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6 Ways to Dig Deeper Into ASC Financial Metrics
Written by Rachel Fields | November 30, 2012
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Benchmarking operational data is nothing new for surgery centers — at this point, most successful ASCs are looking at their performance with a critical eye to plan for thefuture. But there may be benchmarking areas you haven't considered, or results that seem to point one direction but actually indicate something different.

Matt Lau, corporate controller for Regent Surgical Health, discusses six benchmarking tips that will clarify your understanding of your center’s performance and could help improve operations.

1. Analyze payor mix and payorreimbursements by specialty rather than just overall. Many surgery centers look at their payor mix to determine where their reimbursement is coming from. Mr. Lau says "We go one step further and ask, 'What is our payor mix within each specialty?". For example, he would look at the surgery center's total pain volume and determine what percentage of those cases are billed to Medicare, Blue Cross, workers' compand other payors. He says he also drills down even further to determine reimbursement on a per-case basis by payor within each specialty.

Once you have an idea of your payor mix and payor reimbursements by specialty, take your last year of data and look at how your payor mix and reimbursements per case have changed for that specialty. "You might be able to tell that within orthopedic cases,you've really been pushing workers' comp because you're in a state that pays decent workers' comp rates," Mr. Lau says. "You'll see that your overall net collection for orthopedics is higher because you implemented the initiative to increase the proportion of higher-paying workers' comp cases."

He says you need that extra level of detail to determine when initiatives are working and when actionis needed. For example, you might notice that your percentage of Medicare in a certain specialty has increased over the last year. Because Medicare reimbursement cannot be swayed — and is generally lower than commercial reimbursement — it may be important to push for higher-paying commercial cases to make up for the jump in Medicare volume. "Without that extra level of detail, you may not be ableto head off a disturbing trend," Mr. Lau says.

2. Analyze every line in your income statement on a per-case basis. Mr. Lau says most centers analyze their overall net revenue on a per case basis to determine how reimbursement has changed over the last year. But he says the buck shouldn't stop there: Administrators should keep doing that for every single line item on the income statement. "Yourmedical supply costs per case, implant costs per case, labor costs per case — all the way down to the bottom line," Mr. Lau says.

He says it's important to look at these statistics over longer periods of time, because looking at data from the previous month may not show the complete picture. "Most centers have seasonality in their volumes; you may see lower numbers in January and February, andhigher numbers at the end of the year," Mr. Lau says. "What we like to look at is not only how these revenues and expenses move on a month-to-month basis, but how they compare in this calendar quarter versus the same calendar quarter of the prior year."

When you analyze your income statement this specifically, you can generally get a better idea of operational changes. For example, if yourecruited a new physician in one specialty, that could explain a jump in total revenues. If you undertook an initiative to reduce implant costs, you could see a significant difference in those numbers.  Furthermore, if there haven’t been any significant operational changes, but you are still seeing per case costs increasing, these comparisons can act as a “red flag” and alert you to inefficiencies...