those cases," says Mr. Péo. "If they do, it's gravy. But the only
cases you can count on are the owners', because they're legally
obligated to do at least one-third of their eligible cases in the sur-
gery center."
Bad contracts
Right-sized centers with the right number of physician-owners are
still doomed if they don't make money. One of the biggest reasons
centers fail is that they sign bad payer contracts, says Mr. Péo.
Too many sign the first offer they see, without bothering to nego-
tiate. When they do, trouble is bound to follow. You can go back
to the payer and say you now realize you've signed a bad con-
tract. But the response, says Mr. Péo, is going to be, As soon as
it's up, we'll be happy to renegotiate. And even then they proba-
bly won't renegotiate much.
The key is case costing and negotiating accordingly. But too
many centers have gotten lost in the haze that surrounds the myri-
ad details. "It takes 2 months to get paid, and there's overhead, sup-
plies, implants, and so on," says Mr. Péo. "People don't always
understand what it's costing them to do these cases, and that can
be a huge money-loser at times."
In other words, if you're not making money on a given case, and
you keep adding more of those cases, you don't make up for the
losses, you just lose more money. "I've seen it a lot," says Mr. Péo.
"People making $500 or $600 on a case, but when all is said and
done, it's costing them $700 or $800 to do the case."
Part of the challenge is teaching surgeons how to think like sur-
gery center owners and contain costs, says Mr. Péo. "They're
smart people, but they don't know what they don't know. They
have to be trained."
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