revive your asc

Most Common Issues in Struggling ASCs

Non-using surgeon partners

Collections not good—large A/R of old accounts

Accounts payables too extended

Shortage of cash & no distributions

Payer contracts—low yield reimbursement & bad terms

Fee schedule outdated

Staffing not aligned with caseloads

Supply cost/case too high & no ongoing utilization review or GPO use

Strategies for reviving struggling ASCs

Operational Strategies to

Meet the Challenge

Operational strategies to meet the challenge

Operational Audit — thorough review ofall systems

Business office operations, A/R, A/P, collections

Retroactive payer contract analysis

Current debt financing — % and terms

Clinical staffing, compensation & productivity

Supply & drug costs, cost/case, comparison to benchmarks

All costs using critical management benchmarks

Operational Issues

Review service contracts

Equipment costs

Review rent and CAM charges

Physician recruitment

Physician buy-out

Operational strategies to meet the challenge

Develop a new Business Plan

Term sheet

Transition plan

Prioritize issues

biggest economic boost soonest

easy to accomplish & economically beneficial

specific tasks with realistic deadlines and responsibilities

Operational strategies to meet the challenge

Financing

Review options

Plan Real estate

Leasehold improvement

Equipment

Non-recourse

Equity percent

Operational strategies to meet the challenge

Guidelines for

ASC Success

Operational strategies to meet the challenge

12 Key Processes for Success

1. Scheduling

2. Insurance verification

3. Coding

4. Billing

5. Collections

6. Accounts payable

Operational strategies to meet the challenge

12 Key Processes for Success (continued)

7.

8.

9.

10.

11.

12.

Cash management

Inventory management purchasing

Staffing

Compliance

Risk management

Medical records

Operational strategies to meet the challenge

For more information

Robert ZasaPrincipal

Woodrum / Ambulatory Systems Development

626.403.9555

www.WoodrumASD.com

Operational strategies to meet the challenge

Turnaround your ASC through legal re-structuring

Overview of Federal ASC Safe Harbor

Federal Anti-Kickback Statute 42 USCS 1320a-7(b)

1999 ASC Safe Harbor

ASCs meeting each aspect of safe harbor are 100% immune

Is your ASC structured properly?

Turnaround your ASC through legal re-structuring

Safe Harbor Provision 1

Terms of investment in the ASC must not be related toservices rendered by the investors or their expectedvolume of referrals.

Turnaround your ASC through legal re-structuring

Safe Harbor Provision 2

ASC or any party connected to the ASC must not loaninvestors any amount for buy-in.

Investors must be at risk.

Turnaround your ASC through legal re-structuring

Safe Harbor Provision 3

Investor distributions must be directly proportionate toinvestor’s capital investment.

Turnaround your ASC through legal re-structuring

Safe Harbor Provision 4

At least 1/3 of investor’s medical practice income must beMedicare approved ASC procedures.

Turnaround your ASC through legal re-structuring

Safe Harbor Provision 5

Multi-specialty centers:

Physician investors must perform at least 1/3 of their

surgeries at the ASC.

Passive investors not regularly using the ASC donot meet Safe Harbor guidelines.

Turnaround your ASC through legal re-structuring

Passive Investors

Are an economic drain on the ASC

Place ASC at risk for violating Safe Harbor

Turnaround your ASC through legal re-structuring

Legal Turnaround

Legal documents must comply with Safe Harbor

Governing body must be able to force a buy-out

Turnaround your ASC through legal re-structuring

Buy-out Provisions

Step 1

ASC must have governing documents with Safe Harbor

applications.

Turnaround your ASC through legal re-structuring

Buy-out Provisions

Step 2

Structure documents to include adverse and

non-adverse terminating events.

Turnaround your ASC through legal re-structuring

Buy-out Provisions

Step 3

Documents include method for valuing ownership interests.

+Formula for redeeming interest in the event of an adverseor non-adverse terminating event.

Typically: 40% less for an adverse event.

Turnaround your ASC through legal re-structuring

Turnarounds mean governance documentrestructuring

Include Safe Harbor compliance and adverse & non-adverse terminating events

Non-compete clause

Members of investor groups must be individually bound and accountable

Streamlined management & governance

Turnaround your ASC through legal re-structuring

Please Contact

Doug FreePartner

Kessenick, Phillips & Gamma, LLP

415.362.6414

www.KPGLegal.com

Turnaround your ASC through legal re-structuring

Overturn Financial Burdens

Dynamics of today’s economy

Credit world is tightening

Cash is king

Protect your business with a new cash flow strategy

Do you have a strategy?

Overturn Financial Burdens

Sound Strategies for Protecting Cash

1. Total debt restructuring of your center

2. Prepare for the unseen—you don’t know what youdon’t know

You may be profitable, but not have enough cashflow to grow.

Overturn Financial Burdens

Strategy 1: Total Debt Restructuring

Reimbursements going down

Costs of goods and services are going up

There is less cash to grow your center

One strategy is total debt restructuring.

Overturn Financial Burdens

Impact of Current Debt Example: XYZ Surgery Center Current Debt

$16,300$730,000Totals:$581,400

$5,3003660$265,0007.5%Various190,800

$4,4003660$220,0007.2%Various158,400

$1,9004860$95,0006.9%Various91,200

$141,000$4,7003036$150,0008%C-arm

BalanceMonthlyPayment

MonthsRemaining

OriginalTerm

OriginalAmount

InterestRate

Equipment

Overturn Financial Burdens

Impact of Debt RestructuringExample: XYZ Surgery Center Debt Restructured

$7,100120120$581,4008.0%

$8,2009696$581,4008.0%

MonthlyPayment

MonthsRemaining

OriginalTerm

OriginalAmount

InterestRate

Overturn Financial Burdens

Your Monthly Payment

$16,300

Or $8,200

Or $7,100

Cash flow can increase up to 50%

Overturn Financial Burdens

Strategy 2: Prepare for the Unseen

Things happen that you can’t foresee

Environmental catastrophes

Staff turnover

How can you prepare?

Overturn Financial Burdens

Increase cash flowthrough a line of credit

“Cheap” Money

Cost – prime (currently 5%) + 2 = 7%

$100,000 from line of credit = payment $600/month

Overturn Financial Burdens

What is the best use of a line of credit?Not for equipment (depreciating asset)

For working capital—operations

Adding staff

Repairs or redoes

Purchasing position of power— rather than stress.

Overturn Financial Burdens

Financing EquipmentTo be competitive, you must have the latest equipment

C-arm

Other radiological equipment

You don’t have to take money from yourpartners – lease.

Overturn Financial Burdens

Economic advantages of leasing

Typically no out-of-pocket money

Predictable, structured payments

Allows for obsolescence — you always have the latest and greatest

Overturn Financial Burdens

Tax Incentives for leasing

Government stimulus bill doubled the depreciation for thecost of an asset acquired in 2008.

If you plan to lease equipment — do it now.

Overturn Financial Burdens

Use your receivables to improvecash flow

Accounts receivables line . . . or factoring

Overturn Financial Burdens

Accounts receivables line of credit

Advance capital on your receivables

A lean on your receivables

You manage billing and collections

Line of credit requires personal guarantees

Overturn Financial Burdens

Factoring AR

Receivables company buys receivables from you

They manage your billing and collections

Formula can be negotiated

Usually does not require personal guarantees

Overturn Financial Burdens

Impact of receivables deals

Expensive money – typically 2 to 2.5% per month

Relieves stress of slow reimbursements andslow pay.

Overturn Financial Burdens

Consider mix of

line of credit + receivables program

Overturn Financial Burdens

Conclusion

Foresight & Strategy

Leads to profitability with greater cash flow, less stress& more growth.

Overturn Financial Burdens

Please Contact

Ed Mann

415.831.1234

RCLeasing@comcast.net

Overturn Financial Burdens

Thank you for joining us

To learn more about us or download articles visit us at:

Ed Mannwww.OrthoPracticeSolutions.com

Doug Freewww.KPGLegal.com

Robert Zasawww.WoodrumASD.com

One of the nation’s experts on ASCbusiness. Experienced in all levels ofbusiness development, management,expansion, acquisition, legal structuring,marketing and business revitalization. Ina variety of settings—multi-servicecenters, ambulatory care, grouppractices, ASCs and hospitals—acrossthe nation.

A founder of Woodrum/AmbulatorySystems Development, and its ongoingexecutive leader, manager anddeveloper.

Founder, president and CEO of PremierAmbulatory Systems, recognized as oneof the nation’s 500 fastest growingprivate companies (1995, Inc.magazine), ranking sixth for growth in 3years with over $35 million in revenues.

Earlier highlights: Alternacare Corp(founding & public offering), AmericanMedical International (VP corporate, COOof ambulatory centers), BrookwoodMedical Center (administrator), OchsnerClinic (administrator), and hospitals inAlabama.

Zasa earned a Masters in hospital andhealth administration from the U ofAlabama, with graduate studies inmarketing at UCLA and LoyolaUniversity. He is a fellow in the AmericanCollege of Medical Practice Executives,lecturer and author, and served on theeditorial boards of the Journal offAmbulatory Care Management andSurgery Network.

BZasa@WoodrumASD.com

About the PresentersRobert Zasa, MSHHA, FACMPE

Free’s law practice is focusedexclusively on the legal and businessneeds of physicians. He regularlyadvises in all areas of physicianbusiness law, including corporate, tax,and regulatory matters. He has abackground in professional liabilitydefense, and real estate andcommercial leases.

He helped found Kessenick, Phillips &Gamma in 2006 and was named apartner in 2008. Formerly, he was withHanson, Bridgett, Marcus, Vlahos &Rudy; and the Law Offices of CharlesO’Brien(general counsel to The DoctorsCompany, a major physicianmalpractice insurance company).

Free has served as general counsel tothe California Society of PlasticSurgeons since 1997, and hasrepresented many physicians andmedical groups throughout California.

Free is a graduate of Santa ClaraUniversity School of Law, andobtained his undergraduate fromBoston College.

DFree@KPGLegal.com

About the PresentersDoug Free

Mann serves a dual role. He isco-founder of Ortho Practice Solutions,providing financial and educationalsupport to the orthopedic surgerycommunity. As president of RC Leasing& Consulting, he facilitates leases andvendor programs for medical practices,organizations and hospitals worldwide.

In all his vast and varied experience,Mann has focused on finance andleasing. He began his career in the familyauto dealership, Future Motors, thelargest volume dealership in the US in the1970s. He then founded RECOM whichbecame the largest originator oftransportation leases in the Northeast.

He created marketing programs forAmerican Express, which advanced thecorporation’s entry into the officeproducts division. In 2003, Mann honedhis focus to the medical community,creating RC Leasing & Consulting.

Mann is a graduate of C.W. PostCollege.

RCLeasing@comcast.net

About the PresentersEd Mann