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00:00:01
David Thawley – How Proactive Operations Will Change Everything for Your ASC
88 Plays9 months ago
David Thawley is the CEO of HST Pathways, and he is on the podcast today to talk about the idea of proactive operations, detailing how, by building a culture of proactive operations, your surgery center will be able to thrive in this new world for ASCs. Running a surgery center is different from what it was ten years ago or even five years ago, so pivoting to efficient, data-driven, proactive operations is a necessary game-changer. And the ones that have shifted are seeing great success. So, Dave shares some great insight as to how you can begin down this path toward proactive operations.
After my conversation with Dave, we’ll switch to our Data & Insights segment. Today, we’ll break down the Average Net Revenue Per Case, specifically looking at the top 5 specialties. Then, we’ll share ten tips for improving your average net revenue per case if you’re not happy with your current numbers.
Resources Mentioned:
Download HST’s State of the Industry Report to get your hands on even more data: https://www.hstpathways.com/resources/surgery-center-industry-report
Brought to you by HST Pathways.
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Transcript
Introduction and Podcast Overview
00:00:01
Speaker
Welcome to This Week in Surgery Centers. If you're in the ASC industry, then you're in the right place. Every week, we'll start the episode off by sharing an interesting conversation we had with our featured guests, and then we'll close the episode by recapping the latest news impacting surgery centers. We're excited to share with you what we have, so let's get started and see what the industry's been up to.
00:00:28
Speaker
Hi, everyone. Here's what you can expect on today's episode.
Proactive Operations in ASCs
00:00:32
Speaker
Dave Tholley is the CEO of HSC Pathways, and he is on today to talk about the idea of proactive operations and how by building a culture of proactive operations, your surgery center will be able to thrive in this new world for ASCs.
00:00:48
Speaker
Running a surgery center is not the same as it was 10 years ago or even five years ago. So pivoting to efficient data-driven proactive operations is a necessary game changer. And the ones that have pivoted are seeing great success. So Dave shares some great insight as to how you can begin down this path towards proactive operations. After my conversation with Dave, we'll switch to our data and insight segment.
00:01:15
Speaker
Today, we'll break down the average net revenue per specialty, specifically looking at the top five specialties. And then I'll share 10 tips for improving your average net revenue per case if you're not happy with your current numbers. Hope everyone enjoys the episode and here's what's going on this week in Surgery Centers.
Industry Evolution and Challenges
00:01:38
Speaker
Hi, Dave. Thanks for joining us.
00:01:41
Speaker
Good morning, Erica. Longtime listener, first time participant on your podcast. Thanks for having me. Of course. Can you share a little bit about yourself with our listeners? Sure. I am Dave Thawley and I've been the CEO of HST Pathways for approximately three years now. I live in the state of Washington and started my career off in the military and have had various roles within technology over the past 10 or 15 years, but really grateful to be part of HST organization and the ASC industry.
00:02:12
Speaker
Great. I am really excited to have you on today because the surgery center industry as a whole is at a very interesting crossroads right now. And I think it's really important for the longevity of our clients that we talk about it. So let's do it. How has the world changed for ASCs?
00:02:34
Speaker
So at a high level, it's changed in many wonderful ways over the past 20 years. And the ASC industry has been on a very rapid growth rate and
00:02:47
Speaker
As we all know, there's more and more procedure volume that's shifting from hospital to ASCs. There's higher acuity procedures that have been authorized in an ASC setting. And there's a lot of physician and patient preference to have procedures done in an ASC setting.
00:03:05
Speaker
Some of the reasons for this are that there's typically 35% to 45% cost savings when a like-for-like procedure is performed in an ASC versus a hospital. And there's overall efficiency improvements, which are great for physicians as well as for patients and also for payers who are really paying for like-for-like procedures in an ASC or a hospital.
00:03:30
Speaker
So what this means is that the industry itself has grown massively really over the past couple of decades. We're now north of 20,000 total operating rooms in a surgical environment. And with more and more procedures and those higher acuity procedures being authorized in the ASC setting, that growth is expected to continue. And most forecasts suggest that the industry should grow roughly 25% over the next decade.
00:03:58
Speaker
So,
Competition and Financial Pressures
00:03:59
Speaker
in one light, in terms of growth and adoption and now total joint procedures being authorized in an ASC setting, it's fantastic. And for folks that haven't visited some ASCs, like many of these are just absolutely world-class, beautiful operations. And they're also a business extension of some of the most impressive medical professionals, the physicians that are frequently starting these ASCs. And so it's just a really spectacular environment.
00:04:26
Speaker
But with all of that goodness and all of that growth and all of the efficiency improvements, it also means there's increasing competition. And so I think for a while, ASCs were able to sit in the corner of healthcare and operate somewhat independently and in the shadow. But now, given a lot of these changes that we've discussed, hospital systems and other investment groups and large providers are wanting to have more and more presence in the ASC market
00:04:55
Speaker
So, with increasing competition, there's aspects that create some challenges for ASCs as well. Some of those are that reimbursement rates really haven't
00:05:06
Speaker
kept up with a lot of the changes from cost structure, particularly as we've seen post COVID. The increasing competition and consolidation means that ASCs more and more are being operated more effectively. And for
Strategies for ASC Success
00:05:19
Speaker
those that aren't being operated as efficiently, a lot of those are being acquired by larger groups. And that increasing competition in some ways is a very good thing that most of healthcare
00:05:30
Speaker
isn't an efficient market, but the space very much is so the most effective and cost effective operations that can deliver the best patient outcomes and customer delight, ultimately, those are going to be the ones that win. So this increasing competition is, I think, a good and bad thing as it relates to the industry. And then as I mentioned before, between higher QT cases coming online, that's also it's good from a volume perspective. It's good from a profitability perspective, but it adds complexity to how you
00:05:59
Speaker
need to manage an ASC. And then yes, the post COVID staffing shortages and rising costs of everything have created challenges as well, albeit hopefully more of a short term impact versus long term impact. But so I think to get back to your original question, the growth as well as the procedure volume, and I think respect of the ASC industry has been absolutely spectacular over the past
00:06:24
Speaker
a couple of decades, but as it becomes more successful, there's just a rising bar that's required in order to be successful and ultimately compete in this increasingly competitive world. Sure. Absolutely. Yeah. You touched on a lot of great stuff there. So those that are thriving, what do you find that they're doing differently?
00:06:47
Speaker
Sure. So it's never been easy to operate a surgery center, but it was easier five or 10 years ago than it is today. And when I say it was easier, like you could get away with some more manual process, not really be necessarily dialed in in all aspects of your operation, but.
00:07:04
Speaker
as mentioned with this increasing competition and some aspects, reimbursement rates in other areas. Ultimately, the ASCs that are most successful are doing everything from being very surgical with their operating room utilization as well as case mix to say, hey, we're going to grow our facility or group of facilities and really try to have
00:07:28
Speaker
an efficient point between the number of operating rooms that we're staffing for and the cases and case volume that we have coming into those. And we're going to be measured that as we think about expanding and adding new operating rooms, we're doing so in a methodical way. And what we're seeing also more and more is that multi-specialty ASCs are becoming more and more of the norm.
00:07:49
Speaker
And by being multi-specialty, you can have that case mix and have physicians with multiple disciplines coming in order to staff, as well as fill up the OR utilization and make sure that you're growing in a very methodical manner. Another thing has become
00:08:05
Speaker
More and more the norm is really needing to be an echo about analyzing case profitability and so at the time that a physician scheduling a case into the a sc looking into all the details behind from the physician's preference card through.
00:08:20
Speaker
patient information and reimbursement data, implant costs and other supply costs to say, well, what is our expected profit margin from this case? And if we're going to have an under-profitable or unprofitable case, what areas can we look into in order to try to improve the profitability of that case?
00:08:39
Speaker
Then there's a whole area about just being much more automated and moving away from manual processes. I think that's fairly self-explanatory, but really you want to have your staff, which are very talented, highly educated staff members, spending their time in the most critical areas versus being kind of drugged down by a lot of manual process. Another thing that we see a lot is the increasing need to benchmark everything and benchmarking from
00:09:07
Speaker
If you have a group of physicians providing like-for-like procedures and CPT codes, how do your physicians look on a normalized bell curve? Maybe it could be the profitability per minute of OR time or other aspects. Benchmark, hey, how do we look from a contract rate versus other centers in our local area? And how can we use that to negotiate better contracts with our payers? And ultimately, benchmark everything you do.
00:09:34
Speaker
There's an old saying that you can't manage what you don't measure. I think those centers that are really focused heavily on some of those data and insights ultimately help to drive behavior change within the center and find ways to drive incremental efficiency and profitability in the center.
00:09:49
Speaker
And then finally, there's the forecasting hiring needs and supply needs of the center to make this a much more efficient process.
Measuring Success in ASCs
00:09:57
Speaker
And all of these things together ultimately culminate in optimizing the physician experience. And physicians should be spending their time driving cases to the ASC and driving patient outcomes. And ideally spending as little of their time dealing with business nuance as possible.
00:10:15
Speaker
And by doing so, well-run ASCs have this flywheel effect that the single greatest factor in determining the success of an ASC or a group of ASCs is the ability to recruit and retain new physicians and world-class physicians. The ASC healthcare environment, it's a team sport.
00:10:36
Speaker
The best that your ability to recruit world-class team members and physicians who then bring case volume into the facility, which helps drive this overall utilization, which helps drive profitability, is this flywheel effect. Then there's greater distributions to the ASC, which then allows the ASC to bring in even higher quality talent. So I'd say that this focus on proactive operations
00:11:00
Speaker
And moving away from some of these manual redundant tasks to being very surgical and focused on doing the most efficient things within your ASC allows you to drive that success and become differentiated in the ASC market.
00:11:16
Speaker
Yeah, thanks. That's a lot of great tips if I can just kind of summarize it. So the ones who are seeing success, the things they're doing differently are being surgical with their OR utilization case mix. They're analyzing profitability, automating any manual process that they can, benchmarking everything, forecasting those hiring needs, and then ultimately all of that will optimize the physician experience.
00:11:42
Speaker
I'll optimize the physician experience and allow for those ASCs to then do a better job of recruiting and retaining additional physicians that help that ASC or ASC group grow. Yes. Well said. Perfect. So with the surgery centers that we know that are doing these things, what success have they seen so far?
00:12:01
Speaker
So there's any number of ways to measure success, but I think what's most objective and most clear from our data and our data in terms of what we see from clients that ultimately come into HST and those that perform best, one aspect that most centers care about is profitability. And the average ASC operates at roughly 23% profitability.
00:12:26
Speaker
where the top quartile will operate at 32% profitability and the top decile operates at 42% profitability. And so a very large difference in like for like $10 million a year revenue ASC, one of these top performers could be driving $2.1 million in incremental profitability over a peer that's more a median player in the space.
00:12:52
Speaker
And as I mentioned before, a big part of
Implementing Proactive Operations
00:12:54
Speaker
that is about OR utilization and measured growth to achieve a high level of utilization. And the average ASC operates with only 56% OR utilization, where the top quartile operates with 64% and the top decile at 76%. And similarly, it's obviously different based on specialty and, you know, gastro versus ophthalmology or orthopedic.
00:13:18
Speaker
Typically different sizes of centers and revenue, but on average, a 10 to 20% increase in that overall utilization will result somewhere between a half a million dollars and $2 million a year in additional net revenue to the center. And so, and again, that depends on specialty mix, but very large increases in revenue and profitability for some of these centers that really embrace proactive operations.
00:13:46
Speaker
Yeah, that's crazy to think that just by tweaking some of these processes, you could be bringing in a half a million to $2 million. That's huge. That could change so much for one center. Now, you've mentioned proactive operations a few times, Ken, and I just would love to take a minute, give you the opportunity to elaborate on what you mean by that.
00:14:09
Speaker
Sure. So proactive operations is a heavy focus on automation. It's a heavy focus on data, as I mentioned, ideally benchmarking and benchmarking to help drive insights into ways to better improve your business and forecastability of an overall ASC.
00:14:29
Speaker
But being proactive in your operations, it ultimately touches every different subset of the ASC itself. And so for administrators and business office teams, that's again, going back and moving away from reactive work or redundant low value tasks and being
00:14:48
Speaker
proactive in what improvements you can drive within the ASC and doing high value work based on automated insights. So it's taking these most critical assets within the ASC, which is your people and having them focused on doing the most important things with their time to the greatest extent possible. Similarly with clinical teams.
00:15:07
Speaker
nurses make a ASC run. However, a lot of tasks within the ASC, if there isn't this proactive operations, it's making these clinical team members be more clerical in what they're doing. And they have limited visibility into compliance or other items within the ASC. And by being more proactive,
00:15:29
Speaker
It allows these ASCs and these clinical team members to actually be clinical and have full visibility in patient safety and spend time in the right areas. Just as an aside on that, to give you a feel of how the industry is evolving, when I joined a little less than three years ago, only 20% of our new software sales into ASCs
00:15:50
Speaker
included the electronic health record. And there's a reason for this, and that's because in ASC environment, ASCs didn't fall under meaningful use like hospitals did. And meaningful use meant that you had to adopt an EHR in a hospital, and it was voluntary in the ASC. And so, ASCs have said, prove it to us,
00:16:08
Speaker
that this helps us be more effective in our operations. But we've really hit that inflection point where over 80% of our new sales today also include an electronic health record. So I think you see the industry evolving and the appreciation for how, in this case, some technology and tools can help drive proactive operations. But just kind of quickly going through some other areas of the ASC, the physicians, as mentioned before,
00:16:35
Speaker
Let's focus on business inconvenience and more focused on driving case volume as well as patient outcomes for management companies that work with ASCs.
00:16:46
Speaker
It's going from having delayed insights where it may take a month after a month or a quarter closes in order to have some level of insights where you can provide some recommendations to the ASCs on how to operate. And by being surgical and having real-time access to data and benchmarking and some of these visualizations and insights, these management companies can be proactive in their real-time insights patterns and benchmarking across their entire portfolio.
00:17:12
Speaker
And again, all this does come down to from a profitability and financial outcome perspective. It means that those centers that really have embraced proactive operations and management companies that have embraced proactive operations, it means that the distributions and financial outcomes for these folks that do it well become outsized in a positive way. Sure.
00:17:35
Speaker
So for those who are now inspired to start working towards proactive operations, where can they begin? What are the typical hurdles that they'll experience?
00:17:49
Speaker
What we hear frequently in terms of hurdles, the number one is that I've got limited time based on how busy we are. A lot of times that's based on the success of the ASC. It seems daunting to make changes within your business because of whether it's staffing shortages or how busy the center is.
00:18:09
Speaker
And centers also realize that most centers really lack automation and have process improvements that they need to take. And most centers are missing actionable data. So I'd say those are the main areas that are kind of concerns or friction points as centers dive into understanding what great looks like and what it's going to take to get them there.
00:18:31
Speaker
And so there's clearly things that you can do to help enable proactive operations and leveraging technology to assist in that is clearly one of the biggest things you can do. But there's also this aspect of it's not that much different than in our business. It will frequently come across a manager that says, hey, I'm too busy to recruit or hire this team member, or I'm too busy to make this process change.
00:18:58
Speaker
But knowing that by making that investment today or near term in bringing in the right people or making the right changes, that there's massive positive implications downstream on improving your quality of life and the efficiency of the business. And so there's just a little bit of, you got to jump in the cold punch and the cold punch is going to hurt, but it's good for you. And once you get through it, you get to realize those benefits. So I think it's really taking a pragmatic look at
00:19:25
Speaker
How can we start to move towards proactive operations in a way that can fit within our business, but we know it's going to take a decent level of effort and commitment in order to ultimately get to that top decile status that can drive a lot of these benefits that we talked about earlier today? Sure.
Community and Collaboration in ASCs
00:19:44
Speaker
You're giving such great hope, great inspiration here. All right, Dave, one final question. We do this every week with our guests. What is one thing our listeners can do this week to improve their surgery centers?
00:19:59
Speaker
Great question. Other than driving towards proactive operations, the ASC industry is still in the very early innings of what is possible. And now I believe it's over 40% of surgical volume in the United States is going through ASCs versus hospitals. And I don't think it's going to be that long before it's a 50-50 split. And so understanding that there is growth and opportunity in an ASC environment, but it's much newer than the rest of healthcare.
00:20:29
Speaker
I think I'd go back to the earlier comment that business is a team sport and surrounding yourself inside your business with the best possible teammates, but also outside of the ASC, building relationships with peers in the industry and other centers and center administrators to understand what lessons they've learned, what investments they've made that have helped them become successful in sharing in some of that success and scar tissue to ultimately drive collective growth.
00:20:59
Speaker
I think is a great idea. And there's avenues such as ASCA, the ambulatory surgery center association, which is a great forum, both in their conferences, as well as the online community to ask questions and share best practices. But there's also grabbing coffees with the neighboring ASC down the street and talking about their journey and understanding how you can share some of these best practices.
00:21:22
Speaker
I think just building that community
Interview Conclusion and Data Insights
00:21:23
Speaker
of peers and mentors will be highly correlated with driving additional success and helping to achieve some of these incremental goals that we've talked about today. That is great advice. We appreciate you coming on today, Dave. Thanks so much. Thanks for the time. Have a great day. Welcome to Data and Insights, where we turn data into dialogue and numbers into narratives.
00:21:50
Speaker
So HSC Pathways released a state of the industry report late last year, highlighting best practices, key process steps, and KPIs for every step of the patient journey and for nearly every recurring administrative duty. Most importantly, using our own unique dataset from our clients,
00:22:07
Speaker
we were able to extract data points so that anyone in the industry could compare themselves to their peers. Two disclaimers, we only pulled data from clients who gave us permission and we omitted any extreme outliers. So after analyzing data from over 450 ASCs across the country, we were able to determine the average net revenue for the top 12 specialties.
00:22:31
Speaker
So our data analysts derived this metric by first categorizing each primary CPT code to one of the top 12 specialties, and then calculated the average net revenue by identifying the contract fee per case. One thing to note is that neurostimulators are grouped under pain in this analysis. So if that procedure is categorized under a different specialty for you, the profile will look a little different.
00:22:56
Speaker
So here are the top five specialties bringing in the most revenue per case. Ortho is number one, averaging $5,449 per case. Cardio is second to averaging $4,355.
00:23:15
Speaker
Plastic is third, averaging $3,732 per case. Podiatry averages $2,928. And then fifth is just general surgeries bringing in $2,828 per case.
00:23:34
Speaker
So why does this data point matter? I'm sure I don't have to explain to you entirely why it matters, but obviously this one is extremely important to track, understand, and benchmark against. It can be leveraged during negotiations with insurance providers, incorporated into performance reviews, used to project future revenue, and also used to drive your surgery center's growth strategy.
00:24:00
Speaker
I would also recommend leveraging this metric in your quarterly board meetings and showing your governing body how you're tracking internally month over month and also how you compare to your peers. And if you're not seeing the success that you'd like to and would like to increase your average net revenue per case, here are 10 tips in no particular order. Ensure accurate and up-to-date billing and coding practices.
00:24:26
Speaker
Perform regular audits to identify incorrect underbilling or coding errors. Analyze the profitability of different types of surgeries and adjust the case mix to focus on more profitable procedures. Introduce new, high-demand procedures that can attract more patients and higher reimbursements.
00:24:47
Speaker
Optimize your inventory management to reduce any waste. Go with bulk purchasing where possible for better rates. Streamline staffing without compromising patient care, of course, possibly through cross-training employees to perform multiple roles. You can use scheduling software to maximize OR utilization and reduce downtime.
00:25:10
Speaker
You can utilize data analytics to track and analyze performance metrics, identifying areas for revenue enhancement or cost reduction. And then lastly, you can always adopt an EHR and practice management system to improve billing efficiency and reduce errors. If you're interested in more data points and use cases,
00:25:31
Speaker
Subscribe to our podcast so that you don't miss any upcoming segments or head to our website to check out the full state of the industry reports to get your hands on even more data. And I know I mentioned at the beginning that we had tracked average net revenue per case for 12 specialties. I only listed five here, but if you do follow this link that's in the episode notes, you'll be able to see all 12 specialties and then a ton of different other data points as well.
00:25:59
Speaker
And that officially wraps up this week's podcast. Thank you as always for spending a few minutes of your week with us. Make sure to subscribe or leave a review on whichever platform you're listening from. I hope you have a great day and we will see you again next week.