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18 JOINT VENTURES 16 Financial and Operational Trends for ASCs By Laura Dyrda H ere are 16 trends for the ASC industry, including financial, operational and market acqui- sition statistics. Market trends 1. Technavio reports the global ASC market is expected to grow at a 4.36 percent compound annual growth rate through 2020. There will be a con- tinued rise in the minimally invasive surgery market, driving ASC growth. 2. Cardiac surgeries are increasingly becoming minimally invasive and procedures, with aortic valve surger- ies and endoscopic robotic cardiac procedures potentially moving to the ASC. Orthopedic surgeries such as total joint replacements and spinal fusions are increasingly performed in the outpatient setting as well. 3. Vertess predicts the trend toward consumer-driven healthcare shop- ping illustrated by the demand for one-stop shops and on-demand healthcare services pose an opportu- nity for ASCs and urgent care clinics to attract patients. The company expects ASCs to combine with ambulatory groups, imaging centers and other specialists to provide a superior pa- tient experience. 4. As healthcare moves toward pay-for- performance, bundled payments and shared savings models may present an opportunity for ASCs to thrive in a competitive healthcare environment. Transactions 5. Half of the ASC company respon- dents to HealthCare Appraisers' 2017 ASC Valuation Survey use a formula to determine minority interest transactions with new or existing physician investors; another 32 percent obtain an indepen- dent fair market value appraisal. 6. Minority interest sale takes three to six months on average for 55 percent of the respondents when dealing with a new physician. However, when sell- ing controlling interest to an ASC, 56 percent say it takes six months to one year to complete the process. 7. Half of the respondents report sell- ing controlling ASC interest to a hos- pital or health system. 8. Almost half — 48 percent — report earnings growth per year is expected to grow 3.1 percent to 6 percent for the first several years after the trans- action; just 19 percent expect growth exceeding 12 percent over that time period. Operational 9. Salaries, wages and benefits on the high end are 30.4 percent of ASC net revenue; on the low end, they are 17.8 percent of ASC net revenue, according to Avanza Healthcare Strategies "Am- bulatory Surgery Center Special Report: 2017 Benchmarks." Total operating ex- penses on the high end of ASC net rev- enue are 32.7 percent; on the low end, they are 15 percent of net revenue. 10. The typical ASC has eight operat- ing room surgical cases per day on the high end; on the low end, ASCs have 3.2 cases per operating room per day. The average operating room time per surgical case is 60 minutes on the high end and 40 minutes on the low end. 11. At the high end, the typical ASC has 12.6 non-surgical cases per OR per day; at the low end, the average ASC has 3.4 non-surgical cases per oper- ating room per day. Procedure room time per case is 40 minutes on the high end and 30 minutes on the low end. 12. ASC room utilization is typically 1,200 cases per room annually for ENT, general surgery and gynecology procedures on the high end; on the low end, the utilization is 1,000 cases per day. For orthopedic procedures, utilization is 850 cases per room annu- ally on the high end and 750 cases per room annually on the low end. Financial 13. Based on VMG Health's 2016 Intel- limarker Multi-Specialty ASC Study, the average payer mix as a percentage of gross charges for ASCs is as follows: • Commercial: 59 percent • Medicare: 29 percent • Worker's compensation: 9 percent • Medicaid: 7 percent • Self-pay: 4 percent • Other pay: 5 percent The average payer mix as a percentage of case volume at ASCs is as follows: • Commercial: 51 percent • Medicare: 33 percent • Medicaid: 10 percent • Other pay: 9 percent • Self-pay: 5 percent • Worker's compensation: 4 percent You also must focus on coding to thrive with pain management. Half of the battle is having accurate documentation and well-educated coders. You need expert coders who know anatomy, understand how the doctor is per- forming the procedure, know whether the information in the operative note is correct, know the payers' expectations, and under- stand how to pull that information out of the operative note and assign the correct codes. e providers also must be up to date on the payers' policies and guidelines. ey must have accurate and complete documentation in all areas of the operative note that show what occurred in the session with the patient. If information is lacking in the record, such as an issue with laterality or which nerves were treated, coders must clarify this information, and physicians must include it in an adden- dum to the original operative note. Documentation can be an issue. Physicians of- ten work with templates, but there isn't a tem- plate for every type of procedure performed. A physician might try to fit a new procedure into an existing template, but doing so is like trying to fit a round screw into a square hole. It just doesn't work. Continually educating physicians and giving them feedback by showing them ex- amples of well-documented operative notes can help avoid problems with payer approval. e old-fashioned revenue cycle billing prac- tices will not be sufficient in 2017. You need a financial division that has done the analysis and can tell you what the costs are for pain management procedures across the country. You need a deep dive, with ground-level analy- sis, that shows what is working and not work- ing with your reimbursement for pain man- agement. You need data to negotiate stronger contracts, and you need advice on your busi- ness strategy. With the right assistance and di- rection, your pain management program will not only survive in 2017, but it will thrive. n