ASC vs In-office profitability

[bimmer79]

Hey guys, can you help clarify the profitability of performing procedures in ASCs vs in-office setting in general?
Does the professional fee + facility fee payment minus overhead in the ASC generate more profit than the global in-office fee payment minus overhead? Which procedures are disadvantageous in the ASC. For instance, I've read that RFL of SI joints and knee (64640) doesn't make sense to do in ASC. Thanks for your help!

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[drusso]

Hey guys, can you help clarify the profitability of performing procedures in ASCs vs in-office setting in general?
Does the professional fee + facility fee payment minus overhead in the ASC generate more profit than the global in-office fee payment minus overhead? Which procedures are disadvantageous in the ASC. For instance, I've read that RFL of SI joints and knee (64640) doesn't make sense to do in ASC. Thanks for your help!

Depends on your employment status (employed versus independent) and ownership structure of the entity you work for. More money changes hands in the ASC and HOPD due to site of service differentials (SOS) and this is a boondoggle for large MD employers, but very little of that money may trickle down to the guy/gal actually doing the work. If you're in a multi-specialty ASC with a lot of productive proceduralists, everyone's getting a piece of everyone's action. But, you have to balance that with buy-ins, operational issues, and personalities.

 

[nvrsumr]

If u have a pain only asc with all private pay/auto/wc/oon and patients with unlimited time and money for deductible than asc is the winner.

If u buy into 3 existing multi specialty ascs in three parts of town, lots of windshield time, never full schedule at any one place, caid/care making up chunk of payor mix, complicated distributions or some type of super partner then a busy well run office procedure suite is the winner

Many pain docs with office based practice make a million but I doubt many make 2 million. There are a number of practice owner pain docs with their own asc, stimin all day, with multiple employeed docs who are not asc partner making 2+ million.

 

[pmrmd]

I do both. Multiple offices that feed the ASC. For usual procedures the ASC is more profitable for sure but there is more work to be done to keep the thing running. Add in your stim trials, perms, Vertiflex cases and its no question. General rule is spine in ASC and periphery in office. I would never take a facet block case to the ASC though because its so clearly a rip off to the patient and payor.

 

[painfree23]

If u have a pain only asc with all private pay/auto/wc/oon and patients with unlimited time and money for deductible than asc is the winner.

If u buy into 3 existing multi specialty ascs in three parts of town, lots of windshield time, never full schedule at any one place, caid/care making up chunk of payor mix, complicated distributions or some type of super partner then a busy well run office procedure suite is the winner

Many pain docs with office based practice make a million but I doubt many make 2 million. There are a number of practice owner pain docs with their own asc, stimin all day, with multiple employeed docs who are not asc partner making 2+ million.

A million in revenue or profits?

 

[Dr. Ice]

Basically what drusso said. I’m currently in a multispeclaity asc that should be very profitable but factor in cost of real estate, buy in, number of share holders, and lack of commitment on the part of docs who say they will bring volume but don’t because they are used to their current set up and don’t want to deviate, then you have a less than desirable situation. If I had to do it all over again (and still might) I would go small shop, low overhead, all in office procedures...I know people in large ortho practices who happen to have an all office based set up who get fed (aka needle jockey), basically know how to do 3 lumbar procedures and not even well, and are making 500k in a saturated market. By contrast the other shmos in the practice are being forced to do procedures in an asc because they have a higher skill set but will never be able to buy in to the asc because the surgeons want all the profit. Put that into perspective..

 

[bimmer79]

Very interesting responses so far. I appreciate the insight ya'll have provided. Just to clarify, I am the only pain doc in an ortho group with 11 surgeons (2 spine). We have 4 ORs in our ASC and will be competing for block time. I was provided with an equal buy-in opportunity to the ASC. I suppose I could do procedures both in the ASC and in-office. We don't have an in-office suite, but are considering making one if it would be cost-effective.

 

[Dr. Ice]

Very interesting responses so far. I appreciate the insight ya'll have provided. Just to clarify, I am the only pain doc in an ortho group with 11 surgeons (2 spine). We have 4 ORs in our ASC and will be competing for block time. I was provided with an equal buy-in opportunity to the ASC. I suppose I could do procedures both in the ASC and in-office. We don't have an in-office suite, but are considering making one if it would be cost-effective.

You’re basically in the set up I’m in. Have in office suite but there’s constant chatter about shutting it down because I’m “leaking out revenue” from the center. I don’t do a ton of stim which is probably the only real way to maximize asc/office revenue if you pick site of service wisely. What are your asc distribution checks like? Is it an in network or out of network center? What’s the payor mix like? Unless your stimming implanting and pumping away the revenue you bring in to the center is always gonna be below ortho especially if they are doing total joints there and the spine surgeons are doing complex fusion cases.

 

[jsaul]

Very interesting responses so far. I appreciate the insight ya'll have provided. Just to clarify, I am the only pain doc in an ortho group with 11 surgeons (2 spine). We have 4 ORs in our ASC and will be competing for block time. I was provided with an equal buy-in opportunity to the ASC. I suppose I could do procedures both in the ASC and in-office. We don't have an in-office suite, but are considering making one if it would be cost-effective.

it all depends on the buy in for the asc. how much per share and what is thr revenue per share in the last year

 

[TIVAndy]

You’re basically in the set up I’m in. Have in office suite but there’s constant chatter about shutting it down because I’m “leaking out revenue” from the center. I don’t do a ton of stim which is probably the only real way to maximize asc/office revenue if you pick site of service wisely. What are your asc distribution checks like? Is it an in network or out of network center? What’s the payor mix like? Unless your stimming implanting and pumping away the revenue you bring in to the center is always gonna be below ortho especially if they are doing total joints there and the spine surgeons are doing complex fusion cases.

i'm in a similar situation. general rule of thumb that i use is people wanting sedation goes to ASC. if you don't, do in office. peripheral joints usually in office. this keeps a good balance and reasonable flow to ASC to keep colleagues happy at the same time reasonable revenue flows through in office procedure for yourself to keep

 

[bimmer79]

it all depends on the buy in for the asc. how much per share and what is thr revenue per share in the last year

It's actually a new ASC entity with new partnerships; we have finally received the Medicare numbers and awaiting commercial insurance contract negotiations. The buy-in is based on fair market value from previous use of the ASC and pro-forma.

 

[Dr. Ice]

It's actually a new ASC entity with new partnerships; we have finally received the Medicare numbers and awaiting commercial insurance contract negotiations. The buy-in is based on fair market value from previous use of the ASC and pro-forma.

It’s new which means you guys will be new to it. Going to be a work in progress I’m sure. If you are invested long term in the practice it’s probabaly a decent investment, especially if you guys wind up converting to multi-specialty. Only time will tell if as the cash flow moves, the tug of war of “who is pulling more weight” at the center will effect the gel of the practice

 

[strike5858]

So I was offered partnership at an multi specialty surgery center. It was originally 100% physician owned but was sold to a public traded ASC management company a couple years back. It’s essentially a 51-49 arrangement.

The center has multiple original physicians not doing procedures at all or carrying their fair share. There is plenty of block time free on multiple days. Since I started taking cases there, I am in the top 3 physicians when it comes to volume, block time utilization, overall efficiency and likely revenue generated. Bases on the projected growth of my practice I will likely be the top producer at the center within the next 6-12 months. Rest of the partners are pretty much established and unlikely to change their practice habits. They are trying to bring in “younger , more motivated doctors”.

So their initial offer: 2 shares based on a trailing 12 month formula (***prior to the start of Covid***).

I don’t want to get into exact numbers but let’s say that the annual distribution is $10000 per share. What do you all think the value of the share price should be?

my issues are:

They should price it as a trailing 12 that includes the covid period. You can’t just act like it never happened and also you can’t say for sure what the impact will be in the next few months with winter coming.

lastly I would like to buy more shares. If I am the top producer , then I would like to be one of the top shareholders. I stated this and it’s likely ruffled some feathers with the “old guard” but it’s a negotiation and you miss every shot you don’t shoot.

my feeling is that I need to have a decent amount of stake in the center to justify me taking 30% of my cases to the center. Otherwise I’m better off setting everything up in office or starting the process of a single specialty pain ASC ( I don’t need a certificate of need in my state)

I would appreciate your thoughts and feedback.

I just don’t want to come off as the young naive kid that has no idea how the ASC game works and is demanding too much but I also don’t want to be the sheep that’s walking into a slaughter with this negotiation.

 

[drusso]

So I was offered partnership at an multi specialty surgery center. It was originally 100% physician owned but was sold to a public traded ASC management company a couple years back. It’s essentially a 51-49 arrangement.

The center has multiple original physicians not doing procedures at all or carrying their fair share. There is plenty of block time free on multiple days. Since I started taking cases there, I am in the top 3 physicians when it comes to volume, block time utilization, overall efficiency and likely revenue generated. Bases on the projected growth of my practice I will likely be the top producer at the center within the next 6-12 months. Rest of the partners are pretty much established and unlikely to change their practice habits. They are trying to bring in “younger , more motivated doctors”.

So their initial offer: 2 shares based on a trailing 12 month formula (***prior to the start of Covid***).

I don’t want to get into exact numbers but let’s say that the annual distribution is $10000 per share. What do you all think the value of the share price should be?

my issues are:

They should price it as a trailing 12 that includes the covid period. You can’t just act like it never happened and also you can’t say for sure what the impact will be in the next few months with winter coming.

lastly I would like to buy more shares. If I am the top producer , then I would like to be one of the top shareholders. I stated this and it’s likely ruffled some feathers with the “old guard” but it’s a negotiation and you miss every shot you don’t shoot.

my feeling is that I need to have a decent amount of stake in the center to justify me taking 30% of my cases to the center. Otherwise I’m better off setting everything up in office or starting the process of a single specialty pain ASC ( I don’t need a certificate of need in my state)

I would appreciate your thoughts and feedback.

I just don’t want to come off as the young naive kid that has no idea how the ASC game works and is demanding too much but I also don’t want to be the sheep that’s walking into a slaughter with this negotiation.

You have uncovered the Zen Koan of ASC ownership for most pain MD's. To really make it pencil, you need a significant stake purchased at a discount (like at start up). Otherwise, you're coming late to the party and fighting for scraps from Longshank's table.

You WANT to be in the position of the founding partners who recouped their investment several fold and sold for a multiple of EBITA to deep pockets. You don't want to be the new kid on the block buying into a bunch of depreciated stuff, employees, and dead-wood partners...

 

[strike5858]

You have uncovered the Zen Koan of ASC ownership for most pain MD's. To really make it pencil, you need a significant stake purchased at a discount (like at start up). Otherwise, you're coming late to the party and fighting for scraps from Longshank's table.

You WANT to be in the position of the founding partners who recouped their investment several fold and sold for a multiple of EBITA to deep pockets. You don't want to be the new kid on the block buying into a bunch of depreciated stuff, employees, and dead-wood partners...

So what should be a reasonable timeline for ROI?

At what point do you say the benefits of continuing in office Outweigh the Benefits of ASC ownership taking into account the growth potential if managed well and more producers like me are brought in?

I know that’s a loaded question but just trying to get a few opinions and though processes on this topic so it can help me formulate my own strategy.

 

[drusso]

So what should be a reasonable timeline for ROI?

At what point do you say the benefits of continuing in office Outweigh the Benefits of ASC ownership taking into account the growth potential if managed well and more producers like me are brought in?

I know that’s a loaded question but just trying to get a few opinions and though processes on this topic so it can help me formulate my own strategy.

"It depends."

But, now you're asking the right questions: If I were you, I'd ask a savvy accountant (like someone who has ASC owners as clients) or a consultant to give you the over-under or break-even analysis. This is a "knowable" answer. Don't just go by what the ASC is telling you--they WANT you to buy for a reason. Ask for financial statements and production reports and bring it to an objective third-party.

Be careful to consider "up-side," "down-side," and opportunity costs--the costs and forsaken revenue associated with *NOT* doing something for both being in the office and out-of-the-office. What you'll see is that it depends upon a lot of factors--payer mix, the kind of procedures you're doing, overhead, debt, etc.

 

[geauxg8rs]

So I was offered partnership at an multi specialty surgery center. It was originally 100% physician owned but was sold to a public traded ASC management company a couple years back. It’s essentially a 51-49 arrangement.

The center has multiple original physicians not doing procedures at all or carrying their fair share. There is plenty of block time free on multiple days. Since I started taking cases there, I am in the top 3 physicians when it comes to volume, block time utilization, overall efficiency and likely revenue generated. Bases on the projected growth of my practice I will likely be the top producer at the center within the next 6-12 months. Rest of the partners are pretty much established and unlikely to change their practice habits. They are trying to bring in “younger , more motivated doctors”.

So their initial offer: 2 shares based on a trailing 12 month formula (***prior to the start of Covid***).

I don’t want to get into exact numbers but let’s say that the annual distribution is $10000 per share. What do you all think the value of the share price should be?

my issues are:

They should price it as a trailing 12 that includes the covid period. You can’t just act like it never happened and also you can’t say for sure what the impact will be in the next few months with winter coming.

lastly I would like to buy more shares. If I am the top producer , then I would like to be one of the top shareholders. I stated this and it’s likely ruffled some feathers with the “old guard” but it’s a negotiation and you miss every shot you don’t shoot.

my feeling is that I need to have a decent amount of stake in the center to justify me taking 30% of my cases to the center. Otherwise I’m better off setting everything up in office or starting the process of a single specialty pain ASC ( I don’t need a certificate of need in my state)

I would appreciate your thoughts and feedback.

I just don’t want to come off as the young naive kid that has no idea how the ASC game works and is demanding too much but I also don’t want to be the sheep that’s walking into a slaughter with this negotiation.

is it untrue that you need to bring one third of your cases to the ASC? For compliance? I hear that from lawyers but then I hear people not doing that. What is the truth?

 

[gdub25]

bimmer, strike,

What you guys both need these ASC owners to understand is that unlike them, you are not a surgeon and don’t need the ASC. They have to do surgery in an OR so it’s best for them to do it at place they own. You can pick OR or office and will always do better financially if you do your injections in the office. If you are a significant equity owner, say 30% or more, then maybe the ASC makes sense for you to do all you injections there. Otherwise you’re going to take a big pay cut on the professional fee and give away all the facility fee to the high overhead of the ASC and watch the rest get divided up to the other share holders. They have to do the math for themselves to realize this. You aren’t being selfish for wanting to do stuff in the office and if they look at the numbers they’ll realize it’s the good business decision to be made and probably the direction they would go if roles were reversed. My advice is to figure out what you want to take to the ASC and then negotiate your ownership based on how much profit margin that will contribute. SCS trials will be the tough one. They pay so well in the ASC it’s hard to ignore but at the same time they pay really well in the office. For my group, we’ve decided to only do perms and Vertiflex in the ASC. We didn’t get much ownership out of the deal but we feel good about it, make more money on those cases than we would otherwise and still have a great office set up.

 

[BobBarker]

You have to have some office setup anyways. Hip injections pay basically nothing in the ASC. Kyphoplasty pays very little compared to the office in the ASC as well. Your catchment will
be dramatically better in the office. You will lose patients in the delay to get them scheduled at the ASC.

 

[strike5858]

Thank you for the input fellas, I will keep you posted.