So You Want to Build an ASC?

• Focus on the end goal. Determination of Need (DoN) laws are in place in Massachusetts, so the state’s Health Policy Commission and Department of Public Health must review and approve healthcare construction projects. That meant Mr. Ferrari’s group had to navigate regulatory requirements before breaking ground, a process he says can take nine months to a year to complete. The rigid regulatory rules in Massachusetts forced the group to complete most of the heavy lifting — formulating a business plan, forecasting case volumes, setting a capital equipment budget and finalizing the facility’s design — before submitting the required information to the state for approval.

Having the details of the project dialed in from the start, even in states where new construction is not regulated, begins the build in an organized manner and keeps you focused on the end goal. “It also forces you to truly understand the details of the project in terms of design, cost and clinical outcomes,” says Mr. Ferrari. “There’s always opportunity to adapt from the original plan, but you lock yourself into a set of parameters.”

• Rely on the experts. Developing de novo surgery centers can be daunting. “There’s a lot of sweat equity that goes into the entire process,” says Mr. Ferrari. “Building a new facility involves a lot of coordination among numerous partners. It demands a great deal of competency to know how to organize the project and get the work done.”

Consulting firms with experience constructing and opening surgery centers have the know-how to involve numerous voices in the planning process and tap into their insights. “It’s imperative to include perioperative leaders and frontline workers to determine how the facility’s design will help them care for the communities they serve,” says Jacqueline Farland, executive director of surgical services in the Bismarck region of Sanford Health in North Dakota. The health system recently opened the 22,000-square-foot multispecialty Sanford Broadway Same Day Surgery Center. Mr. Ferrari says it’s important to work with a healthcare architect with experience drawing up plans for surgery centers, especially in certificate of need (CoN) or DoN states, where certain design requirements must be met. “If those issues aren’t captured during the design phase, you’ll run into significant issues during the licensure and site-approval process,” he says.

• Right-size the build. A construction project’s overall budget is based on the amount of space needed to host the procedures that will be performed and the equipment that’s required to perform them. Ms. Farland says Sanford Health’s new surgery center includes six ORs to meet the rising need for outpatient ENT, general, orthopedic and plastic surgical care, and includes additional space to accommodate future growth so the health system can continue to serve surrounding communities.

Ultimately, points out Mr. Ferrari, balancing current expectations with future growth and setting realistic goals are essential to achieving a return on investment. His team decided on opening three ORs and two procedure rooms. “It’s more difficult to outfit additional space after the initial build, a process that could involve going through regulatory approval again and interrupting the business and clinical functioning of the facility,” he says.

Mr. Ferrari points out that facilities built in DoN or CON states must outfit the number of ORs justified by the expected case volume when the doors open, but centers in states without regulations have some freedom to build for future growth. Either way, he says, it’s imperative to understand the project’s business modeling, drill down into the case volume data and consider local referral challenges to ensure surgeons will be able to deliver the number of procedures they claim they’ll bring to the facility.

• Make smart purchases. Work with surgeons to determine what equipment they require for immediate use, and what technologies can be categorized as future needs. Keep in mind, you can fund additional purchases with operating margins once the facility is operational and generating cash.

One of Sanford Health’s goals during the planning phase of its ASC was to work with the physicians and surgical team to identify their equipment essentials for the types of services and surgeries they planned to perform. “Once those details were confirmed, we performed a financial analysis to ensure the purchases made sense and adjusted our capital plan as needed,” says Kirk Cristy, vice president of finance in the Bismarck region of Sanford Health.

Be aware, says Mr. Ferrari, that physician-owners who are involved in the equipment purchasing process for the first time might not understand how much technologies and instrumentation cost. He therefore recommends creating a clinical advisory committee comprised of physicians and clinical leaders. The committee discusses the equipment preferences of the physicians, analyzes cost data and recommends buying decisions that make good financial and clinical sense for the facility.

• Plan for downtime. Don’t underestimate how long it will take to operate at full volume after your doors open. “Raise enough money to cover the ramp-up phase, which could take several months,” says Mr. Ferrari. “Failing to plan for a temporary lull in revenue-generating cases can be frustrating for investors.” Remember, even the best-laid plans can go awry, despite your best efforts to prepare for every possibility during the design and construction of a new ASC. “Always expect the unexpected,” says Mr. Ferrari. “Follow a playbook with the understanding that something will force you to alter your plans to some degree.” OSM

Note: This three-part article series is supported by Stryker.