Michael McClain: How to Expand Your ASC

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Erik Sunset: All right. Hello and welcome back. I’m Erik Sunset, your host of the DocBuddy Journal, and today we’ve got a fan favorite and longtime guest of the show, Michael McClain joining us once again. And if you’re new to the show, uh, you may not be familiar with Michael, but he’s the founder of Left Coast Healthcare Advisors.

Erik Sunset: Of course, we’ll get links to his prior experiences, excuse me, into the show notes. Michael, thanks for joining us.

Michael McClain: Hey, thanks for having me back. It’s always a blast to sit and chat with you on recording. Off recording, however, rolls.

Erik Sunset: Yeah, it’s a, it’s a riot. It makes me feel like we need to have a standing episode together at least once a quarter. Uh, it’s, it’s that good. Like I said, you’ll, you’ll, uh, have easy access to prior episodes in the show notes. Um, today we’ve got a pretty pointed conversation that we wanna have, and I’m gonna open it up with the, the big question here.

Erik Sunset: So you wanna expand your ASC, [00:01:00] where do you start?

Michael McClain: Well, let’s not start with something easy. Um. You, you know, that’s, it’s a really great question and, and it’s probably what we hear a lot is, Hey, we wanna grow, we wanna expand. And, you know, I think how we approach it, so how I approach it, you know, from a consultant standpoint, but just a really more basic business standpoint, uh, and we ask this question all the time.

Michael McClain: What’s your goal? What are you really trying to accomplish with this, this expansion, and, and do you have sort of alignment on it? Because what I’ve found is, is when people say they want to expand, they’re usually trying to solve a problem. And what is the problem you’re trying to solve for is that you don’t have enough space.

Michael McClain: You don’t have enough staff, you don’t have enough equipment. Maybe it’s a regulatory issue. Um, you know, [00:02:00] maybe it’s a revenue issue. Um, but really understanding why, why is expansion on the horizon and what problem are you trying to solve for? And if you can get really granular about that piece, I find then it gets a lot easier to solve.

Michael McClain: Okay, now I know what problem I’m trying to solve because. Certain solutions don’t work, uh, for certain problems. You don’t want to double your size if your problem really is just scheduling.

Erik Sunset: Right. Right. And, you know, before we get too far down this trail, I wanted to lead off with the big hook for us there, uh, for, for maybe newer listeners of the show that haven’t been able to catch your, your previous appearances just yet. Maybe lay the groundwork. What, what gives you standing at Left Coast Healthcare, uh, to, to talk about these, um, expansion opportunities for ASCs.

Michael McClain: Yeah, well, you know, besides the, uh, you know, what they [00:03:00] used to call the, the, the bald headed guy, right. You know, the old guy with gray hair that we’re supposed to have standing. What, what I would say is, you know, for me, you know, it’s, it’s almost at this point, 30 years of experience in the clinical world.

Michael McClain: You know, hospitalist, critical care, pa by background. But you know, it’s, it’s almost as much of that time in the ambulatory surgery space, be it, uh, operating, owning my own ASC as a, as a minority owner. Uh, I’ve run large hospital, uh, surgery hospitals. I’ve run ASCs. Um, the team for left coast, um, you know, it’s a team of, of operators, strategy folks, nurses, uh, clinicians that, that have been in this space.

Michael McClain: Um, and then we’ve, we’ve worked within organizations operationally. We, you know, as small as, as single physician groups, you know, [00:04:00] large orthopedic groups and then large integrated health systems on the west coast, IE left coast, uh, where we’ve overseen large platforms for, for integrated health systems.

Michael McClain: And so we’ve seen a lot of things that work well. And more importantly, we’ve made a ton of mistakes as operators. Um. And, and so when we talk about growing, we’ve seen a lot of empty boxes. And when I started this company almost four years ago, um, you know, as the founder for Left coast here, it was sort of with a single purpose, which was I wanted to give folks the opportunity to learn and grow and build their own assets, um, and, and help along the way. So I, I think we’ve seen what works and what doesn’t work, um, and can sort of fill those informational gaps so that, that our, our clients, customers, your [00:05:00] listeners, can make good decisions. Uh, ’cause I’m tired of seeing great big empty boxes where they build it and then it doesn’t work out for them.

Erik Sunset: Yeah, that’s, that’s a shame and hopefully that, uh, that context is helpful for folks. Uh, maybe on the, uh, the east coast. I wouldn’t dare call it the right coast, Michael. I wouldn’t, wouldn’t say that. But for those maybe that aren’t so well acquainted with you.

Michael McClain: That’s right.

Erik Sunset: I want to call back to, to a prior appearance, where at the time in the headlines, if you were looking at Becker’s ASC, or you name your favorite publication, cardiovascular cases, moving to the ASC was the hottest topic other than AI in healthcare.

Erik Sunset: And other than still, uh, the effects of COVID, which, you know, if you’re in media, healthcare, media, you know, those two things are kind of still unavoidable. But one of the things that you shared. Was that look more is more if you would like to do more of a certain type of case that you’re already doing well, more scales, um, that might come back to that scheduling issues that you called out.[00:06:00]

Erik Sunset: But different is not more. And I would imagine when you are helping to define surgery centers, uh, and the problems that they seek to solve through expansion, you know, more is more different. Ain’t more though. What are, what are some words of wisdom from you?

Michael McClain: Yeah, well, you know, leave it to you to make sure that, uh, the last things that I said got recorded and, and left in perpetuity. Thank you very much. It, but, but. Really, it comes down to the idea of what I call the knowable knowns and the unknowable knowns, and then the, the worst, which is the unknowable unknowns, is that when you’re looking at doing more of the same, you kind of know what you’re running into.

Michael McClain: And that’s that concept of more is more, it scales more easily. You sort of understand the, the potential pitfalls. You also kind of have a pretty good idea of what you don’t know. Um, I’m not sure how this is gonna be impacted, but I can [00:07:00] make some guesses or I, I know where the pitfalls are. When you talk about new store growth or new and different development.

Michael McClain: Um, adding service lines, adding new specialties. Um, a lot of times you don’t know what you don’t know. And that makes it really easy to stub your toe, whether it’s on cost expense, uh, you know, uh, we’re a historically reimbursement and strategy driven organization where knowing what you’re paid today and what you’re gonna be paid tomorrow, uh, and how long is it gonna take to get paid tomorrow, what you need to make back.

Michael McClain: For that big investment is so important. If you don’t know what that is going into it, you need to hit the brakes and figure it out. And so that that difference, um, and I think that’s especially important. You know, you brought, brought up cardiac, which is a great example, you know. [00:08:00] Every state is different with cardiac services.

Michael McClain: Uh, that’s a gr you know, a great discussion point. I live here in, in Washington, you know, we have a separate certificate of need around PCI, which is, you know, around, uh, the coronary intervention side. Even though, even though it’s, uh, Medicare reimburses for services. You can’t do many of those services in ASC in Washington state.

Michael McClain: It’s, it’s simply not allowed in ASCs. Some are, some aren’t. Um, you go quick across the border to Oregon. None of those restrictions. So literally Vancouver and Portland, um, two very, uh, and they share patients, they share physicians two very different environments. I think you find that statewide. And, and that’s where.

Michael McClain: The idea that you can just apply what you know to a new service line because, hey, I moved 50% of my orthopedics, I moved [00:09:00] 80% of this. There’s a lot of unknowables when you start adding new service lines, new specialties, and having somebody that’s been there done that and may it hopefully screwed it up, so they found those unknowable unknowns for you, uh, is really valuable.

Erik Sunset: Yeah, that’s, that’s where the true value of, uh, uh, is derived from with, uh, folks like you and your expertise. You’ve been there. You can, you can short circuit the, uh, the hard way of learning things, uh, as it were. And on that topic, you know, when, when we’re talking about what problem do you wanna solve, you’re talking about expanding your surgery center, why?

Erik Sunset: I would imagine there’s quite a few owners and operators out there that say, Hey, we just wanna make more money, so we’re gonna, we’re gonna add on, we’re gonna build, we’re gonna add a couple ORs to this thing. Um, and, and everything will be peachy from there. Is that always the case though?

Michael McClain: You know, it’s, it’s not always the case. Um, you know, there’s lots of reasons [00:10:00] that, um, ASCs look at expanding. Um, sometimes it’s, uh, just a change in their own specialty. Um, you know, we work with orthopedic clients all the time that have found that within their specialty, maybe they’re expanding in a particular line of service that no longer fits well.

Michael McClain: Um, adding total joints, adding more spine, they have experience with it. But the more business that you do of that, which is nicely reimbursing business, the more it crowds out other services because those cases take time and, and doing that math of what could you be doing in that space instead of what you’re doing today is often the kind of homework that we’re gonna ask or other folks are gonna ask those physicians to do.

Michael McClain: Is it really worth the value to expand or. Maybe it’s Saturday hours. Maybe it’s extending your day. Maybe it’s better utilizing the [00:11:00] space you have. ’cause let’s face it, I drive used cars for a reason. I prefer someone else to take the depreciation rather than me take a brand new vehicle. And I, I would like to get a year or two old, gently used car because the overall spend is less.

Michael McClain: And I think you have to apply the same rule of logic to your ambulatory surgery facilities is depreciate that asset, use the, the, the bricks and mortars that you have. ’cause construction is expensive

Erik Sunset: Oh yeah.

Michael McClain: and, and I think that. Let’s say you do have the volume, let’s say it’s con, you’re constrained. You’ve already, um, you know, we work with a great client right now that is just absolutely, there are patients coming out of their ears, you know, they have expanded hours, expanded time.

Michael McClain: It’s still so much more expensive now than it was even five years ago, and certainly more than 15 years ago when they [00:12:00] built their own ASC the first time around. And so I think understanding that, how expensive is it truly? Uh, what is that volume conversion? What, you know, maybe it’s just you need nuke equipment and you need to recapitalize.

Michael McClain: Um, maybe you have all new physicians coming in who are like, I don’t wanna work in this dump. I, I mean, there are all different reasons to approach it, but the key is having everybody in alignment in that decision. Because if you’re spending 2 million, 5 million, 10 million, 40 million on a replacement facility, uh, it all sounds great.

Michael McClain: Uh, and everybody’s excited to write the checks and sign everything at the beginning. Nobody’s excited to write the checks a year into the project when the volume isn’t showing up, when the contracts weren’t quite right, when you haven’t done all the planning that you thought you should do, and now you’re [00:13:00] sitting with a, a facility that isn’t performing as you’d hoped.

Michael McClain: That’s where you really get into trouble.

Erik Sunset: Well, going back, one half step there, uh, talking about organizational alignment, whether you’re. Expansion plans are around a literal physical expansion of your facility. Maybe it’s case mix, like you pointed out. Maybe we should be looking at how, uh, how we view our throughput here. Possibly it’s block time utilization and scheduling it.

Erik Sunset: It could be, it could be anything. And this is one of my favorite types of things to discuss. Is that when you’re talking about organizational alignment, there is some amount of data work that has to happen. Um, hopefully you’ve got a gifted operator that keeps good books, that has good records, your fee schedules are loaded into your software and everything’s more or less, you know, click for this export and then crunch numbers.

Erik Sunset: There’s black and white figures there, but there’s still a lot of, uh, a lot of emotion and there’s a lot of cultural impact, and I mean organizational cultural impact to align [00:14:00] on this because even if you’ve got numbers. It’s amazing that not everybody always agrees on what they mean or or where they’re derived from.

Erik Sunset: So how do you overcome that?

Michael McClain: Yeah, that’s, that’s, that’s a really good question and I think it all sort of starts with, you know, understanding that. For lack of a better term, the the value proposition that, that your expansion represents. What, what value are you trying to generate? Um, and, and where is it coming from? And so what I always think about is, you know, there, there’s kinda like these, these.

Michael McClain: I don’t like to think that, you know, we can talk about feasibility studies, but I think it all boils really down to like five really, really simple questions. And the, the first is, you know, what is the real cost of adding a service or adding an expansion? And, and the second one, and these are the two that I think you have to spend the most time on.[00:15:00]

Michael McClain: So what’s that? What’s the real cost of it? And then it’s. Who’s gonna be impacted by it and why? Because quite often we’re very focused on, Hey, I can do X I’ve, I’ve taken a look at my current net revenue per case. I’ve taken a look at my costs per case. I’ve take, and I can add 500 of these and drive a lot of value here. But remembering that that revenue always drops to the bottom line. So for every dollar you can increase in your revenue, meaning a payer contract, meaning a change in your charge master, you didn’t have to do anything to get that value. So if your goal is just. Dollars and cents. Make sure you’re doing all the work on the financial side to first take advantage of the revenue [00:16:00] cycle.

Michael McClain: You know, make sure you’re effectively working with your rev cycle people, your payer contracting people. You’re getting that information, that accurate understanding of what are your contracts? Are you getting paid what you’re worth? Are you getting paid accurately? Um, because a lot of times there’s a bunch of missing steps there. The second one is, are you maximizing the, the value of the physicians that are coming to your facility? Are you making it easy for them? Have you made yourself an A, SC that everybody wants to come to, um, e easy, accessible to schedule, easy and accessible from a prior authorization standpoint? Are you, are, have you created the the on ramp?

Michael McClain: That all the surgeons want to be at, because sometimes it’s just making those changes that can dramatically increase performance and you don’t have to expand. Um, [00:17:00] you mentioned block time. I think every ASC person on this call probably is familiar with this, is that, you know, that, that you, you, you do better if you run.

Michael McClain: Four or or two ORs all day long than if you run four ORs for half a day.

Erik Sunset: Yeah.

Michael McClain: But that takes relationships and that takes a lot of, of individual skill and conversations and working in, not in your office, in the ASC. It takes working in the clinics and negotiations and really getting to understand what’s happening in the clinics, uh, and what, what’s the motivation of the physicians?

Michael McClain: Because keeping that physician goal front and center, I think drives a lot of the value proposition. So then if you have done that homework. I’ve maximized my ability to bring through physicians. I’ve maximized my net revenue, I’ve maximized my ability to [00:18:00] optimize my my reimbursement. Okay, now you’re in a position to say, okay, what kind of additions should I be making here?

Michael McClain: And then. You need to have that aligned governing board so it’s not just the two loudest voices in the room, because in the end, all the voices have to sign, generally have to sign off on those checks.

Erik Sunset: I want to interject quickly and I’ll get right back outta your way. There’s this old adage, which I’m not sure was ever right, but it seems to be upheld that revenue covers for all sins. And that may be what this, uh, hypothetical surgery center is looking at. Like, maybe they haven’t looked at their revenue psychometrics, maybe they’re getting killed.

Erik Sunset: Maybe they’re, they’re not getting paid to contracts, uh, with any carrier and it’s not even close, which can happen. Um, you could, you would know better today. Um, but if you’re not even, uh, checking that first level box and you have owners or a board going, Hey, we gotta expand, we gotta do something to make more money.

Erik Sunset: Yeah. You know, we could have another million in our pockets [00:19:00] if we just did this, but we’re not worried about that. We just want more cases. How, how prevalent is that and how do you talk people off that ledge?

Michael McClain: You know, I, I, I would say it’s very prevalent. And, um, the, the counter to that, and I’ve had this very conversation with my own physicians, um, whether it was me running an orthopedic practice or in my own ASC, it’s. You know, if you don’t truly understand the costs per case and the revenue per case, are you making a profit on every case you do?

Michael McClain: Because if you’re not. If, if you can’t look at and be confident that you’re making a, a, a, a true profit on the cases that you’re doing, adding cases own, adding cases that don’t bring additional profit, just have you go out of business faster, you just lose money faster. If you’re losing a hundred dollars a case, adding a [00:20:00] thousand cases.

Michael McClain: Is probably not gonna make up that gap. Now. Yes, there’s an argument to be said if you don’t have enough volume to keep a facility open. Uh, I think there’s a realistic business discussion that if you need a thousand cases to keep your ASC afloat and you have 12. Yes, you need more volume to cover your fixed costs, but that’s not usually the situation we see.

Michael McClain: Usually the situation we see is facilities that are at a break even or loss, and that’s not a volume problem. That is almost always a reimbursement and or cost problem, and you have to solve that problem because more volume doesn’t make that problem go away.

Erik Sunset: Right.

Michael McClain: so it’s a, it, you know, it’s really great of you to point that out.

Michael McClain: Um, and I think that the way that you sell for that, and you don’t need a consultant for this, uh, any of your state organizations ask ’em, you know, can help you, you [00:21:00] know, what is a reasonable revenue per case for the kind of business you’re doing? What should your. What should your salary and benefits as a percentage of net revenue look like?

Michael McClain: What are some of the benchmarks, whether it’s VMG or Stout or any of these other valuation companies? There’s lots of information available. Where do you sit? Because if you are the 10th percent I, in terms of revenue and the 60th percentile in terms of costs, building a new facility with more volume is not gonna fix that.

Erik Sunset: no, you’re gonna be right. You’re gonna stay right there, 10% and 60% just at a nice new facility. You’re, you’re paying a note on.

Michael McClain: E. Exactly. And that’s where it comes back to understanding the motivations, having the, you know, what are we trying to accomplish goes right back to that first one. What is the real goal? Um, and then building with intent. So if, if I [00:22:00] have yet to see someone who wants to add. Fewer ORs than we recommend.

Michael McClain: It’s usually the other way around. I’m not 19. Well, I, you have volume for three. You know, so it’s, it’s, you know, having also that sort of realistic understanding of what the future might hold. Uh, that’s the other side of that coin. You’ve done all the work, you do need that, but then what’s it really gonna look like?

Erik Sunset: Yeah, I. Doc, you want 19 ORs at this new, new facility? Well, you’re gonna have to turn this, uh, this facility on a, on a state road, a rural road. It’s gonna have to become a major metro in the next 10 months, or it’s gonna just not get used.

Michael McClain: right. And, and now it’s a $40 million facility, even though it was a $5 million facility 20 years ago.

Erik Sunset: Yeah. Yeah. And I, I know I kind of dragged us off off the core topic there, Michael, but I think that that’s some good talking points around what, what can you do with your current space like that, that revenue cycle layer that’s near and dear to my heart. Listeners [00:23:00] know I’m a former revenue cycle guy.

Erik Sunset: There is so much abuse at the hands of the payers, all of them and you. It’s not easy, but you don’t have to accept that either.

Michael McClain: No. And, and that’s, I mean, happy you, you don’t have to ask me twice to go down that rabbit hole. Um, a a as a guy that started his life working in an organization that all we did was payer contracting. Um, uh, getting paid what you deserve and then making sure you’re holding your payers accountable. Uh, it has to be front and center.

Michael McClain: Uh, uh, if you’re looking to grow, uh, if you’re looking to expand. You’ve gotta make sure, and one of those critical questions. So first, you know, first we asked, right? Like, what’s the true costs? Who’s gonna be impacted? The very next question is, what are you paid today and what needs to [00:24:00] change if you’re being paid cost, and now you’re gonna add a gigantic cost on top of it to build not the time. the time to build. Go back and look at if you’re only being paid costs, what do you need to adjust so that you aren’t just being paid costs? And that comes back to being able to do a deep dive, whether it’s with a rev cycle company, whether it’s using technology. Are you, you know, are your, are your contracts just sitting in a drawer?

Michael McClain: Or do you have, you know, do you really have them, their living, breathing documents? Are you watching ’em like hawks? You know that every time you get an update from New United, um, that changes a grouper rate. Or, you know, you get a, a change from Aetna, you get a change. Are you making sure that you’re not just incrementally losing revenue?

Michael McClain: Are you double checking your charges? Are you running charge master assessments to [00:25:00] make sure, uh, you’re not being, you know, you’re not billing less than you ought to be? Um, you know, I I every talk, and I probably have done this on your podcast before, so I apologize. The free giveaway, right, which is right now, go run a bunch of your, run a comparison of your bill charges to payments, and if any of them are paying at a hundred percent. Where you’ve billed out a hundred dollars and you’re getting paid a hundred dollars, go immediately. Look at that contract. You may have some opportunity to increase your charges.

Erik Sunset: I, I would add too, from a layman’s uh, perspective, talking about negotiating contracts or renegotiating insurance contracts, you have to have data coming out of your practice management software. How many of this case that you actually do, ’cause they may be showing you, Hey, this is a 20% increase, uh, year over two years.

Erik Sunset: It’s 20% increase in your rates. That might be true. The math might work out to that. What is gonna be [00:26:00] the impact to your reimbursement? Who gives a rat’s, you know? What about the contracted rate increase? What does that mean for your surgery center? What are you actually gonna get paid? They might pay you less on the codes you use.

Erik Sunset: More than ever. I give you an increase in ones you never charge anyway. Sorry, I SOAP here.

Michael McClain: No, no, there’s a couple of there. There are definitely a couple of payers who love to provide a sample of the fee schedule, both on the professional side and on the surgery center side. So they’ll see it in the practice as well, that here’s a sample of the new procedure, and based on the sample, it’s a 15% increase in reimbursement. But if you dive into that and actually ask for what you deserve, which is I need the entire fee schedule. For every code, not just the ones you do, but the ones you might do or that you think you’re gonna do in the future, and then run those numbers and compare them to what you’re doing [00:27:00] today? Yes. There are plenty of companies, us included, who can do.

Michael McClain: Great, elaborate multi-level modeling and, but if you don’t even have to get to that level, just go see what they’re offering to pay you for your top 30 or 40 codes. Is it going up, is it going down? Is it staying the same? That’ll give you a great understanding of is this a good or bad contract? And you know, I think the other piece, and you and I have gone on and on about this in the past is.

Michael McClain: Make sure you understand your termination and term language, um, because there’s nothing worse that, especially if you’re thinking about sort of growing a new business or you’re thinking about expanding and you’re like, well, this contract’s crap. I don’t wanna bring it with me. And you look at it and it’s 180 days advance notice to terminate.

Michael McClain: And that was a week ago. And it’s that, you know, [00:28:00] six months advance notice to terminate. And you miss the window. So now you gotta wait an entire year or two years, uh, for it to come around again. So, um, hospitals, hospital, JVs are especially prone to that because they sign enormous, you know, two and three year arrangements that can only be terminated for cause or at 180, you know, days before the, before the, uh, an existing term ends.

Michael McClain: The last thing you wanna do is sign agreements and then plan a move.

Erik Sunset: Right, right.

Michael McClain: You know, if you’re planning something, don’t sign anything.

Erik Sunset: No, and, uh, to that, to that point quickly, and I want to, I want to get us, uh, talking about feasibility studies, but if you do end up in that situation where you just missed, uh, a window to either negotiate or to exit a contract, um. Nobody has to help you there. The other side doesn’t have to help if you [00:29:00] missed your window, but it is still worth bringing up.

Erik Sunset: There is still a pathway when don’t, don’t do nothing. You have to say something.

Michael McClain: Absolutely, especially if the change you’re looking at potentially brings value to the third party payer because you’re, you have the ability to save them some money migrating something from point A to point B, because in the end, that’s what they care about.

Erik Sunset: Yeah, you’re, you’re, you’re not gonna end up in a courtroom. You’re not gonna be in front of a, most likely not end up in front of a judge and jury. Heck, you’re probably not gonna get in front of an arbitrator or even a mediator. You have to talk you. That would be my pro tip. With anything contract related, you have to talk.

Erik Sunset: Otherwise, nothing’s gonna change.

Michael McClain: You got that right.

Erik Sunset: So, uh, that there’s a lot we could have, we could spend the rest of the day talking about what can you do in your current space to expand your ASC? Uh, but one of the things, uh, that’s tangent to that revolves around feasibility studies for growth. So what would it mean to somebody who maybe hasn’t ever [00:30:00] done a thorough feasibility study before?

Erik Sunset: Where do they start?

Michael McClain: Yeah, well, you know, feasibility studies and, and we’ve, we’ve kind of been like. Sneakily touching on that as we go through. It’s, it is really those five questions about, you know, what’s the true cost of it? Who’s gonna be impacted by it? Um, you know, uh, it’s, it’s things like what, what are you paid today or gonna be paid tomorrow?

Michael McClain: What changes clinically? Um, because it’s not just about. What happens, skin to skin or wheels in and wheels out, and that often becomes a, a, it, it gets really easy to get caught up in the volume and, and when you’re doing, you know, as we talked about early, same store growth. Well, you know what the prescreening criteria looks like.

Michael McClain: You know what the prior authorization looks like. You know when you’re adding new service. What’s the impact on the clinics, the prior authorization [00:31:00] process, anesthesia, pain control? What if these cases that only take 30 minutes in the OR take. Two hours to recover and require six new medications you don’t have on your formulary.

Michael McClain: You know, by one by the way, one of them costs 2,500 bucks. Uh, you know, so it’s really understanding the full scope of, of the clinical impact. But, you know, so it’s those five questions, it’s that financial questions about true cost, and it can’t just be cost of bricks and mortar. It’s gotta be. How long does it take to get this going?

Michael McClain: What are the legal and regulatory costs? What’s the operating capital? I don’t know anybody that turns on a spigot and it happens, there’s a ramp period. Right? And, and are you incorporating that? And if you’re borrowing money, incorporating the ramp, the timelines, um, we talked about the administrative, you know, the, the impact on, on people around you, the other physicians, the reimbursement, the clinical side.

Michael McClain: [00:32:00] The one though the third rail. Uh, and you said data, and this is where data will make or break you, is volume. Uh, a true feasibility study doesn’t just look at costs and reimbursements and clinical all that matters and having it thoroughly complete a volume. Um, you cannot make multimillion dollar decisions on expanding services based on physician estimates. I love physicians. I’ve worked with them for 30 years. I think they have, they, they do the most important job in the world. And as a pa, you know, I, I think I speak, uh, very directly to, I don’t know, a physician who’s artificially inflating their experience. It’s often what they’ve experienced over the last 30 days, 60 days that informs their estimates, not.

Michael McClain: The entirety of their last [00:33:00] year of business. So when you start to think about volume and you make projections, be conservative, be incredibly conservative, and give time for physician comfort, um, I’m gonna bring a thousand total joints. Okay, that’s gonna take time. Now, I’ve worked with surgeons, uh, I’ve worked with one surgeon here in the Seattle market, 6, 7, 800.

Michael McClain: A year in his ASC all by himself. Fantastic surgeon. But even him, it took a little time to build that, to get comfortable with the systems, with the equipment, with the process to get the patient screening right to it takes time. And so volume, much like revenue is a hockey stick of growth. It’s a little bit flat and then it accelerates.

Michael McClain: You gotta, you gotta include that back in that financial loop. So it ends up being this nice big circle of cost. People impact reimbursement, impact, clinical [00:34:00] impact, and volume, and you just keep going over that circle continuously. And if you haven’t done it again, you don’t, you don’t need to do. A, a 50 or a hundred thousand dollars feasibility project because you wanna add a, a small element to your business, but you’ve gotta think about those sort of components.

Michael McClain: And I know we have some of that information on our website. People can sort of get a better idea of it. Um, but you really have to do the homework because you do it on an estimate, come sort of back of a napkin on a, you know. The dollars are way too big now. Um, and it’s too easy to get over your skis and I think probably everybody listening already has two full-time jobs.

Michael McClain: So adding, adding or expanding your facility just consume so much time and energy. Um, you, you gotta give this the, you know, honor the [00:35:00] amount of effort that should go into this.

Erik Sunset: I, I would just quickly add, you said everything that needs to be said, but, uh, my, I would encourage folks to trust your guts. But you can’t just trust your gut. You need to trust your gut as you’re evaluating worthwhile and trustworthy data, that’s where you trust your gut, not the recency bias. The human brain is just not meant to store facts and figures over long periods of time.

Erik Sunset: Certainly some are more, uh, uh, inclined to that than others. But I’ve got a, I’ve got a fun fact for you. Would you believe that every time you shuffle a deck of cards, it’s likely that that’s the only time that specific order of cards has ever happened in human history. Because what you’re really talking about is 52 factorial.

Erik Sunset: So 52 times 51, all the one. That’s a number so big. It doesn’t mean anything to anybody. It’s like a trillion. What’s a trillion? So anyway, trust your gut, but you have to trust your gut where you’re looking at data, not your memory.

Michael McClain: That’s such [00:36:00] a good point and, and, and use both, right? It’s get physician professional data, use your EHR system and if you don’t have the ability to get the data, you’ll work with vendors who can help you get to that data. Um, I’m a, I’m a big technology only works if you have the process and the intuition to make it work.

Michael McClain: So don’t, don’t, don’t pave cow paths, you know, figure out the problem you’re trying to solve and then find the technology solution, not the other way around, but, you know, use data and then put the sniff test to it. Does this make sense? Gosh, we see him or her at the a OC seven times a month. Why does it only say three cases, or why does it say 500?

Michael McClain: I mean, there’s, you know, you, you gotta use that intuition. So, great, great add. And I had no idea about the, about the shuffling the deck. I’m gonna go [00:37:00] shuffle a deck today.

Erik Sunset: It will be the first time in history. Odds are, it’s, it’s hard to believe, but, uh, I got that one verified. Uh, I didn’t believe first I saw it either.

Michael McClain: math nerd.

Erik Sunset: I guess so. Yeah. Secretly kind of a math nerd. as always, this has been a fantastic conversation. I also feel like there’s so much we left unsaid today, uh, but for folks that wanna hear it straight from the source and not through me as medium, where can they find you online?

Michael McClain: Oh, probably the two best places to chase us. Number one, um, uh, you can always stop by our website, uh, www that lch advisors.com, one word lch advisors.com. Uh, we have a pretty robust presence on LinkedIn. Um, uh, we try to keep a a, a fair amount of postings there. We’ve got insights on our website, uh, you’ll see us knocking around and things like this.

Michael McClain: Uh, we, we do do a few conferences on the West coast. [00:38:00] Um, we tend to speak in smaller pockets, um, but you’ll see us on the East coast as well. So, um, sort of keep your eyes peeled for where we’re gonna go next. I wish I had a, an agenda for you, but we’re still trying to finalize it ourselves. I, I go where I’m told to go.

Michael McClain: That’s why I’m talking to.

Erik Sunset: I, I can relate totally still early in the year. So when, uh, we’ll be sure to get the links to those destinations into the show notes, just like your previous, uh, show appearances. Michael, as always, thank you for joining us.

Michael McClain: That was great and uh, I’m happy to come back anytime and if you wanna talk about cars. I know a guy.

Erik Sunset: Well, you know, you’ve got a standing invite. And on behalf of the entire DocBuddy team, we wanna thank you for listening. Be sure you’re subscribed on Apple Pod, Spotify, and YouTube. You get the newest episodes of the show. Until next time, I’m your host, Erik. We’ll talk soon.