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Ambulatory Surgery Center Metrics to Measure Business Effectiveness

    

Measuring your ASC’s performance is crucial in order to maintain the health of both your business and your patients. Tracking and assessing financial benchmarks can ultimately provide greater oversight and control over your ASC’s clinical and financial performance and help you identify potential areas for improvement.

With that said, knowing which ambulatory surgery center metrics to monitor, analyze, and compare with industry averages is the key to increasing the profitability and effectiveness of your business. In this article, we’ll provide a benchmarking analysis overview with ROI ratios to keep track of to accurately assess and maximize your ASC’s performance.

Benchmarking Analysis: ASC Metrics to Include

Tracking your ASC’s key performance indicators (KPIs) over time and comparing internal metrics against industry benchmarks plays an essential role in assessing the financial health of your center. Doing so helps paint a more comprehensive, holistic picture of where you’re excelling and where you can improve in comparison to similar facilities.

There are several resources available for accessing external benchmarks, such as the Ambulatory Surgery Center Association (ASCA) Clinical and Operating Benchmarking Survey and Accreditation Association for Ambulatory Health Care (AAAHC) benchmarking studies. Now, let’s cover what to include in your ASC’s benchmarking analysis.

Profitability Ratios

It starts with measuring your center’s profitability ratios, which measure the combined results of your operations. Metrics for this section include:

  • Net profit margin, which calculates the percentage of net revenue that is profit. The higher this number is, the better! You should aim to maintain a 20 percent profit margin. Sometimes it may be higher or lower depending on the market you’re in, the types of cases you serve, your surgical specialty mix, operating costs, and other variables. The industry annual average for profit is 25 percent.
  • Return on total assets, which measures the return on total investment. The industry annual average is 37 percent.
  • Return on owner’s equity, which measures the return on the owner’s investment. The industry annual average is 82 percent.
  • Contribution margin, which calculates the percentage of net revenue available to cover fixed costs and varies widely based on a number of center-specific factors such as capacity and specialty mix.
  • Ratio of expenses to revenue, which breaks down the ratio of operating expenses compared to the percentage of net revenue. In this case, consistency is key. If your metrics look off and your net revenue is low, you may need to revamp your payer contracts. Additionally, you may employ too many people for the amount of revenue your center generates. Average industry ratios are 25-28 percent for personnel costs for net revenue and 20-25 percent for medical supplies per case.

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Asset Management/Activity Ratios

Next, you’ll take a look at your asset management and activity ratios, which measure how effectively your ASC’s assets are managed and utilized. For this step, you’ll want to track:

  • Average revenue days in accounts receivable, which determines the average number of days to be paid for services rendered. For many ASCs, the sweet spot is around 20-25 days between initially sending invoices and eventually receiving payments. With that said, the industry annual average is around 41 days.
  • Inventory turns, which estimate the number of times per year inventory is turned over. This should ideally happen about 11-12 times per year; however, the industry annual average lingers around seven.
  • Fixed/total asset utilization, which measures utilization of fixed and total assets pertaining to the generation of revenue. Industry averages are between 1-2.

Debt Management Ratios

Up next are debt management ratios, which measure your ASC’s use of debt and leverage. To figure out yours, measure the following:

  • Debt to total assets, which calculates the percent of debt to total assets. The industry average for debt to total assets is 38 percent. Keep in mind that the higher this number, the more your risk level increases.
  • Debt coverage ratio, which measures a center’s ability to repay debt from earnings, has an industry annual average of 1.0. (The lower the number here, the better!)
  • Times interest earned, which measures a center’s ability to service its debt from earnings. Unlike other debt management ratios, the higher this number, the better. The industry annual average is approximately 14 percent.

Liquidity Ratios

Liquidity ratios measure a center’s ability to meet its current obligations. To determine your liquidity ratios, measure your short-term solvency. Then, measure it again excluding inventory from the calculation. Industry annual averages come in just under two.

A/R Aging

Lastly is A/R aging, which essentially breaks down unpaid invoice balances by the duration for which they've been outstanding. Ideally, the highest percentage of unpaid invoices falls in the 0-30 day range; however, keep in mind that percent per aging categories are industry averages and not best practices. 

Annual averages for A/R aging are:

  • 0-30 days - 53.4 percent
  • 31-60 days - 17.2 percent
  • 61-90 days - 8.2 percent
  • 91-120 days - 5.4 percent
  • More than 120 days - 15.8 percent

Maximizing Your ASC’s Profitability and Effectiveness

By measuring your ASC’s effectiveness, you can identify areas for improvement, gain better control over your revenue cycle performance, and offer top-quality care for the patients you see in your facility. 

Overwhelmed by benchmarking analysis, revenue cycle management, and other financial business performance essentials? ASCs benefit from outsourcing revenue cycle management in a number of ways. Schedule a free consultation to learn more about Amblitel’s expert revenue cycle management guidance and support.

Strategic Planning for Ambulatory Surgical Centers

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