Type of Facility

There are numerous types of endoscopy facilities, including hospital endoscopy units, single-specialty or multispecialty ambulatory surgery centers (ASCs), and office endoscopy suites. Each model has a unique set of advantages, disadvantages, and regulatory issues. The hospital and ASC environments are highly regulated by state and federal agencies and by third-party accreditation bodies. In the United States, these include the Joint Commission on Accreditation of Healthcare Organizations (JCAHO), the Accreditation Association for Ambulatory Healthcare (AAAHC), and the American Association for Accreditation of Ambulatory Surgery Facilities (AAAASF). Private payers sometimes impose their own specific requirements. Office endoscopy suites, previously less regulated, have been subjected to more controls by state and federal agencies in recent years.

The decision regarding which type of facility to establish is affected by the practice environment (solo practitioner, small or large group, single-specialty or multispecialty group, independent or hospital-based) and local economics and politics. Regardless of the service location, high quality must be maintained. The American Society for Gastrointestinal Endoscopy (ASGE) has stated that the “standards for out-of-hospital endoscopic practice should be identical to those recognized guidelines followed in the hospital.”¹ In an insurance-based environment, the hospital-based unit poses the fewest financial risks and demands for the endoscopist during the early phases of operation, and its use avoids alienating hospital administration by preserving hospital case volume. The hospital-based unit affords the endoscopist little control over operations, however, and offers him or her the lowest total financial return. Office endoscopy offers control and convenience with better financial return for the physician, but it poses some safety and liability concerns.^8,9 A single-specialty endoscopic ambulatory surgery center (EASC) provides the best of control, efficiency, convenience, and reimbursement for the physician owners and is extremely popular with patients, referring physicians, and payers.^10,11 At the time of this writing, a major ASC payment reform is being implemented by the Centers for Medicare and Medicaid Services (CMS), which is resulting in drastic cuts of facility payments for endoscopic services. How this reform will affect efforts to provide beneficial GI services to patients at a reasonable cost remains to be seen. More information about this payment reform is available elsewhere.¹² Regardless of the type of facility being developed, formulating a business plan and understanding various regulatory issues are usually the first steps in the process.

Business Plan

The decision to set up an endoscopy facility should be made only after detailed data gathering and the formulation of a business plan (e.g., market analysis, financial pro forma, implementation time line).^13–15 For a hospital-based unit or academic medical center, facility planners and accountants often perform these functions. For an office-based suite or an EASC, the tasks fall to the physician owners, aided by numerous consultants, contractors, or corporate partners. Even with skilled help, however, development of an accurate and reliable business plan and pro forma are highly dependent on physician estimates, insights, and work habits. Physician input into the business plan makes the difference between a perfunctory exercise and an accurate predictor of future performance. Endoscopy facilities represent small to medium-sized investments requiring substantial financial resources and staff. Procedure volume must be sufficient to produce adequate revenue to cover the costs of building and running the facility and to generate a profit on investment. Generally, three or four busy endoscopists performing 1200 to 1800 total procedures per year are required to offset the financial risk of the facility.¹⁶

Many factors influence the financial performance of an endoscopy facility, including initial investment, expected volumes of service, revenue per unit of service, fixed operating costs, and variable costs per unit of service. The initial investment includes the cost of construction, equipment, and working capital for the first few months of operation. Strategic planning is important to anticipate group growth and demand for services in the coming 5 to 10 years.^13,15 The impact of managed care plans or other major health plans on the practice must also be anticipated. In addition, competition, new technology, population changes, and demographics might affect case volume for the practice and the endoscopy facility.

A pro forma is a calculation examining the financial feasibility of a project based on anticipated investment and operating costs and revenues. The purpose of the pro forma is to predict reliably cash flows and profitability for the project. Initial investment costs have been defined previously. Also incorporated in the pro forma are estimated total costs per case based on estimated fixed and variable costs and expected case volume. Fixed costs are costs that remain constant regardless of the number of procedures performed and include rent, interest, depreciation, taxes, insurance, amortization, and management fees. Variable costs, which account for the largest component of the average cost per case, include salaries and benefits, medical supplies, medications, equipment, maintenance and repair, administrative supplies, utilities, and accounting and legal fees. Break-even volumes can be determined by subtracting the variable expense per procedure from the average payment per procedure to indicate the contribution available to be used for overhead and profit. Dividing fixed costs by the contribution margin per procedure indicates the number of procedures needed to pay the fixed costs, also known as the break-even point. Additional service units above that level constitute profit. Vicari and Garry¹³ provided a simple example of a pro forma. The business plan and pro forma are mandatory in assessing the financial feasibility of the proposed endoscopy unit before construction. They further aid discussions in obtaining financing and help the architect design the unit for anticipated volumes.

Regulatory and Certification Issues

Before planning and designing the facility, one must understand the relevant regulatory and certification issues. As with the business plan, units developed in a hospital or academic medical center usually benefit from administrators and planners familiar with these complex issues. Physician owners of an office endoscopy suite or EASC must gain their own understanding. Various agencies provide myriad rules and regulations concerning endoscopy facilities.^17–23 Legislation can come from federal, state, or local authorities. Regulations may come from federal agencies, state departments of health, and third-party accreditation organizations and private payers. Although these rules and regulations can seem excessive and needlessly costly, their intent is to ensure safe and successful outcomes for patients. Regulations and certification issues for endoscopy facilities can be divided into six main categories, as follows:¹⁷

General federal regulatory laws and rules

Facility state licensure

Medicare certification

Third-party accreditation

Physician credentialing

Private payer requirements

General Federal Health-Related Laws

Federal regulatory laws and rules include Fraud and Abuse Statutes (also known as antikickback laws), which are laws designed to prevent excessive or inappropriate payments. Endoscopy centers typically fall into a specific “safe harbor,” a designation that protects EASC investors or shareholders from allegations of fraud or abuse. The safe harbor applies if the physician participants are surgeons or specialists engaged in the same surgical or medical practice specialty, including gastroenterology. These physicians can refer patients directly to their center and perform procedures on them as an extension of and significant part of their practices.

Additional requirements of the safe harbor apply. Ownership of the facility, or remuneration from it, cannot be related to volume of referrals, services furnished, or the amount of business otherwise generated from that physician to the EASC. The amount of payment to physician owners from facility revenues must be directly proportional to the amount of each owner’s capital investment. There must be no requirement that a passive investor make referrals to the EASC, and the EASC or any investor cannot make loans or guarantee a loan for a physician, if these funds are used to purchase ownership in the EASC. Each physician must agree to treat Medicare and Medicaid patients. Finally, the physician owner must derive at least one-third of his or her medical practice income from the performance of procedures that require an EASC or hospital endoscopy unit setting.

Other general federal health-related laws and rules relevant to endoscopy facilities include the False Claims Act and copayment waivers, Stark provisions, Health Insurance Portability and Accountability Act (HIPAA) provisions, and labor and employment issues. The False Claims Act was designed to prevent false billings, claims that are medically unnecessary, and billings for inappropriately high payment. Copayment or deductible waivers may also be illegal if the government suspects such waivers are likely to induce referrals. Stark provisions stem from the Ethics in Patients Referrals Act. They are closely related to Fraud and Abuse Statutes but are civil rather than criminal laws. The regulatory body overseeing Medicare has ruled that a physician does not make an illegal referral for a procedure when he or she either personally performs the service or refers a patient to a partner to perform the service. HIPAA provisions are rules and regulations covering patient health information disclosed by any covered health care entity, provider, or facility. Regarding labor and employment issues, numerous rules and regulations cover discrimination, harassment, protection of the disabled, and workplace safety. The Occupational Health and Safety Act (OSHA) of 1970 seeks to protect employees from recognized work hazards that might cause death or serious harm. For endoscopy centers, OSHA requirements of major importance cover cleaning of endoscopic equipment, disinfection, and appropriate ventilation.

State Licensure

The state department of health licensing authority is interested in several features of a potential endoscopy facility. First, before any design and construction is undertaken, a careful review of the state’s certificate of need (CON) requirements is needed. Some states do not allow construction of new facilities unless need is demonstrated. This process can be difficult, and prospective physician owners of endoscopy facilities may encounter opposition from hospitals, fearing competition and seeking to maximize use of their own facilities. Regarding specific construction guidelines, state regulators are most often interested in the flow of the facility, cleanliness, and control of infection within the procedure areas. Many states have adopted specific room sizes, acoustic regulations, door and hall size requirements, handicapped access provisions, requirements for exhaust systems, and specific fire codes. The state fire marshal would be concerned with emergency exits. Building codes from the National Fire Protection Association generally apply to endoscopy facilities built as new centers or as centers built in existing buildings. Many states also follow guidelines from the American Institute of Architects and the U.S. Department of Health for design and construction of health care facilities.

Medicare Certification

Medicare certification is usually sought after obtaining state licensure and is required for any facility seeking reimbursement for Medicare and Medicaid work. Medicare regulations and requirements are usually more extensive than regulations of the state and address governance of the facility, transfer agreements with a nearby hospital, continuous quality improvement activities, Medicare architectural requirements, and medical records. Additional standards concern organization and staffing, administration of drugs, and procurement of laboratory and radiology services. Two other requirements warrant special attention as they relate to EASCs. First, the facility must be used exclusively for providing “surgical” services, a definition that includes GI endoscopies. This requirement mandates a separation from other health care activities, separate staffing, and maintenance of special medical and financial records. Finally, the facility must comply with state licensure laws,²⁰ which is potentially difficult in some states because of restrictive CON requirements.

Third-Party Accreditation

After state licensure and Medicare certification have been obtained, some states or specific payers may require a third-party accreditation before authorizing payments to an endoscopy facility. This accreditation can be provided by inspection from JCAHO, AAAHC, or AAAASF. Although these accreditations are typically achieved after state licensure, sometimes they can be pursued simultaneously with Medicare inspection. Under certain circumstances, Medicare accepts accreditation from one of the third-party accreditation authorities in lieu of its own survey; this is known as attaining “deemed status,” and it obviates an additional inspection. These third-party accreditations focus on patient-related and organizational functions and, in the case of an EASC, concentrate on the “environment of care” or “facilities and environment.”

Third-party inspection of a facility can be challenging and demands that the owners and operators fully understand the standards of each specific accrediting organization. A JCAHO survey scrutinizes five patient-focused functions and six organization-focused functions. Patient-related functions include patient rights and organization ethics, assessment of patients, care of patients, education of patients and family, and continuity of care. Organization functions include standards dealing with organization improvement; leadership; management of the environment of care; human resources; information; and surveillance, prevention, and control of infection. AAAHC and AAAASF inspections assess similar functions, although these may be grouped under different organizational headings.

Physician Credentialing

Credentialing and privileging of physicians using an EASC may be mandated by federal, state, local, or third-party organizations and include a formal application process, verification of licensure and drug enforcement administration status, malpractice history, admitting privileges, advanced cardiac life support (ACLS) status, and documentation of training.

Payer Requirements

Individual health plans or insurers may have their own requirements, and these may vary significantly from payer to payer. Careful attention to local payer mix and any special requirements is necessary before designing and building an endoscopy facility to ensure qualification for payment. As outlined previously, the regulatory and certification issues for endoscopy facilities are “complex, detailed, and broad.”¹⁷ Any physician wishing to develop an endoscopy facility must understand these rules of regulation and certification. Appropriate legal counsel should be considered essential.

Choosing a Site

For hospital-based endoscopy facilities, the location of the facility is usually determined by the hospital’s own planners. Although some hospitals have developed separate units for outpatient and inpatient endoscopies, most hospitals operate a single endoscopy unit. Choosing its location requires careful consideration of patient transport issues; the flow of inpatients and outpatients in and out of the unit; and the proximity to radiology, emergency department, intensive care units, and inpatient wards. With office-based endoscopy or EASCs, physician owners choose the site. The site size and location require careful consideration because most office-based facilities or ASCs later expand to accommodate more physicians and patients. Preliminary land requirements are determined from space estimates (discussed later), parking requirements, appropriate landscaping or “green areas,” and anticipated expansion. For an office endoscopy suite or EASC, proximity to a hospital is desirable to minimize travel for patients requiring hospital transfer and for physician convenience. The site should be near but perhaps not on a major street to ease patient parking. Many patients coming to an ASC or office-based facility are elderly or may be anxious about their upcoming procedures. Access should be easy. Locating the physician offices adjacent to the ASC should be strongly considered because it may be very efficient for staff and patients.

Facility Planning and Design

After forming a realistic business plan and acquiring an understanding of relevant regulatory and certification issues, attention turns to the planning and design of the facility. Although the remainder of this chapter includes some remarks about issues specifically related to hospital units, the main focus of the discussion is on the development of an outpatient endoscopy facility, details of which are equally applicable to hospital units. Objectives must be articulated to the design professionals to ensure that the facility meets the needs of patients, endoscopists, and staff. Some points to keep in mind are the following:²⁴

Allow adequate time for planning.

Set aside a regular block of time for discussion, review, and program development.

Choose experienced design professionals who communicate well.

Involve staff to ensure attention to their needs and wishes.

Prepare a statement of needs and goals to aid the architect in preparing a detailed program.

Prepare an inventory of equipment that will be used.

Visit other facilities to gather ideas worth incorporating.

Use flow studies to evaluate placement of functional elements.

Review preliminary drawings carefully.

If questions arise about the size or shape of a space, lay it out with tape on the floor and simulate work practices.