David Thawley – How Proactive Operations Will Change Everything for Your ASC

Here’s what to expect on this week’s episode. 🎙️

The ASC industry is experiencing a significant shift in procedure volumes from hospitals to ASCs, driven by cost efficiency, patient preference, and the authorization of higher acuity procedures in ASC settings.

But, despite the promising growth and efficiencies, ASCs face challenges such as rising competition, static reimbursement rates, higher acuity cases, staffing shortages, and the rising cost of everything.

David Thawley, CEO at HST Pathways, is on this week’s podcast episode to dive into how ASCs, despite the challenges, ASCs can still thrive in this new world. Here are the six things that those who are succeeding are doing differently:

💉 Being surgical with OR utilization & case mix

💰 Analyzing case profitability before the case happens

⚙️ Automating manual processes so that staff can focus on high-value work based on automated insights

📊 Benchmarking everything to drive improvements and looking to peers for best practices

🔎 Forecasting hiring needs & supply needs

👍 Optimizing physician experience to both recruit and retain top-tier physicians

A few other tips? Engage with peers, share best practices, and foster a community of continuous learning and improvement. This collaborative spirit, coupled with a focus on proactive operations, positions ASCs to achieve greater success and resilience in the face of challenges out of their control.

Find the full episode on Apple Podcasts, Spotify, or YouTube to hear all the details.

Episode Transcript

1:38
Hi, Dave.

1:39
Thanks for joining us.

1:41
Good morning, Erica, long time listener, first time participant on your podcast.

1:45
Thanks for having me.

1:46
Of course.

1:47
Can you share a little bit about yourself with our listeners?

1:51
Sure.

1:51
I am Dave Thali and been the CEO of HST Pathways for approximately 3 years now.

1:58
I live in the state of Washington and started my career off in the military and have had various roles within technology over the past 10 or 15 years.

2:06
But yeah, really grateful to be part of HST organization and the AST industry great.

2:13
I am really excited to have you on today because the surgery center industry as a whole is at a very interesting crossroads right now and I think it’s really important for the longevity of our clients that we talk about it.

2:27
So let’s do it.

2:28
How has the world changed for AS CS?

2:34
So at a high level, it’s changed in many wonderful ways over the past 20 years.

2:39
And the ASC industry has been on a a very rapid growth rate.

2:46
And as we all know, there’s more and more procedure volume that’s shifting from hospital to ASC’s.

2:52
There’s higher acuity procedures that have been authorized in ASC setting and there’s a lot of physician and patient preference to have procedures done in AASC setting.

3:05
Some of the reasons for this are that there’s typically 35 to 45% cost savings when a like for like procedure is performed in AASC versus a hospital.

3:17
And there’s overall efficiency improvements which are great for physicians as well As for patients and also for payers who are really paying for like for like procedures in AASC or hospital.

3:30
So what this means is that the the industry itself has grown massively really over the past couple decades.

3:37
We’re we’re now north of 20,000 total operating rooms in a in a surgical environment and with more and more procedures and those higher acuity procedures being authorized in the ASC setting, that growth is expected to continue and most forecasts suggest that the industry should grow roughly 25% over the next decade.

3:58
So in one light in terms of growth and adoption and now total joint procedures being authorized in ASC setting, it’s fantastic.

4:07
And for folks that haven’t visited some ASC, like many of these are just absolutely world class beautiful operations and they’re also a business extension of some of the most impressive medical professionals, the physicians that are frequently starting these AS CS.

4:23
And so it’s just a really spectacular environment.

4:26
But with all of that goodness and all of that growth and all of that the the efficiency improvements, it also means there’s increasing competition.

4:34
And so I think for a while AS CS were able to sit in the corner of healthcare and operate somewhat independently and in in the shadow.

4:43
But now given a lot of these changes that we’ve discussed, hospital systems and other investment groups and large providers are wanting to have more and more presence in the ASC market.

4:55
So with increasing competition, there’s aspects that create some challenges for ASC’s as well.

5:02
Some of those are that reimbursement rates really haven’t kept up with a lot of the changes from cost structure, particularly as we’ve seen post COVID.

5:11
The increasing competition and consolidation means that AS CS more and more are being operated more effectively and for those that aren’t being operated as efficiently, a lot of those are being acquired by larger groups.

5:25
And that increasing competition in some ways is a very good thing that most of healthcare isn’t an efficient market, but the ASC space very much is.

5:34
So the most effective and cost effective operations that can deliver the best patient outcomes and customer delight, ultimately those are going to be the ones that win.

5:44
So this increasing competition is I think a good and bad thing as it relates to ASC industry.

5:49
And then as I mentioned before, between higher acuity cases coming online, that’s also it’s good from a volume perspective, it’s good from a profitability perspective, but it adds complexity to how you need to manage an ASC.

6:01
And then yes, the post COVID staffing shortages and rising cost of everything have have created related challenges as well, albeit hopefully more of a short term impact versus long term impact.

6:12
But so I think to get back to your original question, the growth as well as the procedure volume and I think respect of the ASC industry has been absolutely spectacular over the past couple of decades.

6:25
But as it becomes more successful, there’s just a rising bar that’s required in order to be successful and ultimately compete in this kind of increasingly competitive world.

6:37
Sure.

6:37
Absolutely.

6:38
Yeah, You touched on a lot of great stuff there.

6:40
So those that are thriving, what do you find that that they’re doing differently?

6:47
Sure.

6:47
So it’s never been easy to operate a surgery center, but it was easier five or ten years ago than it is today.

6:55
And and when I say it was easier like you could get away with some more manual process, not really be necessarily dialed in in all aspects of your operation.

7:04
But as as mentioned with this increasing competition and some aspects of reimbursement rates in other areas like ultimately the AS CS that are most successful are doing everything from being very surgical with their operating room utilization as well as case mix to say.

7:23
And we’re going to grow our facility or group of facilities and really try to have an inefficient point between the number of operating rooms that we’re staffing for and the cases and case volume that we have coming into those.

7:35
And we’re going to be measured that as we think about expanding and adding new operating rooms, we’re doing so in a methodical way.

7:42
And what we’re seeing also more and more is that multi specialty AS CS are becoming more and more of the norm and by being multi specialty you can have that case mix and have physicians with multiple disciplines coming in order to staff as well as fill up the OR utilization and make sure that you’re growing in a very methodical manner.

8:03
Another thing has become more and more the norm is really needing to be maniacal by analyzing case profitability.

8:11
And so at the time that a physician scheduling a case into the ASC looking into all the details behind from the physician’s preference card through patient information and reimbursement data, implant costs and other supply costs to say what is our expected profit margin from this case.

8:29
And if we’re going to have an under profitable or unprofitable case, what areas can we look into in order to try to improve the profitability of that case?

8:39
Then there’s a whole area about just being much more automated and moving away from manual processes.

8:46
I think that’s fairly self-explanatory.

8:48
But really you want to have your staff which are very talented, highly educated staff members spending their time in the most critical areas versus being drugged down by a lot of manual process.

9:01
And another thing that we see a lot is the the increasing need to benchmark everything and benchmarking from if you have a group of physicians providing like for like procedures and CPT codes, how do your physicians look on a normalized bell curve?

9:16
Maybe it could be the profitability per minute of OR time or other aspects benchmark, hey, how do we look from a contract rates versus other centers in our local area and how can we use that to negotiate better contracts with our payers and ultimately benchmark everything you do.

9:33
You know there’s an old saying that you can’t manage what you don’t measure.

9:36
And I think those centers that are really focused heavily on some of those data and insights ultimately help to drive behavior change within the center and find ways to drive incremental efficiency and profitability in the center.

9:49
And then finally, there’s the forecasting, hiring needs and supply needs of the center to make this a much more efficient process.

9:57
And all of these things together ultimately culminate in optimizing the physician experience.

10:02
And physicians should be spending their time driving cases to the ASC and driving patient outcomes and ideally spending as little of their time dealing with business nuance as possible.

10:15
And by doing so well run AS CS have this fly wheel effect that the single greatest factor in determining the success of an ASC or a group of ASCs is the ability to recruit and retain new physicians and world class physicians.

10:32
The ASC healthcare environment, it’s a team sport and the best your ability to recruit world class team members and physicians who then bring case volume into the facility which helps drive this OR utilization which helps Dr.

10:46
profitability.

10:47
It’s this flywheel effect then there’s greater distributions to the ASC which then allows the ASC to bring in even higher quality talent.

10:55
So I’d say that this focus on proactive operations and moving away from some of these manual redundant tasks to being very surgical and focused on doing the most efficient things within your ASC allows you to drive that success and become differentiated in the ASC market.

11:16
Yeah, thanks.

11:17
That’s a lot of great tips.

11:18
If I can just kind of summarize it.

11:20
So the ones who are seeing success, the things they’re doing differently are being surgical with their OR utilization case mix.

11:28
They’re analyzing profitability, automating any manual process that they can, benchmarking everything, forecasting those hiring needs.

11:37
And then ultimately all of that will optimize the physician experience.

11:42
I’ll optimize the physician experience and allow for those AS CS to then do a better job of recruiting and retaining additional physicians that help that ASC or ASC group grow.

11:52
Yes, well said, perfect.

11:55
So with the surgery centers that we know that are doing these things, what success have they seen so far?

12:01
So there’s any number of ways to measure success, but I think what’s most objective and most clear from our data and our data in terms of what we see from clients that ultimately come into HST and those that perform best, one aspect that most centers care about is profitability.

12:20
And the average ASC operates at roughly 23% profitability, where the top quartile will operate at 32% profitability and the top decile operates at 42 profitability.

12:35
And so a very large difference in like for like $10 million a year revenue.

12:40
ASC, one of these top performers could be driving $2.1 million in incremental profitability over a peer that’s more a median player in the space.

12:52
And as I mentioned before, a big part of that is about OR utilization and measured growth to achieve a high level of utilization.

13:00
And the average ASC operates with only 56% OR utilization where the top quartile operates with 64% in the top decile at 76%.

13:10
And similarly, it’s obviously different based on specialty and you know gastro versus ophthalmology or orthopaedic.

13:17
There’s typically different sizes of centers and revenue, but on average a 10 to 20% increase in that O bar utilization will result somewhere between a half, $1,000,000 and $2,000,000 a year in additional net revenue to the center.

13:33
And so and again that depends on specialty mix, but a very large increases in revenue and profitability for some of these centers that really embrace proactive operations.

13:46
Yeah, that’s crazy to think that just by tweaking some of these processes you could be bringing in 1/2 a million to $2,000,000, that’s huge.

13:56
That could be that could change so much for one center.

14:00
Now you’ve mentioned proactive operations a few times, Ken and I just would love to take a minute, give you the opportunity to elaborate on what you mean by that.

14:09
Sure.

14:10
So proactive operations is heavy focus on automation.

14:16
It’s a heavy focus on data as I mentioned, ideally benchmarking and benchmarking to help Dr.

14:21
insights into ways to better improve your business and forecast stability of an overall ASC.

14:29
But being proactive in your operations, it ultimately touches every different subset of the ASC itself.

14:37
And so for administrators and business office teams, that’s again going back and moving away from reactive work or redundant low value tasks and being proactive in what improvements you can drive within the ASC and doing high value work based on automated insights.

14:55
So it’s taking these most critical assets within the ASC, which is your people and having them focused on doing the most important things with their time to the greatest extent possible.

15:06
Similarly with clinical teams, nurses make AASC run.

15:11
However, a lot of tasks within the ASC, if there isn’t this proactive operations, it’s making these clinical team members be more clerical in what they’re doing and and they have limited visibility into compliance or other items within the ASC.

15:27
And by being more proactive, it allows these AS CS and these clinical team members to actually be clinical and have full visibility to patient safety and spend time in the right areas.

15:37
Just as an aside on that, just to give you a feel of how the industry is evolving, when I joined a little less than three years ago, only 20% of our new software sales into ASCs included the electronic health record.

15:53
And there’s a reason for this.

15:54
And that’s because in ASC environment, ASC’s didn’t fall under Meaningful Use like hospitals did.

16:00
And Meaningful Use meant that you had to and adopt an EHR in the hospital and it was voluntary in the ASC.

16:06
And so ASC’s have said prove it to us that this helps us be more effective in our operations, but we’ve really hit that inflection point where over 80% of our new sales today also include an electronic health record.

16:20
So I think you see the industry evolving and the appreciation for how in this case some technology and tools can help Dr.

16:26
Proactive operations, But just kind of quickly going through some other areas of the ASC, You know the physicians as mentioned before less focus on business inconvenience and more focused on driving case volume as well as patient outcomes.

16:42
For management companies that work with a S CS.

16:46
It’s going from having delayed insights where it may take a month, after a month or quarter closes in order to have some level of insights where you can provide some recommendations to the AS CS on how to operate.

16:58
And by being surgical and having real time access to data and benchmarking and some of these visualizations and insights.

17:05
These management companies can be proactive in their real time insights patterns and benchmarking across their entire portfolio.

17:12
And again, all this does come down to from a profitability and financial outcome perspective, it means that those centers that really have embraced proactive operations and management companies that have embraced proactive operations, it means that it’s the distributions and financial outcomes for these folks that do it well, become outsized in a positive way, sure.

17:35
So for those who are now inspired to start working towards proactive operations, where can they begin, what are the typical hurdles that they’ll experience.

17:47
So what we hear frequently in terms of hurdles, the number one is that I’ve got limited time based on how busy we are and a lot of times that’s based on the success of the ASC that they it it seems daunting to make changes within your business because of whether it’s staffing shortages or and how busy that the centre is.

18:09
And centres also realize that they most centres really lack automation and have process improvements they they need to take and most centres are missing actionable data.

18:21
So I’d say those are the main areas that are kind of concerns or friction points as centres dive into understanding what great looks like and what it’s going to take to get them there.

18:31
And so, you know, there’s clearly things you can do to help enable proactive operations and leveraging technology to assist in that is clearly one of the biggest things you can do.

18:44
But there’s also this aspect of it’s not that much different than in our business.

18:48
It will frequently come across a manager that says, hey, I’m too busy to, you know, recruit or hire this team member or I’m too busy to make this process change.

18:58
But knowing that by making that investment today or near term in bringing in the right people or making the right changes, that there’s massive positive implications downstream on improving your quality of life and the efficiency of the business And so.

19:13
So there’s just a little bit of you got to jump in the cold punch and the cold punch is going to hurt, but it’s good for you.

19:19
And once you get through it, you get to realize those benefits.

19:22
So I think it’s really taking a pragmatic look at, you know, how can we start to move towards proactive operations in a way that can fit within our business.

19:31
But we know it’s going to take, you know, a decent level of effort and commitment in order to ultimately get to that top desal status that can drive a lot of these benefits that we talked about earlier today.

19:43
Sure.

19:44
You’re giving such great hope, great inspiration here.

19:47
All right, Dave, one final question.

19:49
We do this every week with our guests.

19:51
What is one thing our listeners can do this week to improve their surgery centers?

19:59
Great question other than driving towards proactive operations.

20:02
The ASC industry is still in the very early innings of what is possible.

20:07
And now I believe it’s over 40% of surgical volume in the United States is going through ASCs versus hospitals.

20:16
And I don’t think it’s going to be that long before it’s a 5050 split.

20:20
And so understanding that there is growth and opportunity in ASC environment, but it’s much newer than the rest of healthcare.

20:30
I I think I go back to the earlier comment that business is a team sport and surrounding yourself inside your business with the best possible teammates, but also outside of the ASC building relationships with peers in the industry and other centers and center administrators to understand you know what lessons they’ve learned, what investments they’ve made that have helped them become successful in sharing in some of that success.

20:54
And scar tissue to ultimately Dr.

20:57
collective growth I I think is a great idea.

21:00
And if there is avenues such as ASCA, the Ambulatory Surgery Center Association, which is a great forum both in their conferences as well as the online community to ask questions and share best practices.

21:13
But there’s also, you know, grabbing coffees with the neighboring ASC down the street and talking about their journey and understanding how you can share some of these best practices.

21:22
I think just building that community of peers and mentors will be highly correlated with driving additional success and helping to achieve some of these incremental goals we’ll talk about today.

21:33
That is great advice.

21:35
We appreciate you coming on today.

21:37
Dave, thanks so much.

21:38
Thanks for the time.

21:39
Have a good day.

21:43
Welcome to Data and Insights, where we turn data into dialogue and numbers into narratives.

21:50
So HSC Pathways released a State of the Industry report late last year highlighting best practices, key process steps, and KPIs for every step of the patient journey and for nearly every recurring administrative duty.

22:04
Most importantly, using our own unique data set from our clients, we were able to extract data points so that anyone in the industry could compare themselves to their peers.

22:13
2 Disclaimers We only pulled data from clients who gave us permission and we omitted any extreme outliers.

22:20
So after analysing data from over 450 AS CS across the country, we were able to determine the average net revenue for the top 12 specialties.

22:31
So our data analysts derived this metric by first categorizing each primary CPT code to one of the top 12 specialties, and then calculated the average net revenue by identifying the contract fee per case.

22:44
One thing to note is that neurostimulators are grouped under pain in this analysis, so if that procedure is categorized under a different specialty for you, the profile will look a little different.

22:56
So here are the top five specialties bringing in the most revenue per case.

23:02
Ortho is #1, averaging $5449 per case.

23:09
Cardio is second to averaging 4355 dollars.

23:15
Plastic is third, averaging $3732 per case.

23:22
Podiatry averages 2928 dollars.

23:27
And then fifth is just general surgeries bringing in $2828.00 per case.

23:34
So why does this data point matter?

23:37
I’m sure I don’t have to explain to you entirely why it matters, but obviously this one is extremely important to track, understand and benchmark against.

23:47
It can be leveraged during negotiations with insurance providers, incorporated into performance reviews, used to project future revenue, and also used to drive your surgery centre’s growth strategy.

24:00
I would also recommend leveraging this metric in your quarterly board meetings and showing your governing body how you’re tracking internally month over month and also how you compare to your peers.

24:11
And if you’re not seeing the success that you’d like to and would like to increase your average net revenue per case, here are 10 tips in no particular order.

24:22
Ensure accurate and up to date billing and coding practices.

24:26
Perform regular audits to identify incorrect underbilling or coding errors.

24:32
Analyze the profitability of different types of surgeries and adjust the case mix to focus on more profitable procedures.

24:40
Introduce new high demand procedures that can attract more patients and higher reimbursements.

24:47
Optimize your inventory management to reduce any waste.

24:51
Go with bulk purchasing where possible for better rates.

24:55
Streamline staffing without compromising patient care of course, possibly through cross training employees to perform multiple roles.

25:04
You can use scheduling software to maximize OR utilization and reduce downtime.

25:10
You can utilize data analytics to track and analyze performance metrics, identifying areas for revenue enhancement or cost reduction.

25:19
And then lastly, you can always adopt an EHR and practice management system to improve billing efficiency and reduce errors.

25:27
If you’re interested in more data points and use cases, subscribe to our podcast so that you don’t miss any upcoming segments, or head to our website to check out the full state of the industry reports to get your hands on even more data.

25:41
And I know I mentioned at the beginning that we had tracked average net revenue per case for 12 specialties.

25:47
I only listed 5 here, but if you do follow this link that’s in the episode notes, you’ll be able to see all 12 specialties and then a ton of different other data points as well, And that officially wraps up this week’s podcast.

26:02
Thank you, as always, for spending a few minutes of your week with us.

26:06
Make sure to subscribe or leave a review on whichever platform you’re listening from.

26:10
I hope you have a great day and we will see you again next week.