What Does It Take to Launch a New ASC?

Getting to the finish line requires a team of experts, as well as flexibility in achieving the end goal.

With reimbursements dropping and construction costs on the rise, successfully building a new ASC from the ground up requires a Herculean effort from a diverse group of experts.

That said, the combination of an aging patient demographic and a pandemic-aided push to avoid hospital-based care makes launching an ASC well worth the time and money in the long run — if it’s done right.

3 key considerations

Here are the core principles of building and launching an ASC: 

• Stick to the end goal but remain flexible. Building an ASC is a huge undertaking and one that requires regular revision and flexibility — especially when developing the critical pro forma that projects future revenue and case volume. 

“One of the most common challenges I see, and one with the most significant ramifications, is when stakeholders fail to continually revise their ASC financial pro forma as, or ideally before, decisions are made during the development process,” says Joan Dentler, founder of Austin, Texas-based Avanza Healthcare Strategies. “This can lead to big and often unpleasant surprises once the facility opens.” She should know. Ms. Dentler has been opening ASCs since the late ’90s and compares her role in the process as “the equivalent of the general contractor but on the clinical and business operations side.” 

The development of a pro forma that accounts for complex market forces and clearly identifies the decreased-reimbursement, increased-cost landscape is also a must, according to Michael J. Patterson, FACH, president and CEO of Mississippi Valley Health. “Understanding the economics of a new facility or service line is key,” he says.

You need to keep growth in mind and plan for it with the least amount of disruption as possible.
Michael J. Patterson, FACH

• Lean heavily on the experts. Both Ms. Dentler and Mr. Patterson emphasize the critical role experts play in overcoming the many challenges — from overbuilding and overequipping to not fully understanding the complex regulatory environment — inherent in an ASC construction project.

“The best way to overcome or avoid these challenges is to work closely with an ASC-experienced team,” says Ms. Dentler. “Enlist the help of attorneys, architects and advisors throughout planning and development and then listen to their advice.”

In addition, if the build is a conversion of an HOPD to an ASC — a development trend Ms. Dentler is seeing quite a bit of these days — she also recommends adding a freestanding ASC life safety expert to the team of experts and having them do an in-depth review of the facility to ensure the process will meet current freestanding ASC regulations. “Often people skip this step thinking that if the facility is licensed as an HOPD it will ‘surely’ pass as an ASC,” says Ms. Dentler. “That is often not the case for many reasons.”

That sentiment is echoed by Mr. Patterson, who points to tricky, state-specific Certificate of Need (CON) laws as just one of the regulatory hurdles that legal counsel can help stakeholders navigate. “They can walk you through what documents must be submitted, who to submit them to and what the timeline is for decision-making,” he says. “I had to appear at a CON hearing and go before the state Health Facility Council to explain our project, and it really helped to have them right there guiding me through the process.”

You don’t always need to bring the experts to you, however. In many cases, you can learn a lot by going directly to peers who have just gone through a new build. “I would recommend doing site visits to other well-established facilities and learning from their operations leaders about what has worked well and what they would have done differently,” Mr. Patterson says.

In addition to an experienced attorney who can help you navigate the regulatory and licensing rules and obstacles, Mr. Patterson recommends leaning on expert advice on HVAC and building mechanicals, CPD, storage and patient flow throughout the facility. “You need to keep growth in mind and plan for it with the least amount of disruption as possible,” he says. “It’s challenging for sure but certainly required in this day of constant change.”

• Build with growth in mind. Speaking of growth, both local and national outpatient surgery trends should be used to forecast your expansion goals, says Mr. Patterson. “Develop a strategy based on your one-, three- and five-year goals,” he says. “Be prepared for growth but also recognize the appropriate timing of such growth so that, from a facility perspective, you aren’t chasing it, but instead you are always prepared to capitalize on future opportunities when they present themselves.”

Of course, this is easier said than done and right-sizing your facility with future growth in mind requires stakeholders to strike a very delicate balance, says Ms. Dentler. “I’m very sensitive to not overbuilding. Of all the ASCs I’ve seen that aren’t as profitable as everyone wanted, it is often due to the facility costs being out of proportion to the revenue,” she says. 
To avoid this issue, Ms. Dentler advises a cautious approach to the square-footage quandary and an emphasis on an expanded schedule — at least early on. “If an ASC experiences additional cases, I recommend investors look first at expanding the hours of operations rather than building out excess square footage,” she says. “Once they determine if the increased cases are there to stay, then they can look at a physical expansion.” OSM

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