February 2003 Bulletin

Bring your ambulatory surgery center to fruition

Hire an experienced team

By Michael J. McCaslin, CPA

This is the final piece of a three-part series of articles addressing the development of an ambulatory surgery center (ASC) for orthopaedic surgeons. This article focuses on the team of individuals you need to have on board to develop your ASC and bring your ASC to fruition.

The ASC team should include the following:

During the course of the ASC project, you will have—at minimum—two-to-four of any one of the above individuals involved in the project. In selecting your team, be sure to perform due diligence on the team members. This could include a review of a written proposal from prospective team participants, references, a tour of other projects completed by the team members and interviews with prospective team members.

It is important that a group of representative physicians be involved in selecting the team of advisors. This will ensure that team members are made aware they represent the interest of the organization of the physicians and no one individual member. Once you have selected the team, it is important that you rely on the team members.

If you allow every physician’s attorney and accountant to continually review and comment on every aspect of the project, you will delay the project resulting in lost profits and you will increase the cost of bringing the project to completion. Your long-time advisor may continue to advise you personally about the impact of the project on your personal financial position and your tax position.

ASC consultant

This person could be from a certified public accounting firm, a health care consulting firm or from an ASC consulting organization. This consultant—in conjunction with a designated individual from your medical practice or your surgery center executive director—and assuming this person is hired early in the process—will quarterback the entire project. It is extremely important to have an overall project coordinator so that one party can assume total responsibility for making the project happen.

The ASC consultant will oversee feasibility asssessment, finance, governance and planning, architect and general contractor selection and oversight of services rendered, medical staff governance and credentialing, all professional service agreements required, staff needs and identification, all system selections, all support agreements, development of policies and procedures, staff orientation and training, as well as licensure, Medicare certification and accreditation. The ASC consultant might rely on other members of the team to assist in these areas.

Health care attorney

The health care attorney could have a minimal level of involvement or a significant level of involvement—depending upon the depth and expertise of the ASC consultant. At minimum, the health care attorney will be involved in developing the legal documents that govern the operations of the surgery center with special emphasis on the anti-kickback safe harbors related to ASC projects.

In addition to the original organizational documents—typically represented by Articles of Organization and a Limited Liability Company Operating Agreement (or Articles of Incorporation and By-Laws of a corporation), the health care attorney would be involved in any appropriate documentation related to securities laws.

When organizing your fellow physicians to participate in the project and seeking a financial investment, you must seek legal counsel on the securities issues and required written disclosures.

In addition to the organization documents, Anti-Kickback, Safe Harbors and securities services, a qualified health care attorney may also be able to assist or provide the professional service agreements and the support services agreements. Lastly, the attorney may be a valuable participant who brings years of experience and solutions to the organization phase when many problems arise related to governance, ownership and buy-in and buy-out methodology.

Certified public accountant

To the extent your ASC consultant is not a CPA, you need to have a CPA involved in the project. There are many issues that need to be addressed during the organizational phase, including determination of the entity structure, tax elections with respect to the method of accounting for the ASC operating entity, determination of depreciation methods for the large amount of equipment, furniture and fixtures to be purchased by the ASC, selection and implementation of an accounting system and ongoing tax and accounting questions. In addition, if the physicians are going to construct and own the real estate in which the ASC operates, the CPA should be involved in a detailed cost segregation study that looks to maximize and accelerate the deductions related to the real estate ownership.

Health care architect

The health care architect will be responsible for the design of the facility and oversight of the construction of the facility. The health care architect will be involved in program planning, schematic design, development of request for proposal (RFP) for the construction company, design development, assistance with the review of construction documents, participation in the awarding of bids, oversight of the construction process including change orders, ongoing development and updating of the punch list (i.e., open items list), and the participation in the achievement of the certificate of occupancy.

The health care architect will spend a significant amount of time in meetings with the appropriate personnel, especially the physicians in the design of the facility with extensive effort in the design of the operating rooms, pre-op and post-op areas and all other areas of the facility. The architect needs to be knowledgeable about your state’s Department of Health regulations for designing a health care facility.

Real estate developer

Assuming your ASC consultant is not serving on the real estate development side, and assuming the physicians wish to purchase or construct a facility they will own that will house the ASC, you will need an individual who understands the development of medical office space. Working with the architect, they collectively will address any zoning requirements, review construction bids and change orders during the construction process, assist with financing and may later assist with the sale of the facility.

Executive director and director

Somewhere between four-to-six months prior to the opening of your ASC, you should hire your executive director and director. The executive director will be responsible for the overall management of the operation including achievement of health care delivery and business performance in fulfillment of regulatory requirements and within the parameters established by the governing body. The executive director is the top-level non-physician position in the organization and will have an extensive and comprehensive job description and list of responsibilities. The executive director will be college-degreed and most likely have a Master’s in Business Administration or in Public Health Administration and some experience with a health care entity preferably a surgery center.

The director of the facility is responsible for managing the staff of the ASC effectively and efficiently. He or she also assures the quality and reliability of patient care and nursing functions. The director will report to the executive director. The director position is a clinical position and thus should be a graduate of an accredited School of Nursing with experience in managing, working with and understanding operating room personnel and all operating room operational issues.

The reason for hiring these two positions four-to-six months in advance of the opening of your facility is to have them assume many of the functions under the responsibility of the surgery center consultant, to have them involved in the development of the clinical and business policies and procedures that they and the facility will operate under and to have the individuals involved in the ongoing operation involved upfront so they feel as if the center is "their" center. Hiring these individuals in advance of the opening does not increase the cost of the project, but rather shifts some cost from the consultant to compensation for these two positions. The right executive director and director can be critical to the ongoing success of your ASC.

Conclusion

An ambulatory surgery center is an intense project with many technical, legal, financial, regulatory and operational requirements that mandates you have a qualified team of individuals on board to see your surgery center through to completion.

Michael J. McCaslin, CPA, is director, Health Care Group Services at Somerset Financial Services Health Care Group in Indianapolis, Ind. He can be reached at (800) 469-7206 or MMcCaslin@somr.com.

Note: Part I of the three-part series of articles addressed the development of an ASC for orthopaedic surgeons. It focused on the need to conduct a feasibility study and can be found on the AAOS Web site in the August 2002 Bulletin.

Part II addressed capitalization and financing requirements and can be found on the AAOS Web sitein the December 2002 Bulletin.


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