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4 Mistakes That Cause Surgery Centers to Fail

Rob Murphy, founder and CEO of Murphy Healthcare Group and founder of ASC Turnaround Group, discusses four critical mistakes that spell failure for an ambulatory surgery center.

1. Too many rooms, not enough cases. According to Mr. Murphy, one of the top reasons for ASC failure involves over-building the center and failing to staff enough surgeons or bring in enough case volume. "We've been called into situations where ASCs were built with five operating rooms that only needed one or two," he says. "The ongoing costs of maintaining these large physical plants can really eat away at the profits." He says in extreme cases, partners are required to write checks to the ASC to keep it afloat financially — a major red flag that the ASC is failing and urgently needs outside help.

2. Poor managed care contracts. Mr. Murphy says many ASCs fail financially because they rely on poor managed care contracts. A center that consistently loses money on cases can approach bankruptcy rapidly. In the process of turning around a failing ASC, Mr. Murphy says his team reviews managed care contracts and often decides to re-negotiate the contracts or terminate them completely.

3. Failure to bring in complex, high-paying ASC cases. In order to succeed, an ASC needs to change and develop when necessary, Mr. Murphy says. "Failure to constantly bring in more complex, higher-paying ASC cases puts the facility behind the curve," he says. "This would be the equivalent of running a restaurant with the same limited menu year after year." He says in order to maintain strong ongoing profits, ASCs must make sure to stay ahead of the competition by adding profitable procedures that may not be available elsewhere. "Some examples include major spine cases, joints (i.e. total hips), brachytherapy, lithotripsy, ENT navigation guided procedures and, more recently, platelet rich plasma therapy," he says.

4. Out-of-control costs. Even if an ASC is bringing in profitable cases and recruiting new surgeons, the problem of out-of-control costs could still mean major financial leakage. "For example, if an ASC doesn't know its costs per minute of OR time, it can't know whether cases are profitable or money-losers," Mr. Murphy says. Much of the time, he says out-of-control costs can be attributed to a lack of professional, hands-on management, or team members who will diligently look at center data and track trends over time. If the center is losing money on unprofitable cases, sloppy supply management, staffing costs or other high-cost factors, administration needs to know immediately.

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