recommend you get bids from three contractors. We recommend three because we find that two bids is not enough to get a good number and more than three bidders causes contractors to spend little time on their bids as their chance of getting the job drops to 1 in 4 rather than 1 in 3.

Your architect and consultants should make a recommendation as to which bidder wins the contract. It should be the owner’s decision ultimately although the architect and consultant’s recommendation should be taken into consideration since they know what to look for.

Once the contract is awarded be sure to sign a contract for the construction of the project. Also be sure to set out expectations for payment to the contractor at the start of the project so everyone knows what is expected of them. You should expect multiple requests for payment during the project based on a percentage of the project that is completed.

The architect and / or consultants should provide regular onsite visits. A report should be available on a weekly or bi weekly basis to the owner by the architect and / or the consultants to keep everyone apprised of the progress being made. Construction meetings with the subcontractors, general contractor and the owner’s representative should be held at least bi weekly and should continue throughout the project.

Phase IV Equipment Selection and Acquisition

Equipment for the ASC should be considered at the start of construction. The selection and acquisition of equipment for your ASC can be a time consuming and frustrating process. The best way to avoid this is to use a consultant who has the experience to research the required equipment options for you and make a recommendation as to what equipment should be used in the facility. Remember, you are not trying to duplicate the appearance of your hospital here. There are many lower cost options to be had such as state of the art tabletop sterilizers, which can save you 50% of the cost of traditional gravity sterilizers.

Once word gets out that you are constructing an ASC sales people who want your business will be contacting you on a regular basis. Direct the sales people to contact your consultant who can field these calls in your behalf and make recommendations as to who you should do business with. This will save you endless amounts of time and interruptions. The one exception to this rule is the selection of your phaco machine. We would encourage you to meet with the various company representatives in order to sample the latest technologies out there. In many instances these companies have supply programs and equipment programs you should be aware of. This is the one instance where meeting with these folks first hand will be of benefit to you in making a decision as to which company you will go with. We found it helpful to understand exactly what services we were looking for ahead of time. That way we were able compare what each company was offering us fairly.

The selection process should be complete 90 days before the ASC is to open. Your equipment consultant should prepare a final list of equipment and furnishings for the ASC and the owner needs to approve the list prior to ordering. Ordering should take place no later than 75 days from completion of the project, as many items can have long lead times.

It is recommended the equipment be received in outside storage like a moving and storage company so it can be accounted for upon receipt and staged for delivery to the ASC as soon as the Certificate of Occupancy is received. This minimizes congestion at the building site and makes it less likely that equipment will be damaged if it is stored on site.

Phase V Licensure & Certification

One of the essential components of developing your surgery center is the licensure and certification process. Be sure to use a consultant who has a proven track record in managing through this process. It will be a disaster if you get your facility constructed and fail to gain acceptance as a CMS approved facility since you will not be able to bill for the cases you perform at your center.

Licensure and Certification is a complex process, which begins four to five months prior to the completions of your ASC project. It is a good idea to contact the appropriate department that handles this process in your state. Make an effort to establish a relationship with the people who will ultimately provide the certification for your ASC. They can be a wealth of information and are usually pleased to be asked for assistance and will share their knowledge willingly if you just take time to ask. A bit of understanding is also in order regarding the challenges these state agencies are facing today. Most of these agencies are operating on restricted budgets with fewer people than they have had in the past so patience will be rewarded.

A filing of the CMS 855 Form is required to get paid in an ASC by the Federal Government. This is a good time to fill this form out. Remember, you will be billing for the facility fee in your ASC, you will bill as you always have for the professional fee. Since the ASC is a provider of services it is required to register with CMS for this service. An approved 855 Form is essential for approval of the facility and will be required by the state-licensing agency. Without the approved form you will not receive a CMS billing number.

A good set of policy and procedure manuals is a must if you intend to certify your ASC. There are many consultants who can provide this service or you can get a copy of the requirements from CMS and design your own books, but we do not recommend that you do this. The policy and procedure manuals will become your owner’s manual and if used correctly will be your guide to operating your ASC and maintaining compliance for future inspections.

There are a number of key points that need to be considered as you move towards the day of your licensure and certification visit. You will be required to have credentialed all surgeons who intend to use the ASC and certain documents such as a CLIA Waiver will be required in most instances. Employee files will need to be established as you hire your staff and protocols and procedures specific to your center will need to be documented in your manuals. There will also be requirements to document the various meetings you will be required to conduct prior to their visit.

The process for the initial inspection process varies from state to state but in general the contractor will produce a document known as a CO or a Certificate of Occupancy when construction is completed. This document allows you to move into the facility and begin the placement of equipment and the ordering of supplies. This process generally takes two weeks during which time the State Fire Marshall will make a visit to determine if the ASC is safe for a patient to be treated in. This is called the “Life Safety Inspection”. Once you have the approval of the State Fire Marshall the State Department of Health, Licensing will be notified and they will either set a date or come unannounced to make their inspection. Once you are approved you can begin performing cases as of the date they place on the certificate. Any cases performed prior to that date cannot be billed for so be careful about the date.

Conclusion

We have given you an overview of what our experience was to develop our own ophthalmic surgery center. There are many more details, which we have not discussed, which are important to the process but we do not have the space here to discuss. Above all we want to convey to you that while this process is complex and requires considerable effort on the part of everyone involved the end result is well worth the effort.

For the first time in our practice history we have complete control of our patient’s experience in our practice. The lifestyle improvement for the surgeons is simply amazing, as we no longer have to fight for block time and worry about cancelled cases. Turnover time has been reduced considerably and we have our own “Eye Team” for each and every case we perform. I would encourage anyone who desires to take control of the destiny of his or her practice to consider whether the addition of an ASC could be the right move for you.

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