Strategy for success in one word? Volume!
MGMA analyzes performance of surgery centers
Surgery centers are indicating higher levels of profits as their caseloads and procedures per case increase, according to a recent report from the Medical Group Management Association (MGMA). Once a critical mass of case volume is reached at ambulatory surgery centers (ASCs), profits rise correspondingly, according to the report, Ambulatory Surgery Center Performance Survey 2000.
"The one word strategy for financial success at ASCs then, is volume," the report says. "After the break-even point is reached, variable costs such as medical/surgical supply expenses and staffing expenses per case can be minimal, depending on the specialties you offer, so the potential for profit rises at an increasing rate."
Study to be expanded outside the MGMA
MGMA included 311 members in its survey. The report reflects data from calendar year 1999 or the surgery centers’ most recently completed 12-month period. MGMA is planning to expand the study next year by working with outside organizations, including the American Association for Ambulatory Surgery Centers in San Diego.
Here are key findings from the report, which are reprinted with permission of the MGMA:
• Median net income after operating cost is $327,931. That number dropped to $87,484 at the 25th percentile and rose to more than $950,000 at the 75th percentile.
"These discrepancies are primarily a function of the volume achieved by ASCs and also by the surgery center’s operating capacity and the amount of physical resources it houses," the report says.
The larger facilities are probably multispecialty, says Bob Williams, president of the Federated Ambulatory Surgery Association in Alexandria, VA, and senior development executive with Johnson and Johnson Healthcare Services in Superior, CO, points. "The smaller ones could be single specialty, such as ophthalmology, where you have a lot of Medicare," Williams says.
• The report shows that median net revenue from operations is $1,743,256 overall, $747 per case, and $782,578 per operating room. Median net income after operating cost as a percent of net revenue from operations is 37.98%. That percentage is before taxes, Williams points out. "Most of these surgery centers are for-profit," he adds.
Medical and surgical supply costs per case were a median of $192. The median costs in the 1999 report were $171. "This trend could signify an increased and more accurate deployment of just-in-time inventory techniques at ASCs, and possibly that more and more ASCs are using group purchasing arrangements to facilities better economics of scale," the report says.
Case mix and age of the facility can impact medical supply cost, Williams says. "As a center operates, they become more astute as to how to reduce medical supply costs," he says.
Case mix can impact cost in that a new procedure, such as pain blocks, may have a significantly lower cost per case than a surgical procedure, Williams points out.
"So when you roll in pain blocks to a normal case mix, on average, your supply cost
is going to drop," he adds.
• The breakout of total expenses averaged 33.32% for personnel salary and benefits, 29.6% for medical and surgical supplies, and 37.08% for other expenses.
• Net income per case was a median of $241.
• Total expenses per cases were a median of $546.
[The cost of the report (PMM-5590) is $75 for members plus $6.50 shipping and handling and $135 for nonmembers plus $7.50 shipping and handling. To order, contact: Medical Group Management Association, P.O. Box 17603, Denver, CO 80217-0603. Telephone: (877) ASK-MGMA, ext. 888. Fax: (303) 643-4439.]
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