Case Study: Transforming an Underperforming ASC into a Profitable Orthopedic Surgery Center
Background: A Multispecialty ASC Facing Profitability Challenges
NueHealth acquired a minority equity stake in an independent, physician-owned, multispecialty ambulatory surgery center (ASC) in the greater Chicagoland area. At the time of acquisition, the 10,400-square-foot facility operated three operating rooms and one procedure room and supported a broad mix of service lines, including orthopedics, pain management, gastroenterology, ophthalmology, plastics, general surgery, podiatry, OB/GYN, and urology. Despite a deep physician bench and case volume that, on paper, should have supported profitability, the center struggled to achieve consistent financial sustainability.
The facility’s broad service line scope created significant operational complexity, contributing to inefficiencies in operating room utilization, supply chain management, and staffing.
Recognizing the need for a comprehensive transformation, NueHealth implemented a data-driven, multifaceted action plan to address these challenges and reposition the ASC for long-term success.
Initial Performance Analysis
Key Challenges & Findings
The ASC’s underperformance was not the result of insufficient demand or physician engagement, but rather a misalignment between clinical activity, operating model, and the underlying economics.
When evaluated on a total cost basis, many procedures generated minimal or negative contribution margin after accounting for supplies, labor, and overhead. Collectively, these dynamics produced a structurally inefficient operating model in which volume alone was insufficient to drive profitability, reinforcing the need for a focused, data-informed strategic reset.
Several challenges were identified:
- Unfavorable case and payor mix, with a disproportionate share of low- to negative-margin procedures and a higher concentration of government payors than peer ASCs in the market.
- Limited case-level financial visibility, as the facility lacked detailed contribution margin analytics needed to evaluate profitability by procedure, service line, and payor.
- Excessive service line breadth, with too many specialties and surgeons spread across the block schedule, driving inefficiencies in operating room utilization and patient flow.
- Operational friction, created by frequent changes in procedure types that increased setup time, staffing variability, and workflow disruption.
- Supply chain and labor strain, as accommodating a wide range of physician preferences across multiple specialties increased inventory complexity and limited cost discipline.
- Suboptimal payor contracts, with reimbursement rates trailing comparable ASCs in the Chicagoland market, further compressed margins and amplified the impact of an unfavorable case mix.
NueHealth Approach: A Comprehensive Action Plan
NueHealth executed a robust, multi-pronged strategy to address the ASC’s challenges, focused on improving operational efficiency, strengthening financial performance, and achieving long-term strategic alignment. The initiative was led by a highly collaborative team of NueHealth executive leaders, physician partners, and subject-matter experts, working in close coordination across on-site operations and centralized functional teams.
1. Service Line Rationalization
- Conducted a detailed breakeven and contribution margin analysis to identify underperforming service lines and case types.
- Transitioned the ASC from a multispecialty model to a focused orthopedic center, prioritizing total joint replacements and other high-margin orthopedic procedures.
- Reduced service line complexity to improve operating room utilization, staffing efficiency, and cost management.
2. Payor Contract and Revenue Cycle Optimization
- Conducted a market-based assessment of existing payor contracts and focused renegotiation efforts on high-volume total joint procedures.
- Realigned billing and collections workflows to improve revenue cycle performance and accelerate cash flow while reducing AR aging.
3. Supply Chain Optimization
- Evaluated implant utilization, vendor pricing, and purchasing patterns to identify opportunities for standardization and cost discipline.
- Collaborated with physician leadership and the primary implant vendor to align pricing and inventory practices with the ASC’s focused orthopedic operating model.
4. Physician Profitability Analysis and Engagement
- Conducted detailed physician-level and procedure-level profitability analyses to increase transparency and educate physicians on their contribution to the ASC’s financial performance.
- Collaborated with physician partners to optimize scheduling patterns and shift case mix toward higher-margin procedures, aligning clinical practice decisions with facility-level profitability objectives.
5. Physician Recruitment and Expansion
- Engaged high-volume, high-quality orthopedic groups and individual surgeons to expand case volume and strengthen the ASC’s regional market presence.
- Prioritized long-term partnerships with physicians aligned with the ASC’s strategic vision and operational model.
Results & Impact of NueHealth Operating Expertise
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Financial and Operational Turnaround
Through disciplined execution and partnership, the center achieved a full turnaround, reversing years of operating losses and establishing a durable, profitable foundation. Once at risk of closure, the ASC returned to profitability in the second half of 2024 and is on track to more than double net income year over year in 2025.
Balance sheet performance improved materially over a 12-month span, with more than $1M in property debt and accumulated accounts payable retired on an accelerated timeline. As a result, liquidity, working capital, cash collections, accounts receivable aging, and solvency metrics now exceed industry-leading benchmarks, positioning the center for sustained growth and reinvestment.
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Focused Orthopedic Service Line Strategy
A deliberate transition to an orthopedic-only model aligned with the facility’s market dynamics and physician strengths, enabling the predictability and operational focus required for long-term success. Total joint volume increased by approximately 240% over a four-year period, converting a multi-year loss profile into sustained positive net income.
Volume momentum continues to accelerate:
- Projected orthopedic volume for 2025 increased by more than 40% following new physician investment and committed late-year case bookings.
- Year-over-year orthopedic growth is projected to exceed 50% from 2025 to 2026, driven by expanded physician participation and improved market positioning.
This growth trajectory is expected to support more than a doubling of net income by 2026.
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Sustainable Margin Expansion
Profitability gains were reinforced by targeted reimbursement and cost initiatives that strengthened per-case economics in an inflationary environment. A disciplined focus on commercial payor strategy increased reimbursement for major orthopedic procedures by 10%, generating an estimated $200K in margin expansion in 2025.
Additionally, NueHealth partnered with surgeon leadership and the primary implant vendor to achieve a 3% reduction in implant pricing. While modest in percentage, the impact was meaningful, producing $65K in annual savings in 2024, with comparable savings expected in 2025 and 2026. Together, these initiatives materially improved contribution margins and operating leverage.
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Physician Recruitment and Investment
As financial performance and strategic clarity improved, the ASC emerged as a compelling investment for local orthopedic surgeons. After years of outreach and relationship development, the center successfully recruited a group of high-volume, high-reputation surgeons in early 2025.
These physician partners:
- Invested in both operations and real estate
- Committed substantial case volume through 2025 and into 2026
- Drove a step-change in projected volume and profitability
With physicians holding 95% of the facility’s equity, clinical leadership, operational accountability, and long-term value creation are tightly aligned, enabling both professional autonomy and sustained financial outcomes.
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Capital Reinvestment
Despite rapid growth, the center continues to operate at approximately 50% utilization, creating meaningful runway for expansion. To support inbound demand while enhancing the patient experience, NueHealth and the physician owners initiated a $2M capital reinvestment program designed to strengthen both clinical capability and facility infrastructure.
Key investments include:
- Interior renovations and facility modernization to create a more efficient, comfortable, and patient-centered care environment.
- New equipment to support expanded orthopedic volume and enable consistent, high-quality clinical outcomes.
- Infrastructure upgrades, including HVAC, roofing, and expanded sterilization capacity, to improve reliability, safety, and throughput.
- Financing is secured for the conversion of a procedure room into a fourth operating room, enabling higher capacity and scheduling flexibility.
Strategic Positioning for Long-Term Success
The ASC’s transformation reflects a clear strategic recalibration rather than a short-term correction. By aligning its operating model with the procedures, physicians, and economics best suited to the market, the center has established a performance profile that is both durable and competitive.
Equally important, the outcome is the result of close partnership. The commitment and professionalism of the physicians and staff, combined with NueHealth’s disciplined, data-informed operating model, created the conditions for success.
To learn more about NueHealth’s services and our approach to improving ASC performance, contact our team to request an operational assessment and discuss how we can help your center achieve similar results.
