Revive Your ASC


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Revive Your ASC

  1. 1. Strategies for reviving struggling ASCs Most Common Issues in Struggling ASCs  Non-using surgeon partners  Collections not good—large A/R of old accounts  Accounts payables too extended  Shortage of cash & no distributions  Payer contracts—low yield reimbursement & bad terms  Fee schedule outdated  Staffing not aligned with caseloads  Supply cost/case too high & no ongoing utilization review or GPO use
  2. 2. Operational Strategies to Meet the Challenge
  3. 3. Operational strategies to meet the challenge Operational Audit — thorough review of all systems  Business office operations, A/R, A/P, collections  Retroactive payer contract analysis  Current debt financing — % and terms  Clinical staffing, compensation & productivity  Supply & drug costs, cost/case, comparison to benchmarks  All costs using critical management benchmarks
  4. 4. Operational strategies to meet the challenge Operational Issues  Review service contracts  Equipment costs  Review rent and CAM charges  Physician recruitment  Physician buy-out
  5. 5. Operational strategies to meet the challenge Develop a new Business Plan  Term sheet  Transition plan  Prioritize issues  biggest economic boost soonest  easy to accomplish & economically beneficial  specific tasks with realistic deadlines and responsibilities
  6. 6. Operational strategies to meet the challenge Financing  Review options  Equipment  Plan  Non-recourse  Real estate  Equity percent  Leasehold improvement
  7. 7. Operational strategies to meet the challenge Guidelines for ASC Success
  8. 8. Operational strategies to meet the challenge 12 Key Processes for Success 1. Scheduling 2. Insurance verification 3. Coding 4. Billing 5. Collections 6. Accounts payable
  9. 9. Operational strategies to meet the challenge 12 Key Processes for Success (continued) 7. Cash management 8. Inventory management purchasing 9. Staffing 10. Compliance 11. Risk management 12. Medical records
  10. 10. Operational strategies to meet the challenge For more information Robert Zasa Principal Woodrum / Ambulatory Systems Development  626.403.9555 
  11. 11. Turnaround your ASC through legal re-structuring
  12. 12. Turnaround your ASC through legal re-structuring Overview of Federal ASC Safe Harbor  Federal Anti-Kickback Statute 42 USCS 1320a-7(b)  1999 ASC Safe Harbor  ASCs meeting each aspect of safe harbor are 100% immune Is your ASC structured properly?
  13. 13. Turnaround your ASC through legal re-structuring Safe Harbor Provision 1 Terms of investment in the ASC must not be related to services rendered by the investors or their expected volume of referrals.
  14. 14. Turnaround your ASC through legal re-structuring Safe Harbor Provision 2 ASC or any party connected to the ASC must not loan investors any amount for buy-in. Investors must be at risk.
  15. 15. Turnaround your ASC through legal re-structuring Safe Harbor Provision 3 Investor distributions must be directly proportionate to investor’s capital investment.
  16. 16. Turnaround your ASC through legal re-structuring Safe Harbor Provision 4 At least 1/3 of investor’s medical practice income must be Medicare approved ASC procedures.
  17. 17. Turnaround your ASC through legal re-structuring Safe Harbor Provision 5 Multi-specialty centers: Physician investors must perform at least 1/3 of their surgeries at the ASC. Passive investors not regularly using the ASC do not meet Safe Harbor guidelines.
  18. 18. Turnaround your ASC through legal re-structuring Passive Investors  Are an economic drain on the ASC  Place ASC at risk for violating Safe Harbor
  19. 19. Turnaround your ASC through legal re-structuring Legal Turnaround  Legal documents must comply with Safe Harbor  Governing body must be able to force a buy-out
  20. 20. Turnaround your ASC through legal re-structuring Buy-out Provisions Step 1 ASC must have governing documents with Safe Harbor applications.
  21. 21. Turnaround your ASC through legal re-structuring Buy-out Provisions Step 2 Structure documents to include adverse and non-adverse terminating events.
  22. 22. Turnaround your ASC through legal re-structuring Buy-out Provisions Step 3 Documents include method for valuing ownership interests. + Formula for redeeming interest in the event of an adverse or non-adverse terminating event. Typically: 40% less for an adverse event.
  23. 23. Turnaround your ASC through legal re-structuring Turnarounds mean governance document restructuring  Include Safe Harbor compliance and adverse & non-adverse terminating events  Non-compete clause  Members of investor groups must be individually bound and accountable  Streamlined management & governance
  24. 24. Turnaround your ASC through legal re-structuring Please Contact Doug Free Partner Kessenick, Phillips & Gamma, LLP  415.362.6414 
  25. 25. Overturn Financial Burdens
  26. 26. Overturn Financial Burdens Dynamics of today’s economy  Credit world is tightening  Cash is king  Protect your business with a new cash flow strategy Do you have a strategy?
  27. 27. Overturn Financial Burdens Sound Strategies for Protecting Cash 1. Total debt restructuring of your center 2. Prepare for the unseen—you don’t know what you don’t know You may be profitable, but not have enough cash flow to grow.
  28. 28. Overturn Financial Burdens Strategy 1: Total Debt Restructuring  Reimbursements going down  Costs of goods and services are going up  There is less cash to grow your center One strategy is total debt restructuring.
  29. 29. Overturn Financial Burdens Impact of Current Debt Example: XYZ Surgery Center Current Debt Equipment Interest Original Original Months Monthly Balance Rate Amount Term Remaining Payment C-arm 8% $150,000 36 30 $4,700 $141,000 Various 6.9% $95,000 60 48 $1,900 91,200 Various 7.2% $220,000 60 36 $4,400 158,400 Various 7.5% $265,000 60 36 $5,300 190,800 Totals: $730,000 $16,300 $581,400
  30. 30. Overturn Financial Burdens Impact of Debt Restructuring Example: XYZ Surgery Center Debt Restructured Interest Original Original Months Monthly Rate Amount Term Remaining Payment 8.0% $581,400 96 96 $8,200 8.0% $581,400 120 120 $7,100
  31. 31. Overturn Financial Burdens Your Monthly Payment  $16,300  Or $8,200  Or $7,100 Cash flow can increase up to 50%
  32. 32. Overturn Financial Burdens Strategy 2: Prepare for the Unseen Things happen that you can’t foresee  Environmental catastrophes  Staff turnover How can you prepare?
  33. 33. Overturn Financial Burdens Increase cash flow through a line of credit “Cheap” Money Cost – prime (currently 5%) + 2 = 7% $100,000 from line of credit = payment $600/month
  34. 34. Overturn Financial Burdens What is the best use of a line of credit? Not for equipment (depreciating asset) For working capital—operations  Adding staff  Repairs or redoes Purchasing position of power — rather than stress.
  35. 35. Overturn Financial Burdens Financing Equipment To be competitive, you must have the latest equipment  C-arm  Other radiological equipment You don’t have to take money from your partners – lease.
  36. 36. Overturn Financial Burdens Economic advantages of leasing  Typically no out-of-pocket money  Predictable, structured payments  Allows for obsolescence — you always have the latest and greatest
  37. 37. Overturn Financial Burdens Tax Incentives for leasing Government stimulus bill doubled the depreciation for the cost of an asset acquired in 2008. If you plan to lease equipment — do it now.
  38. 38. Overturn Financial Burdens Use your receivables to improve cash flow Accounts receivables line . . . or factoring
  39. 39. Overturn Financial Burdens Accounts receivables line of credit  Advance capital on your receivables  A lean on your receivables  You manage billing and collections  Line of credit requires personal guarantees
  40. 40. Overturn Financial Burdens Factoring AR  Receivables company buys receivables from you  They manage your billing and collections  Formula can be negotiated  Usually does not require personal guarantees
  41. 41. Overturn Financial Burdens Impact of receivables deals Expensive money – typically 2 to 2.5% per month Relieves stress of slow reimbursements and slow pay.
  42. 42. Overturn Financial Burdens Consider mix of line of credit + receivables program
  43. 43. Overturn Financial Burdens Conclusion Foresight & Strategy Leads to profitability with greater cash flow, less stress & more growth.
  44. 44. Overturn Financial Burdens Please Contact Ed Mann  415.831.1234 
  45. 45. Thank you for joining us To learn more about us or download articles visit us at: Robert Zasa Doug Free Ed Mann
  46. 46. Robert Zasa, MSHHA, FACMPE About the Presenters One of the nation’s experts on ASC Earlier highlights: Alternacare Corp business. Experienced in all levels of (founding & public offering), American business development, management, Medical International (VP corporate, COO expansion, acquisition, legal structuring, of ambulatory centers), Brookwood marketing and business revitalization. In Medical Center (administrator), Ochsner a variety of settings—multi-service Clinic (administrator), and hospitals in centers, ambulatory care, group Alabama. practices, ASCs and hospitals—across the nation. Zasa earned a Masters in hospital and health administration from the U of A founder of Woodrum/Ambulatory Alabama, with graduate studies in Systems Development, and its ongoing marketing at UCLA and Loyola executive leader, manager and University. He is a fellow in the American developer. College of Medical Practice Executives, lecturer and author, and served on the Founder, president and CEO of Premier editorial boards of the Journal off Ambulatory Systems, recognized as one Ambulatory Care Management and of the nation’s 500 fastest growing Surgery Network. private companies (1995, Inc. magazine), ranking sixth for growth in 3 years with over $35 million in revenues.
  47. 47. Doug Free About the Presenters Free’s law practice is focused Free has served as general counsel to exclusively on the legal and business the California Society of Plastic needs of physicians. He regularly Surgeons since 1997, and has advises in all areas of physician represented many physicians and business law, including corporate, tax, medical groups throughout California. and regulatory matters. He has a background in professional liability Free is a graduate of Santa Clara defense, and real estate and University School of Law, and commercial leases. obtained his undergraduate from Boston College. He helped found Kessenick, Phillips & Gamma in 2006 and was named a partner in 2008. Formerly, he was with Hanson, Bridgett, Marcus, Vlahos & Rudy; and the Law Offices of Charles O’Brien(general counsel to The Doctors Company, a major physician malpractice insurance company).
  48. 48. Ed Mann About the Presenters Mann serves a dual role. He is He created marketing programs for co-founder of Ortho Practice Solutions, American Express, which advanced the providing financial and educational corporation’s entry into the office support to the orthopedic surgery products division. In 2003, Mann honed community. As president of RC Leasing his focus to the medical community, & Consulting, he facilitates leases and creating RC Leasing & Consulting. vendor programs for medical practices, organizations and hospitals worldwide. Mann is a graduate of C.W. Post College. In all his vast and varied experience, Mann has focused on finance and leasing. He began his career in the family auto dealership, Future Motors, the largest volume dealership in the US in the 1970s. He then founded RECOM which became the largest originator of transportation leases in the Northeast.