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Endoscopic ambulatory surgery centers are more efficient than hospital-based procedures, they are less costly to payers than hospital-based procedures, and they provide an additional source of revenue to healthcare providers. Physicians interested in establishing endoscopic ambulatory surgery centers must be aware of advantages and disadvantages of such units as well as optimal financing and equipment and personnel utilization.
There are many reasons why endoscopic ambulatory surgery centers (EASCs) are thriving in the United States. We have an aging population and a shortage of physicians and healthcare costs are rising. As our population grows and grows older, there are increasing demands on physicians to become more efficient to keep up with the numbers. This is happening in a time when reimbursements are decreasing. Physicians are now at the point of having realized that they can increase efficiency only so far before they end up sacrificing good patient care and their own sense of well-being. EASCs fit well for everyone in this healthcare scenario. They are more efficient than hospital-based procedures, they are less costly to payers than hospital-based procedures, and they provide an additional source of revenue to healthcare providers.1
In comparison with hospital-based procedures, EASCs are advantageous to all parties involved. A low-risk patient is provided with a pleasant, convenient, and less intimidating atmosphere. The EASC is also more economical for the patient, which adds to his or her positive view of the experience. The insurance provider/payer is assured that the patient is receiving quality care in an accessible environment. In addition, the payer pays less for the EASC procedure than he or she would with a hospital-based procedure.
The physician also benefits from the EASC environment. When a group of physicians establishes an EASC, they are given control that they do not have in the hospital environment. This management aspect of the business allows the doctors to ensure that quality personnel are hired and trained to give both the patient and the physician the necessary services in a timely fashion. The physician is better able to control turn-around time and scheduling of procedures. Doctors are also able to incorporate their daily tasks, such as clinics and hospital rounds, with their time at the EASC because of their control over scheduling and the efficiency of the operation.
One major disadvantage of the EASC is the strain it often puts on the relationship between the physician and his/her affiliated hospital. A physician affiliated with an EASC who previously did all procedures in the hospital may now find it more difficult to schedule hospital-based procedures. This is probably due to a combination of factors: lack of resources, other physicians now using the hospital's allotted procedure times, and the hospital staff feeling lack of loyalty from the EASC-affiliated physician. Another issue that affects the hospital-physician relationship is the loss of revenue the hospital experiences when lucrative services such as endoscopy are moved from the hospital setting to an EASC.
Establishing an EASC means physicians must delve into the business aspect of medicine. The process means getting state licensure, becoming certified by payer groups, and accreditation by JACHO. Once these are approved, the decision-making process begins.
Many factors are involved in deciding how to run an EASC:
“If you build it, they will come.” Does this adage really apply to EASCs? Every year there is an 8% increase in the number of EASCs. In 2003 there were 432. However, every year a small number of EASCs close or are bought up by hospitals or corporations. Limitations to success include the location of an EASC. Will the patient come to an area where real estate is more competitive, but is “on the other side of the track”? Is there a closer facility, specifically the hospital or another ambulatory surgery center (multiple versus single specialty)? Is transportation a limiting factor? All these questions should be considered from the patient's perspective.
Another barrier to setting up a viable EASC may be exclusive contracts that managed care companies have with hospitals. Most insurance companies will not contract with a facility until it is JACHO accredited.
In terms of viability, the revenue potential must be calculated. The number of cases multiplied by the base rate equals the potential gross revenue. An average of 1000 cases per physician per year at $450 base rate would generate a gross revenue of $900,000 for two physicians. One can expect the number of procedures to increase 5 to 10% per year and the revenue to grow 3.5% per year for all payers except Medicare. Medicare has frozen rates until 2009.3
The risk involved in setting up an EASC can limit physicians from undertaking this step. There are alternate setups, specifically corporate partners and hospital ventures. Is it worth it? It depends. Half of something is better than all of nothing. A corporate partner (hospital or third party) can help with planning and development, financing, negotiating contracts, staffing, marketing, and policy and procedures. In the end, physician-owners will have to share that revenue. Ultimately, it depends on the specific relationship between the physician and third party and if that relationship is necessary to get the ambulatory surgery center developed.4
Before a decision is made to set up an EASC, it is crucial to determine the number of procedure rooms. That decision is based on the number of physicians participating in the EASC. If one calculates a capacity of 1000 procedures per room per year, it is possible to determine the number of endoscopy rooms that are necessary. The average EASC in the United States. has between two to three procedure rooms. By calculating the average time a patient spends in an EASC from admission to discharge, one can determine the efficiency of the setup and the number of preop and recovery beds that would be needed. In general, allocating 20 minutes for preop, 30 minutes per procedure (including turn-around time), and 40 minutes for recovery is adequate. With this allocation, one to two preop beds and two to three recovery beds per procedure room seem to be necessary for adequate flow of patients.5 A sample flow pattern is described in Table Table11.
If the endoscopists' procedure time is equal to or less than the room turnover time (end of one procedure to start of next procedure), the best physician efficiency is obtained if each endoscopist has at least two procedure rooms assigned.6 This allows the endoscopist to continue scoping in one room while “turnover” is occurring in the second room.
Once you have determined that developing an EASC is a worthwhile undertaking and you are willing to invest the time and energy to set one up, you must determine the amount of space that will be necessary. Should you rent or build a free-standing EASC? The advantages to renting or leasing a space are decreased financial risk and location closer to a hospital. You can also offset tension with the hospital by leasing a space in the hospital office building. The advantages to building a free-standing EASC are freedom of design and little need for space or expansion reconstruction.
Marasco and Associates, Inc, a healthcare consulting firm, has developed a formula to help determine the square footage necessary for an EASC (Table 2).
Deciding on the type of equipment and the number of endoscopes can be the most difficult part of the planning process. In general, five scopes (three lower and two upper) per room is a good rule. However, if you have an excess of scopes, you are wasting money on leasing or buying expensive equipment. On the other hand, if there are not enough scopes, you may be waiting around to do procedures, resulting in reduced physician efficiency.
One must also consider what type of equipment is necessary for keeping the EASC running efficiently: what type of software will you use? Do you want to use electronic medical records (EMR) to keep records? The different vendors (such as Olympus, Pentex, and Fuji) each have their unique advantages and disadvantages. One must consider scopes, software, long-term service, and cost before making a decision.
According to Gastrointestinal Associates, P.C., one can estimate equipment costs at $500,000 for the first procedure room and $150,000 for each additional procedure room.6 The types of equipment required for an EASC are listed in Table Table33.
If capital is available and the equipment will be efficiently used, purchase of the equipment is the best financial option. If startup capital is limited, most of the major equipment companies have lease options available. With leasing, the unit is charged a fixed amount for each procedure performed. The amount of the charge is contractual, based on the cost of the equipment and its utilization (number of procedures performed per month or year). A typical lease agreement may charge $35 to $50 per colonoscopy.
Sedation for procedures can vary from moderate sedation (pain and sedative medication such as fentanyl, meperidine, and/or midazolam) administered by RNs to deep sedation (propofol) which is administered by certified RN anesthetists or anesthesiologists. Unless specific reimbursement is available to support the additional charge for anesthesia personnel, nurse-administered sedation is the most cost-effective and safe option. Physical control of the anesthesia medications must also be considered.
Once the physical plant and equipment are in place, the largest recurrent expense for the EASC will be staffing costs.6 Again, a good balance must be achieved in which staff members are utilized to their maximum efficiency without being over- or underworked. Too few staff members or staff that is improperly matched to a job (e.g., an RN assigned to a tech job) can result in higher turnover and ultimately higher staffing costs. It is essential to establish a hardworking and motivated staff that is determined to make the EASC a success. Profit-sharing plans and/or financial bonus structures can give staff a sense of ownership and spark efficiency and the necessary work drive. The quality of service depends critically on the staff and affects not only the participating doctor, but also the patient and referring physicians. This will also be reflected by customer loyalty.
There are certain fundamentals to consider before making staffing decisions. One must consider the number of procedures, the number of rooms, the number of staff members who will be part- or full-time, and the qualifications of the staff (i.e., nurse versus tech for a particular position). Generally, one can use the formula below to decide on the appropriate number of staff members.
Maximizing efficiency without affecting the morale of staff members is one way to control staff cost. Efficiency is based on the time from admission to discharge. Patient flow management can help increase efficiency and decrease costs. Time studies can help identify where problems lie. Studies of issues listed in column A of Table Table66 can help identify delay reasons listed in column B and can ultimately help increase efficiency.
EASCs are not only a profitable addition to a gastrointestinal or colorectal practice, but they are also a means of controlling efficiency and quality of the care provided. It is difficult to predict the future and how favorable or unfavorable the climate will be for EASCs. There are many factors that could hurt EASC development including lack of EASC set referral, expanded certificate of need review, and more rigorous licensure requirements.
If you can't have an EASC, office endoscopy is a good alternative. This type of service mainly exists in states with certificate of need requirements. The advantages are lower cost setup compared with an EASC, seemingly fewer hassles, and optional accreditation in many states. The disadvantage is lower profit margins. Medicare reimbursement does have a site of service differential (Table 7).7
EASCs provide control over the quality of care one provides, control over the efficiency with which one provides that care, and an alternate source of revenue. The average EASC is small, independently owned, successful, and growing.