Creating a strong, repeatable budget process for Ambulatory Surgery Centers (ASCs) is essential for efficiency and strategic decision-making. MedHQ’s Senior Vice President of Client Accounting and Finance, Matt Lau, recently shared his expertise on this topic on HST Pathways’ “This Week in Surgery Centers” podcast, breaking down a four-step approach to streamline budgeting while ensuring its alignment with organizational goals.
Here’s a recap of his insights:
Step 1: Craft a Narrative
Before diving into numbers, take a step back and define your vision for the coming year and create a “mini business plan.” This includes:
- Conducting a SWOT analysis (Strengths, Weaknesses, Opportunities, Threats).
- Asking, “What do we want to achieve?”
- Identifying goals that align with your ASC’s strengths and market opportunities.
Step 2: Dive into Case Volume Analysis
Case volumes are the core driver of an ASC’s financial performance. Discuss anticipated volumes with physicians to predict trends based on past performance and future expectations. Questions to ask:
- How many cases did each physician perform last year?
- Are volumes expected to increase or decrease, and why?
- Are there plans to recruit new physicians, and when?
Step 3: Perform a Payor Mix & Reimbursement Analysis
Once volumes are clear, connect them to revenues and expenses:
- Calculate average reimbursement per case and adjust for payer mix changes.
- Factor in potential shifts, such as new contracts or an influx of Medicare cases.
- Do the same for supply and labor costs to build accurate projections.
Step 4: Build the Budget Spreadsheet
Leverage your Profit & Loss (P&L) statement to create a detailed spreadsheet:
- Separate variable costs (e.g., supplies, labor) from fixed costs (e.g., rent, insurance).
- Use historical averages to project future expenses tied to case volumes.
- Apply adjustments for inflation or anticipated changes in fixed costs.
To explore these insights in greater depth, Matt Lau and Dhara Raval’s recent webinar, “ASC Budgeting,” offers a comprehensive guide on how to approach ASC budgeting. Watch the webinar here.
