Creating a budget for an ambulatory surgery center can be an intimidating task for even the most senior of management. With so many factors to consider—staffing, projected case volume and upcoming equipment purchases, just to name a few—many are tempted to dive in, crunch some numbers, and cross it off their to-do list as quickly as possible. But drafting a budget becomes a far less daunting process if some pre-budgeting work is finished first. Before the barrage of numbers and spreadsheets, it is critical to examine the ASC on a qualitative basis. By completing a comprehensive analysis of the center, its community, and the larger ASC landscape within the healthcare industry, ASC leaders can create a far more realistic and practical budget for the year(s) ahead. Sometimes called a SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats), this review of an ASC’s current capabilities and future goals is critical to provide a basic framework for a reliable budget. Below are three steps to take before even opening the budgeting software to ensure a highly accurate and well-organized financial plan:

Define internal strengths and weaknesses

As Harvard Business Review writes, whether you are leading a startup or an established company, “information about an organization’s internal capabilities is crucial to informing your goals and strategy and making the right business decisions.” This is true for international corporations and local medical facilities alike. It is critical to determine an ASC’s strengths before heading into a new year and a new budget: Is the ASC’s strength its people, and therefore funds should be shifted away from recruitment and more toward retention? Equally as important, what are the center’s weaknesses? Is some of its technology outdated, and will it need to be replaced? Are reimbursements for its service lines decreasing, and are there other, more profitable specialties senior leaders could introduce? Knowing this information is critical to not only improving the organization’s operational efficiency, patient care capabilities and growth opportunities, but also to thoughtfully compiling an informed, specific and highly accurate budget.

Identify external opportunities and threats

According to a report by the University of California at Berkeley, the next step in creating a comprehensive business plan and associated budget is finding “the opportunities for growth, greater profit, and larger market share. Assessing opportunity in relation to competition is imperative.” This is especially pertinent in the rapidly evolving healthcare industry. Not only did the number of ASCs in the U.S. double between 2000 and 2010, but healthcare analytics firm Sg2’s 2015 growth forecast report predicts surgeries performed in an outpatient setting will grow by 19 percent between 2015 and 2025, while the number of inpatient procedures will be reduced by 4 percent. With this expected amount of growth in such a dynamic landscape, it is critical to measure both opportunities to expand in local communities and achieve new growth, and accurately assess potential threats in the community, region or overall industry itself. What trends are occurring that may impact your ASC’s growth rate, productivity or success? What chances do ASC leaders have to expand their service offerings, and their overall capacity to serve their patient pool? ASC leaders must proactively measure and track this data to generate an accurate budget that allocates funds toward reaching for growth opportunities, while compensating for possible losses of business due to external threats.

Examine the year’s projected “bumps”

After determining the ASC’s strengths, weaknesses, opportunities and threats, there is one final step to take to complete the action plan and, from there, build out a budget. This final step is an in-depth analysis of any expected “bumps” in the upcoming year. This includes equipment replacements, equipment purchases for new or expanding service lines, and any retirements among key staff members, especially senior physicians. For example, if Physician A has been a senior physician at the ASC for 10-plus years and has decided to retire, how will the organization compensate for this loss? Will you fill the gap with a new physician, moving funds toward recruitment and training efforts? Will you perhaps wind down whatever service/specialty he offered, and allocate the funds toward launching a new specialty at the facility? This is where examining the reimbursement landscape becomes essential. How can you cater the ASC to offer the most profitable and necessary procedures for your particular community? Because the payor mix will not change dramatically from year to year, it is critical to examine the industry overall and position the ASC for success in the market. This may include increasing physician productivity; for example, if Physician B did 500 cases last year, what do we think he can do next year, and how can we encourage him to complete this goal? Looking for the key drivers of the facility and ways to increase operational efficiency, including picking up lost cases and filling gaps in patient care, is essential to allocate funds appropriately in a well-planned budget. To learn more about creating a successful business plan and operating budget, please contact mlau@regentsurgicalhealth.com.