How Much Can You Earn By Owning a Surgical Center?

Doctors Can Make a Lot of Money Owning Surgical Centers
ASC Ownership Can Be Very Lucrative

In the 1960s, nearly every surgical procedure was performed in a hospital.  Lengthy waiting times were common for surgical procedures and physicians had to deal with the inefficiencies of each hospital including limited room availability, inadequate equipment, and limited access to operating rooms.  That changed in the 1970s when doctors began establishing Ambulatory Surgery Centers (ASCs), which specialize in providing a limited set of surgical procedures outside of a hospital environment.

The growth of ASCs in the past few decades has been impressive.  According to the Ambulatory Surgery Center Association (ASCA), by 2011 there were more than 5,300 ASCs in the United States, performing more than 23 million surgeries annually.  The ASCA estimates that 65% of surgery centers are completely owned by physicians, with 17% owned by physician-hospital partnerships.  Initially offering simple procedures, ASCs now offer a wide range of complex surgeries including orthopedic, ophthalmologic, gastroenterological, plastic, ENT, gynecological surgeries and more.

Physicians have driven the development of ASCs because of the many advantages they offer including:

  • Bypassing the bureaucracies and inefficiencies of hospitals
  • Ease of access to surgical facilities and a reduction in scheduling issues
  • Shorter waiting times for patients, reduced costs, and more specialized care
  • Facilities can specialize in a particular field or set of procedures, enabling the purchase of state-of-the-art equipment for optimal performance of those procedures
  • Facilities can be designed to match the needs of particular patients and surgeons
  • Teams of staff can be gathered that are expertly trained to treat patients with certain conditions
  • ASCs can be a valuable financial investment for the physician, growing in value over time

Many physicians are particularly interested in discovering the potential profitability of ASCs.  Although it is a complex question involving a number of variables, we will identify some of the key parameters which determine how profitable an ASC can be.

How much can physicians earn?
Some of the factors which go into determining the profitability of surgery centers include:

1. The insurance companies with which the ASC is contracted: ASCs often sign deals with insurance providers to handle certain procedures at certain prices.  These contracts can be difficult to negotiate and play a huge role in determining how profitable your ASC may eventually be.  Analysts suggest that more than 59% of gross charges come from commercial payers, while 24% comes from Medicare, highlighting the need for negotiating payment schedules.

2. Capital costs of developing the facility
The cost of opening the facility or “buying in” to an existing facility can also vary greatly.  Some specialties may require more expensive equipment or larger rooms for procedures.

3. Operating costs
Some facilities may have higher overhead costs including staff wages, insurance, energy costs, and rent.  The resources necessary to handle patient records can also vary, with some specialties involving much more complex patient histories and treatments.

4. The number of partners involved in the practice: Too many and a physician’s profit share will diminish, too few and risk is greatly increased.

5. Utilization and capacity of your ASC: The volume of surgical cases which can be performed at a facility also affects profitability.  The number of available operating rooms, the available hours, duration of procedures and patient demand all combine to determine facility utilization.  The speed and skill of physicians also plays a huge role in determining how many procedures can be performed each week.

6. Cost of the specific procedures in the specialty: How much the payee is charged for the procedure can vary greatly.  In terms of the best paying procedures, Regent Surgical Health (2010) suggests the top 10 procedures are:

  1. Neurosurgery diskectomies $17,000-$34,000
  2. Laminotomies $9,000-$11,000
  3. Vertebral corpectomies $17,000-$20,000
  4. Insertion or repair of neurostimulators $11,000-$18,000
  5. General Surgery — Hernias (Epigastric/incisional/inguinal) $5,000-$9,000
  6. Laparoscopic cholecystectomies $5,000-$6,000
  7. Laparoscopies — gastric banding $12,000-$15,000
  8. Urology Sling operations $5,000-$8,000
  9. Cystourethroscopies with lithotripsy $5,000-$7,000
  10. Orthopedic surgery, Shoulder arthroscopies $5,000-$10,000

Average Profitability: The combination of operating costs, capital costs, payee agreements, and fees charged will determine its break-even point and potential profitability of an ASC.  Based on 2010 figures, on average, a surgery center receives net revenue of $6,833,000, with a total operating cost of $4,881,000 and average EBITDA of $2,001,000.  EBITDA refers to Earnings Before Interest, Taxes, Depreciation and Amortization.  The net revenue and gross charge of the average procedure varies greatly between specialties:

  • ENT — Net revenue per case: $1,742, Gross charges/case: $7,066
  • GI/Endoscopy — Net revenue per case: $746, Gross charges/case: $3,216
  • General Surgery — Net revenue per case: $1,545, Gross charges/case: $5,534
  • OB/GYN — Net revenue per case: $1,757, Gross charges/case: $6,404
  • Ophthalmology — Net revenue per case: $1,227, Gross charges/case: $5,395
  • Oral Surgery — Net revenue per case: $1,041, Gross charges/case: $3,024
  • Orthopedics — Net revenue per case: $2,443, Gross charges/case: $8,973
  • Pain Management — Net revenue per case: $898, Gross charges/case: $3,835
  • Plastics — Net revenue per case: $1,415, Gross charges/case: $6,198
  • Podiatry — Net revenue per case: $1,664, Gross charges/case: $7,061
  • Urology — Net revenue per case: $1,435, Gross charges/case: $5,937

The utilization of facility resources combines with net revenue figures to determine overall profitability.  While there is some risk associated with establishing an ASC, it can be far more rewarding financially than many other doctor jobs.  It is definitely an investment worth considering.

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