How to keep your surgery program alive and well

By Stephen W. Earnhart, MS
President and CEO
Earnhart & Associates
Austin, TX

It always seems as if there are obstacles that get in our way when we try to do our job. Below are some interesting roadblocks that your peers are facing. You are not alone out there!

Question: I am a surgeon who is talking with the local hospital about developing a joint venture ambulatory surgery center (ASC). We have, however, reached an impasse in our discussions that is centered on anesthesia contracting. We, the surgeons, understand we need to have a contract with a group or individuals for services.

The hospital is claiming that it has an exclusive arrangement with its anesthesia group that it would have to honor in the new joint venture.

Our problem is one of the reasons we are leaving the hospital and doing our own center is to get away from this anesthesia group. The hospital is claiming its hands are tied and the current anesthesia group will fight if it changes groups for the ASC. What can we do?

Answer: You are not alone in this issue. There are many other potential joint ventures in the same situation.

First, the hospital will be setting up a new corporation with the surgery center, and therefore, the contract with the anesthesia group is not an issue as it is not the same corporate structure that has the original contract. (I reviewed the agreement.)

Second, if you can work with the current hospital anesthesia group but exclude members of the group that the surgeons do not want to work with in the new center, you might accomplish the same goal. While it might be painful, most anesthesia groups realize that not all of the members are attuned to the special needs of a for-profit ASC.

Question: Our hospital is a very prestigious East Coast facility that is headed for trouble. Many of the cases we are doing in the OR are not being charged properly, are miscoded, or not charged to the patients at all. We, as the operating room staff, are clueless as to what things costs, and I am shocked that we are still in business! I have told my supervisor repeatedly what is going on, but he just tells me not to worry about it. I just cannot accept that advice. I came from a freestanding ASC to the hospital (there is not a freestanding ASC in the area), and I am having a very difficult time adjusting to this attitude. What should I do?

Answer: Run! What you described is not that uncommon. However, to be fair, I do know of other hospitals that are right on top of all these issues.

Hospitals are beginning to realize they need to become more businesslike in cost control and efficiency, and a great many of them are doing so.

Yours, however, is not. The physicians in your institution (most of whom are employed by the hospital) have been spoiled for decades into having whatever they want. You hospital is so well-endowed that it will have cash for operations for many years — long after you are gone. After everything you have discussed in your e-mail and phone conversation, I think it is safe to say that it is you who will have to change — not the hospital. Don’t stay too long and get used to this situation.

Question: We are a small ASC that is struggling to make ends meet. We have a completely full-time staff with a guarantee of 40 hours per week, and we pay 100% of health benefits for each staff member and their family. We match the employee retirement plan with 25% of their contribution, and each staff member has four weeks of vacation per year. I know that we are too generous, but the surgeon who owns 51% of the shares is adamant that we maintain this package. (His wife and daughter also work at the center.) If nothing is done, we will need to start "cash calling" on all the investors in a couple of months. Help!

Answer: I was going to apply for a job there until you told me that you had cash calls coming. Once you start asking your investors for monthly "cash out of pocket" to sustain operations at your center, you are, essentially dead and will shut down within a matter of months.

Instead, do this: Redo your budget with 50% of the staff on per diem. (They go home without pay at the end of the surgical day.) Assume your staff will start paying for family members’ health insurance. Reduce your retirement contribution to 10%, and let two full-time equivalent staff members go. With that type of attitude about staffing, I can safely predict that you are overstaffed by at least two individuals.

Take your new budget (which actually put the center back into the black) to the majority owner and explain the dire situation to him. Show him the budget with your suggestion. (Do not just go to him with cash call problem. Give him a solution!) If he fails to act accordingly, then you should start looking around for a new position yourself. Again, cash call centers have a very short life span.

(Editor’s note: Earnhart & Associates is an ambulatory surgery consulting firm specializing in all aspects of surgery center development and management. Do you have additional questions? Contact Earnhart at 8303 MoPac, Suite C–146, Austin, TX 78759. E-mail: Web: