Failing SDS program? Address multiple causes

Staff and labor costs, underutilization key problems

There usually is more than one reason a same-day surgery program doesn’t show a profit, and at Brookside Ambulatory Surgery Center in Battle Creek, MI, management had to address multiple issues to turn the center from a program that had accounts receivable of 80 days, operating rooms that were used 20% of the time, and staff costs that represented 50% of overhead expenses.

"The center had been open for five years, and the partners had never seen any profit," says Luke M. Lambert, chief executive officer of Ambulatory Surgery Centers of America, a Norwell, MA-based company that owns or manages same-day surgery programs and a speaker on this topic at the most recent annual meeting of the Federated Ambulatory Surgery Association.

When Lambert’s company first looked at the center’s information, it saw several items that needed to be addressed immediately, he says.

"The facility was underutilized, with operating rooms scheduled only 20% of the time, but the facility stayed open five days a week," he points out. "This meant a lot of downtime for staff members, most of whom were full-time employees instead of part-time or per-diem employees who could be sent home if there was no work."

Even with the underutilization, the center paid a significant amount of overtime, Lambert says.

"Physicians would start cases late in the day to avoid conflicts with office time and patients’ work days, and that required employees to stay longer hours, which meant overtime pay," he explains. "We pointed out the cost to physicians and eliminated start times that would mean staff members staying late for procedures and recovery."

Other centers set a time to start the last case of the day, sources say. For example, they dictate "no cases after 2 p.m." or "no cases that won’t end by 3 p.m." Other facilities have a split shift with some nurses coming in for early cases, 6 a.m. to 12:30 p.m., for example, and others coming in later, such as 9 a.m. to 3 p.m., sources say.

Supply costs also can cause problems. At Brookside, these costs were extremely high because the center’s cash-flow problems meant bills were paid late so vendors would give no discounts, Lambert notes. "Once we finished our audit, we discovered that the center owed $1.3 million to vendors, a fact that the physician owners and the center staff didn’t know," he says.

One of the reasons for the late payments to vendors was the length of time that it took the center to collect its fees, Lambert explains. "The center was using an outside billing company that charged high fees and didn’t provide good service, so we brought the billing process back to the center," he says.

The variety of reasons for Brookside’s problems are not uncommon, says Michael Sawyer, administrator of Santa Barbara (CA) Surgical Center. While the basic problem may be the same among faltering centers, you do have to evaluate solutions based on each center’s geographic, financial, competitive, and physician issues, says Sawyer, who also serves as regional director for Regent Surgical Health, a Westchester, IL-based company that manages and owns surgery centers.

Cash flow was a problem for the Santa Barbara center, he says. They were using an outside billing company, but they chose not to bring the job in-house, Sawyer says. "It takes time to hire and train people to handle billing, and we did not want to put off correcting our cash-flow problem," he adds.

The previous billing company had been billing only two times each month. "We switched to a company that agreed to bill daily, so we get our money faster," Sawyer says. "The new billing company began working immediately on collecting outstanding debts as well, so I could concentrate on other areas we needed to correct."

The center also began collecting copayments at the facility, which was not done previously, he adds.

Supply costs are another area that usually needs to be targeted immediately, Lambert says. "Once we found out that vendors were owed over $1 million, we immediately contacted all of them to explain that the center was under new management and we were committed to paying all debts," he notes.

They set a timeframe with each vendor, making a substantial first payment, Lambert explains.

"After the first payment, we made regular monthly payments, and within nine months, we were current with all vendors," he continues.

Once they could prove that they paid their bills, they joined a group purchasing organization that provided discounts on supplies, he adds.

Another supply cost that Sawyer eliminated was service contracts. The previous management purchased every equipment maintenance contract available, he says.

"I believe that it is less expensive to buy equipment that has a good reputation or with which you’ve had good experience in the past and to pay for repairs as you go along," Sawyer notes. "Even with maintenance contracts, you will have downtime that you have to cover, but if you have enough scopes, for example, you can cover the time that one scope is out for repair."

Staffing costs also are straightforward, but addressing some issues can be tough, admits Lambert. "We were able to reduce labor costs from being 50% of our net revenue to 18% by making sure we had the right mix of full-time, part-time, and per-diem employees," he says.

Santa Barbara is relatively isolated, so the staff members that were hired for the center came from the local hospital, and all of the staff members came with the hospital mentality, Sawyer explains. Because the Santa Barbara center was the first same-day surgery center in the area, staff members and management assumed that full-time employees would work best, he says.

Unfortunately, the center didn’t have the caseload to support full-time employees, and employees didn’t have the flexibility to work shorter hours when needed. "They felt entitled to their hours," Sawyer says.

Also, they needed staff members who were willing to cross-train and didn’t say that something "wasn’t their job," he adds. "We needed everyone to believe that the success of the center depended on everyone pitching in to do whatever needed doing," Sawyer says.

New staff members were hired. "Today, the staff are composed of more per-diem members than full-time members, but they are all people who like working in the same-day surgery environment," he adds.

(Editor’s note: Do you have a success story to share? Contact Joy Daughtery Dickinson, Senior Managing Editor, at


For more information about improving same-day surgery program performance, contact:

  • Luke M. Lambert, Chief Executive Officer, Ambulatory Surgical Centers of America, 15 Farrar Farm Road, Suite 2, Norwell, MA 02061. Phone: (866) 982-7262 or (781) 659-0422. Fax: (781) 659-0434. E-mail:
  • Michael Sawyer, Administrator, Santa Barbara Surgical Center, 3045 De La Vina St., Santa Barbara, CA 93105. Phone: (805) 569-3226. E-mail: