This Week in Surgery Centers: Wil Schlaff – Opening an ASC: Conducting a Comprehensive Feasibility Assessment

Here’s what to expect on this week’s episode. 🎙️

Interested in opening a new surgery center?

Wil Schlaff is no stranger to the process. As an ASC Development and Operations Specialist, he has worked on many new builds from their infancy stage through to the first patient walking in the door. Wil joins us on This Week in Surgery Centers to discuss the importance and logistics of Conducting a Comprehensive Feasibility Assessment.

🚀 Market Demand

📄 Certificate of Need

‍⚖️ Regulatory Concerns

🩺 Physician Recruitment

💰 Securing Financing

📈 Revenue Forecasting

Psst… if you’re considering venturing into the world of ASC development, keep an eye out on our episodes for the next few weeks – we’ll be covering facility construction, payer contracts, physician recruitment, and more!

Find the full episode on Apple Podcasts, Spotify, or YouTube to hear all the details.

0:00
welcome to this week in surgery centers if you’re in the ASC industry then
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you’re in the right place every week we’ll start the episode off by sharing an interesting conversation we had with
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our featured guests and then we’ll close the episode by recapping the latest news impacting surgery centers we’re excited
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to share with you what we have so let’s get started and see what the industry’s been up to [Music]
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hi everyone here’s what you can expect on today’s episode will schlaff is no
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stranger to the process of opening up a new Surgery Center as an ASE development
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and operations specialist he has worked on many new builds from their infancy stage all the way through to the first
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patient walking in the door today he joins us to talk about the importance and Logistics of conducting a
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comprehensive feasibility assessment before you start working on a new Surgery Center
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so from determining market demand to physician recruitment to securing financing will and our host Nick cover
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as much as they can on this critical piece of the puzzle in our news recap we’ll cover how one
1:10
community in Michigan is fixing their sterile processing technician shortage some advice from an admin in Idaho on
1:18
how to get creative to solve your staffing and supply chain issues various ways to celebrate National ASC
1:25
month and of course end the new segment with a positive story about an experimental gene therapy gel that has
1:32
helped one teen gain his sight back hope everyone enjoys the episode and here’s what’s going on this week in
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surgery centers [Music]
1:46
yeah thanks Nick thanks for your time and having me excited for the conversation so want to
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talk a little bit about the de novo process today and specifically feasibility assessments on The Upfront
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side of planetovo there’s lots of buzz in the market today as it relates to De
2:06
novos and new facility development from an outpatient perspective in your
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experience what are the most common reasons that folks think about starting the novo ases
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I mean I guess there’s two perspectives there’s going to be the Physicians perspective in the hospital’s
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perspective from a physician perspective you’re looking at a new source of income
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and building a valuable asset almost more importantly though there’s the
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convenience factor and the efficiency Factor you know Dax spend a lot of time in the or in the
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hospitals waiting for ORS to open up sitting around and having an ASC it’s
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going to improve their quality of life they might actually have a chance to spend more time with their family I
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enjoy some Hobbies get out and play nine holes in the afternoon and they also have control over their environment over
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their staff and which and it’s also a patient advocacy you’re offering a lower
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cost higher quality of care which is going to increase patient satisfaction and eventually hopefully lower the cost
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of Health Care overall you know from a Hospital’s perspective and now it’s interesting even more than it was is the
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trends of price transparency and the quality transparency the hospitals now
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you know previously they were resisting the agencies as competitors they’re
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jumping on the bandwagon and they look at it as a physician retention and
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recruitment tool and they also use it as a they can migrate less profitable cases
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out of the hospital setting and opening up our time for more profitable cases on
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their campuses sure okay that’s helpful so we’ll different kind of perspectives
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and value props you mentioned the position value prop the hospital value prop for considering a de novo ASE
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facility is folks are thinking about this from a business planning perspective
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what are some of the initial things they need to do or be thinking about from an upfront evaluation perspective
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well the first thing you need to think about is the regulatory environment
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state and federal and then you need to make sure that you are looking at the
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financial feasibility of any de novo project absolutely got it
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and the feasibility assessment is something I wanted to unpack with you because I understand it’s a key kind of
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part of the evaluation process so is we’re thinking about that feasibility assessment stage the
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business planning stage what are some of the key components that go into that maybe if you can kind of help me
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brainstorm on the different pieces you know we’ll start to Deep dive a little bit into each of those
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yeah well you want to start regulatory right because that’s going to be the first hurdle that you’re going to have
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to overcome and a lot of that starts at the state level right so in healthcare there’s
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things called certificate of need and we can dive into certificate of need
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program this is not all state so first thing look up and see if your state has a seal when a requirement that affects
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developments of surgery centers okay off the top of my head I believe that there’s 35 states that require conc for
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all types of Health Care Facilities okay I believe now 27 of them require con
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requirements for the development of a surgery center so those requirements change from state to state so if you are
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in a con State make sure that you do your due diligence and you know what
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you’re getting into a lot of times cons to obtain them can be very expensive and
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also impossible there may be some states even have a moratorium on them all right so that would be the the first step so
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it sounds like roughly half and half on certificate of need States in terms if they have that requirement or they don’t
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just as a general rule of thumb is it typically harder to get approved and certificate of need States
6:21
yes absolutely but from a business perspective the more difficult it is to
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obtain a con the more valuable that asset is
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two sides of that a coin because you’ve got more of a competitive mode I would assume right if you do get it yeah
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absolutely and you know the purpose of the con uh when it was developed from a
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state’s perspective is to control competition I make sure that those Community Hospitals can stay in business
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and things of that sort but really what’s happening now is that they’re
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just creating a restrictive environment and as far as I’m concerned they’re pretty archaic
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the trend is there’s a deregulation Trend that’s going on right now from a state to state basis last states are
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starting to work out those con requirements and getting rid of them but
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there’s really four types of cons there’s the public hearing
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which is very political so you need to be prepared for that some states even are volume based so you
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actually have to prove existing volume and the need to build an or some are
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just Financial feasibility allows States the logic behind that is if you’re not
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making money it might affect the quality of care and then there could be a combination of all three
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we got it so that’s on the regulatory certificate of needs side once you’ve
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got your head around that how do folks start thinking about hey if we build it
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will they come right how do they think about the demand side of the equation from a patient perspective yeah and I
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see this all the time I the building they will come theory is a
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recipe for failure and it’s not about bringing in the patience
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it’s about bringing in the physician owners okay so
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if you’re a single practitioner and you think you have this idea of developing an ASC and it’s going to be great right
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my colleagues other Specialists are going to want to come in they’re going to want to invest into it and they’re
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going to want to bring their cases there it never works that way you’re going to want to syndicate physician Partners
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look at the specialty mix and that’s when you start developing the
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feasibility based off of that volume you want to make sure that you have the volume there at the point of project
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syndication to support the expenses of the business that you’re going to build right does that make sense
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it does so if I’m hearing you right if you’re a physician you’re thinking about hey who am I going to be able to partner
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with and who’s going to join me in this endeavor if you’re a hospital you’re thinking about hey what positions are
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going to be interested what specific positions are going to be interested in helping to run this facility yeah
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exactly and then that’s also when you want to start looking at some of the safe harbors and the
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kickback regulations too are tied to that because there’s a lot of doctors out there that might want to
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invest in more than one ASCS and a lot of them know that they are money generators and they might not have the
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volume to spread across multiple facilities but they’re still going to be reaping the benefits of distributions if
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this facility is profitable right that brings down the excitement for the other
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physician owners obviously there’s resentment that builds so you want to pay attention to who you’re bringing on board it’s not about bodies it’s about
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the volume that each physician owner can generate and bring into the surgery center
9:55
got it okay so there’s the physician Recruitment and understanding side once
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you’ve thought a little bit about your market demand once you’ve thought a little bit about your physician mix and
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who you’re going to partner with how do you start thinking about building out a financial model do folks do that
10:16
up front to start to forecast their revenue and expenses that might come in yeah absolutely I think after you
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Syndicate and you have interested parties at that point is when you really
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want to get granular and start looking at actual historical case volume
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procedure type Etc and I can’t stress how important
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this is it’s one of the main reasons why surgery centers will fail is that
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physician Partners don’t bring the volume that they promise the facility and so you want to break it down I I
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no less than 12 months worth of data some practices go through an annual
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cycle where they have increased volume less volume during the Summers
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who knows so you want to take a look at 12 months minimum and you want to break
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it down by procedure types and procedure combinations and then you also want to
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break it down by payer type and you want to look at reimbursement for each one of
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those cases and also the cost the the cost of supplies the cost of implants
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those variable expenses are something that you really want to pay attention to but on the revenue side it is it’s all
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about Chase volume procedure type payer mix
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and the key behind that is you want that data validated by each physician have
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them sign off of and provide the hard data and the reports just so in the
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future if it needs to be referenced you can always go back to this this is why we built the performa the way it is okay
12:01
so this seems like it could be a complicated part of the process right you mentioned that there’s assumptions
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rolled up at the physician level around case volume case mix on the revenue side
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and I’ve got to imagine that relatively small differences in things like your
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case mix could have a big impact on the overall Revenue you’re projecting for the facility especially in the early
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years is that something that you’ve seen oh absolutely and you’re pulling the data from the professional side so
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they’re going to need to comb through and look at the place of service where were these cases performed right were
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they performed at the hospital where they performed in the office or are these actual cases that you can bring to
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an ASC they need to be very thoughtful on this yep what about the expense side and you touched on a couple of them in
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terms of supplies but as we think about the biggest expense drivers for an ASE
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and especially the novo ASC I gotta imagine labor is a big piece and
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Staffing is a big piece of the equation supply cost as you mentioned which probably differ by a procedure type how
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do you advise people to think about those two components in particular when you’re looking at the variable
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expenses like medical supplies implant cost you can look at each doctor’s
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preference cards and you can case cost that out now they might not use
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everything in the preference card and you always might want to be conservative on the high side when it comes down to
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that but then there’s also a next layer where you want to look at the payer type
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reimbursement methodology right so Medicare for an example it might not
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reimburse for a knee implant where a lot of the private commercials will and so
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that for an example needs to be taken into consideration salary wage and
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benefit costs it’s more of a broader expense and that really comes down to
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the efficiency of operations but you need to look at how how the volume some
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of these longer cases you know you in pacu how many nurses are you going to need how many clinical staff members
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Tech two nurses are needed in the operating room and you can come up with a general idea based on the volume and
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the specialty type and what those salary wage and benefit expenses are going to
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be and there’s also a lot of data out there that’s available to the public like the vmg and telemarker they can
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tell you by specialty and by region and what you should expect the per case salary wage and benefit costs are going
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to be at any given facility so that’s another tool another piece of data to
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reference but you definitely want to make sure that you’re looking at salary wage and benefits but once you’re
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operational and I know we’re not friends but there’s ways to control that and obviously create efficiencies within
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your facility yep okay so we’ll pivoting over to the financing
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side right because starting these new de novos does have some upfront Capital costs right so as we think about
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purchasing the real estate building the actual facility building it out some of the equipment that goes into it whether
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those are crms or monitors how do folks think about financing it
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and where does the bank get involved first construction and real estate right
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there’s two ways that this is typically looked at is if you’re looking at building the bricks and mortar and
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purchasing the land you’re going to wrap that up in a real estate investment company and that’s going to be a separate entity okay yeah but you know
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there’s some benefits to that first off to surgeons and this also goes down to
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the safe harbors and the regulatory environment okay there’s an exception where they can own the operating entity
15:52
of a surgery center okay but there’s other doctors out there that might be a
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referral source primary care doctors for an example that are not allowed to own
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and operate equity in the operating entity so there’s an investment opportunity on the real estate side that
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you might be able to bring in some of your referral sources and that the
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operating entity is going to rent the space from the Real Estate Investment
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Company totally separate entity then you have construction and now
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you’re looking at if you’re building out within a shell tenant Improvement for an example that’s definitely a note that
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you’re going to consider and it’s going to be added into the pro forma construction note you’re going to have
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to typically put uh 30 down on a construction note and then you’re
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talking about equipment Capital cost you can go purchase new equipment all the
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power equipment and the equipment that the certain Specialties need also instrument sets things of that sort and
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those are pretty easy to obtain financing for almost at 100 because the
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equipment’s going to be collateral right and then the third financing that you’re
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going to need to obtain is an operating line and you need to be really thoughtful on this because
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anytime you’re opening up you need to look at the development timeline you need to make sure that you have enough
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cash to get you through the ramp up before you’re hitting the numbers that the performer is showing right so a good
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performer is going to show you from the data certificate of occupancy right so you’re open you’re going to have some
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key employees in there so you have some salary wage and benefit expenses you have some upfront costs in addition to
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the startup cost right but that’s probably going to be coming out of cash too so each doctor is going to be
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putting down a down payment for all of this stuff from Co to State licensure
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you’re not going to have any Revenue coming in there but you’re going to have these expenses right all right then once
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you get State licensure you can start doing cases there but most of your insurance contracts aren’t going to kick
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in at State licensure because you haven’t obtained accreditation or Medicare certification at that point
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which the majority of payers require that so you’re going to have a trickle up effect and that’ll all be shown in
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the performer so you’re going to need the cash for operations to get you
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through to the point to where you’re actually cash flowing the facility typically it’s about 8 to 12 months
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worth of operational expenses and you want to make sure you’re conservative and then once you get ramped up the
18:34
place is Cash flowing and happy times yeah that’s a good point because you can’t run a business uh cash and I bet
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those first eight to 12 months can be tight as you imagined if you don’t plan accordingly and you never know what kind
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of hiccups you’re going to run into you could have a difficult time closing a negotiation with a big payer I’ve seen a
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lot of things payer Contracting is so important and again you need to be thoughtful on that and make sure that
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your professional practice is all nipped and tucked on that payer Contracting side before you start Contracting with
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other payers I mean negotiations because they can hold you to that professional contract and hold those ASC contracts
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hostage yep okay so that’s a lot so will as we talk through that feasibility
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assessment we talked through the pieces of that whether that’s the regulatory environment forecasting demand physician
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Recruitment and syndication the pro forma modeling it’s a long list of things it seems like it requires
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experience and expertise and I gotta imagine if I put myself in the shoes of the hospital looking to do this for the
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first time or certainly physician looking to do this for the first time or one of the initial times
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it’s got to be a daunting task of things to go through are there templates or
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resources that are available for folks that are going through this process anything you’d advise I mean there’s so
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much material from a physician side and they’re practicing medicine at the same
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time right so take advantage of there are Consultants there’s management
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development companies if you want to consider that there’s also state and federal associations ASE associations
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aska for example every state will have an ASE Association
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reach out to them they’re great resources ask questions and find the
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right people to work with if it’s independent consultants make sure that you can work with them personality wise
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make sure they have the experience and then the other thing is too is you
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always want to save money and limit expenses don’t be a Pennywise in a pound
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foolish the other thing I’ve seen that turned certain ASC developments into complete disasters is hiring the wrong
20:48
architect and engineering firm there’s a lot of firms out there that don’t have the experience but they want to get into
20:53
the market you want to go with somebody that’s developed successfully built designed surgery centers in the past I
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can’t stress that enough yeah you’re going to be paying more upfront but man
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you’re going to be paying a lot more if you hire the wrong architect have to start tearing down walls
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Etc good piece of advice is look for Consultants hire the right
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architectural engineering firm that would be a big deal you need to make
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sure that you have the right people in place that are going to help you through this process got it that sounds like
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good advice well final question for you here Will and we do this each week with all of our guests what is one thing our
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listeners can do this week to improve their surgery centers you know they just released the ASE
21:41
medicare payment schedule and I have a few things first have a voice advocate
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for the industry speak up write letters and make recommendations
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to the federal government about what cases should be reimbursed at the
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Medicare level in the surgery center advocate for the industry it’s a really exciting time to be in the industry we
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have a lot of growth coming up that would be one the second one would be invest in technology and invest in the
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time it takes to integrate it and learn how to use it properly it will pay back
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dividends and use that data case costing profit forecasting is one of the most
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powerful Tools in operating in ASC and the other issue that we have right
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now is staff retainment and recruitment invest in your staff invest in your staff nothing eats away at profits more
22:39
than having to contract with Travelers and then charity care I give back to the
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community there’s people out there that are self-pay Medicaid everybody should
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be doing their part love it well thanks so much for joining us today
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you got it Nick thank you [Music]
23:00
as always it has been a busy week in healthcare so let’s jump right in our first piece of news comes from
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outpatient surgery magazine and it’s a really cool story about a partnership so
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ProMedica Monroe Regional Hospital is in Michigan and they are partnering with
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neighboring Monroe County Community College to host an open house designed
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to attract students to the college’s sterile processing technician course
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so the 12-week medical career training track prepares students to sit for the
23:35
certification board for sterile processing and distribution technician certification exam and in theory passed
23:42
the exam and then immediately be able to join the workforce like most this
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community and Market in Michigan is struggling to staff Sterile Processing technicians through their standard
23:53
recruiting efforts they decided to take a unique approach with this partnership so not only is it excellent PR for both
24:01
parties involved but for the hospital it really establishes them as a partner and a great employment
24:09
option for the text going through the certification program so as soon as
24:14
they’re done they’re going to have multiple employment options but ProMedica Monroe Region Hospital should
24:21
be top of mind for them so I share this story because I hope it can inspire you
24:26
to consider bringing similar programs and Partnerships like this to your communities a surgery center that
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engages in such an event and hosts it and kind of guides potential recruits
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through a program like this can really make a lasting first impression on text and training that would certainly factor
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into their own employment search and decisions down the road so kudos to the
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partners in Michigan that are putting this program on and I can’t wait to see how it impact the the workforce and the
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numbers so following the theme of getting creative Becker’s ASC sat down
25:02
with Brett Maxfield director of Madison Avenue Surgery Center in Idaho Falls
25:08
Idaho to discuss the biggest problems as are up against and possible solutions so
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Brett shared a well-known sentiment that will not be news to anybody that the significant rise in cost post pandemic
25:22
combined with a decrease in Revenue has put ases in an extremely tough spot so
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what do we do here are three ways that Brett suggested mitigating this overall issue
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so the first is just general creativity traditional approaches to solving problems just aren’t going to cut it
25:41
anymore so like the sterile Tech issue I had shared in the previous story you have to start to think outside the box
25:48
find new partners find ways that other Industries operate and see if there’s any ideas you can leverage talk to your
25:55
state ASE associations and ultimately get connected with as many other local
26:00
ASCS that you can to see how they’re solving issues and really kind of
26:05
brainstorm and go at it with this We’re All in This Together approach and also see if they are having any success that
26:12
you could leverage as well the second so supply chain disruptions
26:18
are still going strong and Brett shared that you shouldn’t feel like you have to purchase from the pharmacy Pirates as he
26:25
called it who are charging four hundred dollars for a drug that used to be forty dollars let’s say now he didn’t give any
26:32
specific examples as to Alternatives but he did share and I quote a lot of the
26:38
surgery centers that I’ve seen that have been able to flourish have gotten creative in their purchasing and the way
26:45
that they’re doing things they’ve really gone back in and reevaluated everything
26:50
and lastly we’ve talked about this before but cross-training staff will allow you to reduce the total overhead
26:57
and allow you to streamline operations a bit more cross-training staff has a ton
27:03
of benefits aside from the obvious ones of your staff members having a more well-rounded level of experience if you
27:09
do have a staffing shortage in one area you can pull a cross-trained staff member it also keeps staff more
27:16
satisfied and busy and engaged in the facility instead of just clocking in and doing the same job and clocking out it
27:23
keeps it more involved and makes them feel like they’re part of the bigger picture so cross-training staff is a
27:31
really really good idea as well so there you have it three ideas from Brett Maxfield on how to overcome some
27:38
of the current struggles that most ASCS are facing and as you likely have heard by now
27:44
August is National ASC month so every August ASCS go out of their way more so
27:50
than usual to promote awareness by educating key policy and decision makers
27:55
and the general public about the many benefits that ases provide to their communities if you ask the average
28:03
member of your community if they know the difference between a surgery center and a hospital or even a hospital
28:09
outpatient Department you can bet that the overwhelming majority would still not know how to answer that and honestly
28:16
whether you’re in the healthcare industry or not it can be a tricky question to try to answer to so just a
28:24
few ideas for how to celebrate the industry’s contributions and spread the word the first is all-around lawmakers
28:31
so it’s vital that lawmakers understand what an ASC has to offer one way that
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you can voice your support is through the outpatient surgery quality and
28:42
access Act of 2023 you can use ask us template to reach out to your lawmakers
28:48
and ask them to sign on to the bill as a co-sponsor you can also sign up to host a facility
28:55
tour for your members of Congress or even your local legislation honestly even your local media hold an open house
29:01
in your community whether you’ve been there for one year or 50 years the more people you let inside your doors the
29:08
more people you let know that your surgery center exists these events can be really fun really easy really quick
29:14
to organize so reach out to your local legislation and invite them to your surgery center to see what it’s all
29:21
about another idea you can download and share the what is an ASC infographic that ASCA
29:28
has created they also have state-specific fact sheets to help expand recognition of surgery centers in
29:34
general in your community and also you can share how much money ASC save
29:39
through Medicare programs for patients and then lastly but certainly not least
29:45
you really want to celebrate your staff in a way that is Meaningful to them so
29:50
don’t assume that you know what they want and how they would feel appreciated ask them for ideas for how
29:57
they want to be celebrated maybe a nice dinner weekly raffle drawings for a spa day whatever it might be but more so
30:05
than usual go out of your way this month to try to do something nice for your staff that would make them feel loved
30:11
and appreciated but regardless of how you celebrate please make sure that you do and to end
30:18
our new segment on a positive note an experimental gene therapy gel has worked
30:24
wonders for Antonio vento cavar Hall and doctors are hopeful similar therapies
30:31
could soon help millions of other people battling eye disease so Antonio is only 14 years old but he
30:39
has a rare genetic condition that only about 3 000 people worldwide have which
30:45
causes blisters on the body and eyes Antonio underwent several eye surgeries
30:50
to remove scar tissue but it continued to grow back and his vision deteriorated
30:55
so he joined a clinical trial and after several months the scarring has not
31:01
returned and his vision has improved tremendously congrats on the successful trial and I hope this treatment will
31:08
help many others with the same or similar conditions and that news story officially wraps up
31:14
this week’s podcast thank you as always for spending a few minutes of your week with us make sure to subscribe or leave
31:21
a review on whichever platform you’re listening from I hope you have a great day and we will see you again next week
31:33
why are you keeping me