Planning Feasibility of an ENT (Otorhinolaryngology) Daycare Surgical Unit with Reference to Return on Investment

Abstract

To project return on investments for a private ENT (Ear, nose & throat) autonomous surgical day care unit attached to large academic hospital, as a business model. Prospective, Observational study was conducted at two hospitals - a medical college hospital and a private hospital. Financial revenue generated from both hospitals was computed for a 1-year period. Historic 3-year arrival rates of patients against the name of surgery performed were collected from the statistics department of both hospitals. From this new day care unit feasible number of patients in 1 year period were projected. Personal identifiable information or health information about patients was not collected. Medical College hospitals cater to public health insurance patients from government. The package prices would be lower in government insurance schemes, but the volume of patient arrivals will be high. This large number of arrivals would be essential for maintaining bed occupancy rates, which is ideal for student training. Private hospitals receive more volume of out-of-pocket patients; hence a comparative study is useful. The net operating margin for a large hospital stands at 45% and for a small hospital it stands at 25% per annum, without considering the capital infrastructure costs. Administrators of hospitals can strategize towards achieving profitability. Both types of hospitals can successfully implement the day-care surgery model with substantial profits, improving operational efficiency and patient turnover.

Introduction

In the evolving landscape of medical science and technology, the significance of specialized healthcare facilities cannot be overstated. Hospitals specializing in Ear, Nose, and Throat (ENT) care play a pivotal role in diagnosing and treating a myriad of disorders related to vital sensory organs. With a growing demand for specialized medical services, the need for modern, well-equipped healthcare facilities becomes imperative to cater to the evolving needs of patients and medical professionals alike. The scope of day-care surgery in the United Kingdom by British Association of Day Surgeries (BADS) [1] and in USA by American Society of Anesthesiologists (ASA) is well-established and is deemed suitable for procedures requiring brief general anesthesia without anticipated postoperative issues necessitating hospital treatment. The benefits for patients undergoing day-case surgery include a shorter waiting period, reduced risk of cross-infection, minimal disruption to daily life, and a quicker recovery from social and emotional trauma compared to in-patient stays. It includes patients requiring general anesthesia and those unfit for local anesthesia or classified as ASA Grade III or above. Routine pre-anesthetic check-ups are conducted, with patients over 35 years subjected to ECG, blood sugar tests (fasting and postprandial), and chest X-rays.

While day surgery is widely accepted and acknowledged by most practicing doctors globally for its financial and health benefits, the situation in India appears different. Challenges include the need for sufficient training for ENT doctors to identify suitable patients, anesthesiologists, insurance benefits issues, infrastructure challenges, and patient concerns about early discharge.

Additionally, ensuring proper documentation, using standard equipment and monitoring procedures, and providing staff backup in case of emergencies are essential elements that can significantly enhance the effectiveness and safety of day-care anesthesia. Despite global advancements in day-care surgery, the specifics of anesthesia for day-care procedures in India still require detailed description. The choice of anesthetic agent and method, facilitating a swift return to regular functioning post-surgery, is deemed crucial. Pain control is another vital aspect, with a recommendation to limit the use of opioids and prefer non-opioid analgesics and regional anesthesia procedures to avoid potential delayed recovery associated with opioid-related side effects. Local anesthetics (LAs) are suggested to be used more frequently, either through peripheral nerve blocks or wound infiltration. Addressing all the above issues by the hospital authorities and then starting a day-care business model is crucial for the revenue generation. Many studies suggest feasibility study before starting any business model [2].

We compared with existing literature from experiences of Belgium, a study done by Michelis et al. in year 2017 [3], suggests that very few cases get overnight admissions after procedure done on day care basis. Studies were conducted, as early as 1990s and early 2000s, Ganesan et al. [4] conducted study in UK suggested that 50% of cases which were operated in main operation theater can be taken up as minimal stay surgery cases. Comparing existing literature and focus group discussion with our team of doctors, we converted 60% of our cases is managed under Day care hospital set up and evaluated the feasibility of stand-alone ENT Day care hospital. We conducted this study in two hospitals in India, because the prices charged will vary across different hospitals and revenue margins also vary.

In both these hospitals, space for overnight admission if required, inpatient beds will be used from the few existing beds, so there won’t be additional costs except for opportunity cost. The existing Operation Theater will be used, and the existing ward rooms of the hospital will be used.

Methods

One-year observational retro-prospective study was conducted at two hospitals, comparing the prices charged to the patients as revenues and costs incurred to provide patient care as expenses, including both fixed and variable costs.

Data Collection

Secondary Data

We collected data retrospectively from medical records departments on the number and types of surgeries performed from March 2020 to March 2023 at both hospitals.

Eligibility Assessment

To project the demand for day care units in next one year, we used informal discussions with ENT surgeons, anesthesiologists and operation theater managers of both the hospitals, compared with existing literature to estimate that 55–60% of major surgeries are eligible for day-care procedures [5].

Prospectively, we collected one year data from April 2023 to March 2024, the number of operations done in both hospitals in purely day care units without overnight stays, except for few cases where complications can lead to overnight stays.

Cost Analysis

During the prospective study, we collected the variable costs - manpower, materials, electricity, water requirement and assumed the existing infrastructure would suffice, thus no additional major fixed costs were required to start a day care unit, in both hospitals. We were trying to change the business model, so that lesser night stay beds would be needed to be manned.

Revenue Estimation

Revenues as outputs from the investment were estimated based on procedure bill paid by patients who are on an out-of-pocket basis and paid by administrator of public health insurance patients in patients approached through government health insurance. Data Analysis: We used Microsoft excel sheet to summarize the values.

Results

Historical data collected from the medical records departments of two hospitals– one is ENT department attached to a large, public medical college teaching hospital and one small private mono-specialty ENT hospital were studied, is shown in Table 1. In the previous 3 years between March 2020 to March 2023, the public hospital conducted 18,200 operations, and it has two Operation theaters dedicated in the main OT complex where three units schedule their surgeries in it every alternate day in a week. All the procedures have been performed in the major Operation theater.

Table 1.

Table showing historical data of 3 years surgeries performed at both hospitals

S. No	Types of operations	Private Academic Hospital ENT	Private small standalone ENT hospital
	Particulars	Number of surgeries done in the previous 3 years
1	Tympanoplasty	578	157
2	Foreign Body Removal	32	145
3	FESS (Functional Endoscopic Sinus Surgery)	8032	378
4	Polypectomy	189	38
5	Laryngoscopy	312	765
6	Gourmet insertion	89	76
7	Mastoidectomy	249	104
8	Pina cyst Extraction	42	8
9	Diagnostic Endoscopy (Nose)	6931	1834
10	Septal Abscess Drainage	46	9
11	Septoplasty, rhinoplasty	781	145
12	Synechia Release, Septal Abscess Drainage	4	2
14	Exploratory Tympanoplasty	832	198
15	Periarticular sinus drainage	12	4
16	Adenoidectomy	3	31
17	Tonsillectomy	54	56
18	Tuboplasty	4	3
19	Stapedotomy	10	24
	Total	18,200	3977

In the private mono-specialty hospital, two ENT surgeons performed surgeries in two operation theaters simultaneously running their out-patient departments. A total of 3977 surgeries were performed at this hospital in their main theater. All the surgeries were done in the main theater and attached inpatient beds.

If each procedure takes 1.5 h, we estimated that one OT can perform 4 to 6 procedures in a 12-hour shift and keep aside one OT for major surgeries in the medical college hospital and another OT can be used for day care surgery unit. In the next year, from April 2023 to March 2024, tympanoplasty, FESS, laryngoscopy, tonsillectomy was converted into day care, and about 4550 surgeries were conducted in medical college hospital attached autonomous day care Operation theater and about 994 surgeries were done in standalone day care ENT hospital in another town. Table 2 data show the revenue that can be collected from the large hospital. The distinct feature of medical college hospital in India is they accept government insurance scheme patients more, because their prices are lower than private hospitals and, for maintaining bed occupancy rates as mandated by regulatory agencies of 85%, to continue recognition for accepting post-graduate students teaching. Hence, out of the total surgeries done, the revenue collection has been split into private paying patients in a general bed (Column A, B, C) and the same general bed occupied and provided service for government scheme public health insurance patients (Columns D, E, F). The prices paid against the bill to the hospital by Government scheme patients are considerably lower than private out of pocket payment patients (Column E and Column B).

Table 2.

Financial feasibility estimates of revenue from day care unit attached to medical college hospital in 1 year

	Types of operations	Bundled price of each operation paid by private patient (A)	No. of operations per year (B)	Revenue from the operations (C)	No. of operations done under government insurance scheme (D)	Bundled price of each operation paid in private hospital (E)	Revenue from the operations (F)
1	Tympanoplasty	70,000	58	40,60,000	87	20,000	1,74,000
2	Foreign Body Removal	15,000	3	45,000	5	8000	40,000
3	FESS	65,000	803	5,21,95,000	1205	18,000	2,16,90,000
4	Polypectomy	50,000	19	9,50,000	28	20,000	5,60,000
5	Laryngoscopy	30,000	31	9,30,000	47	10,000	4,70,000
6	Grommet insertion Myringotomy	30,000	9	2,70,000	13	15,000	1,95,000
7	Mastoidectomy	75,000	25	18,75,000	37	25,000	9,25,000
8	Pinna cyst Extraction	15,000	4	60,000	7	8000	56,000
9	Diagnostic Endoscopy (Nose)	10,000	689	68,90,000	1040	3000	31,20,000
10	Septal Abscess Drainage	20,000	5	1,00,000	7	8000	56,000
11	Septoplasty, rhinoplasty	1,00,000	78	78,00,000	117	25,000	29,25,000
12	Synechia Release, Septal Abscess Drainage	20,000	1	20,000	1	8000	8000
14	Exploratory Tympanoplasty	40,000	83	33,20,000	125	14,000	17,50,000
15	Periarticular sinus drainage	20,000	1	20,000	2	8000	16,000
16	Adenoidectomy	60,000	1	60,000	1	18,000	18,000
17	Tonsillectomy	45,000	6	2,70,000	8	20,000	1,60,000
18	Tuboplasty	30,000	1	30,000	1	12,000	12,000
19	Stapedotomy	80,000	1	80,000	2	25,000	50,000
	Total		1818	7,71,00,000	2733		3,20,51,000

The final revenue generated from both types of patients in large hospitals in one year is INR 10,91,51,000/. Average revenue per procedure is around INR 23,984/-, if 4551 patients are being operated in a year period.

Table 3 shows the revenue estimates from a mono-specialty attached day care surgical unit operating on 994 surgeries in a year duration. As they are not mandated to receive government insurance schemes patients, they are currently not accepting. We can also notice that bundled prices for each operation is significantly higher in private hospitals than in a medical college teaching hospital.

Table 3.

Financial feasibility estimating revenue from day care unit attached to ENT private hospital

	Types of operations	Bundled price of each operation in a private hospital in India (A)	No. of operations done in mono-speciality hospital (B)	Estimated Total revenue for specialty care hospital (A X B)
1	Tympanoplasty	90,000	39	35,10,000
2	Foreign Body Removal	18,000	36	6,48,000
3	FESS Functional Endoscopic Sinus Surgery	85,000	95	80,75,000
4	Polypectomy	60,000	10	6,00,000
5	Laryngoscopy	30,000	191	57,30,000
6	Grommet insertion Myringotomy	50,000	19	9,50,000
7	Mastoidectomy	75,000	26	19,50,000
8	Pinna cyst Extraction	15,000	2	30,000
9	Diagnostic Endoscopy (Nose)	10,000	459	45,90,000
10	Septal Abscess Drainage	30,000	2	60,000
11	Septoplasty, rhinoplasty	1,30,000	36	46,80,000
12	Synechia Release, Septal Abscess Drainage	40,000	1	40,000
14	Exploratory Tympanoplasty	40,000	50	20,00,000
15	Periarticular sinus drainage	20,000	1	20,000
16	Adenoidectomy	60,000	8	4,80,000
17	Tonsillectomy	60,000	14	8,40,000
18	Tuboplasty	40,000	1	40,000
19	Stapedotomy	100,000	6	6,00,000
	Total Revenue		994	3,48,43,000

The final revenue generated in a year by the private hospital is INR 3,48,43,000/- and 994 patients being operated on in one year period, average revenue per procedure is around INR 35,054/-.

Analysis of Expenditure or Annual Investments

The cost of manpower was obtained from the human resource department includes cost to company salaries for both the hospitals with considering 30% extra for leave reserves. The consultants’ salaries counted at INR 30,00,000 per annum. The material costs were calculated on an actual basis from historical data. Infrastructure costs are not being considered because, existing hospital operation theater and post-operative intensive care units and equipment can be used in this business model. This data is shown in Table 4.

Table 4.

Financial feasibility: expenses of performing the surgeries at the large hospital

	Cost heads	Expenditure per annum
1	Manpower (4 ENT Surgeons, 4 Anesthesiologists, 8 scrub nurses, 8 Post-op Nurses, 8 environmental workers, 6 Anesthesia technicians)	INR 3,00,00,000
2	Materials at variable cost for surgeries	INR 2,40,00,000
3	Electricity Cost	INR 5,00,000
	Total Expenses without Infrastructure cost	INR 5,90,00,000

In smaller private hospital, manpower considered was based on the workload and expecting them to be on call or fee for service basis, the salaries of consultants has been considered as INR 1,40,00,000/- per annum and the rest of the cost estimates in small mono-specialty ENT hospital are shown in Table 5.

Table 5.

Financial feasibility: expenses of performing the surgeries at the small private hospital

	Cost heads	Expenditure per annum
1	Manpower (2 ENT Surgeons, 2 Anesthesiologists, 4 scrub nurses, 7 Post-op Nurses, 6 environmental workers, 3 Anesthesia technicians)	INR 1,40,00,000
2	Materials at variable cost for surgeries	INR 1,20,00,000
3	Electricity Cost	INR 1,00,000
	Total Expenses without Infrastructure cost	INR 2,61,00,000

The profit (without fixed infrastructure costs) can be summated as Revenue minus Expenditure in each hospital.

In a large hospital attached autonomous day care surgical unit, Profit = 10,91,51,000–5,90,00,000 = 5,01,51,000/-. From this we can expect a net operating margin of 45% per annum. (5,01,51,000/10,91,51,000 × 100%)

In the mono-specialty hospital attached autonomous day care surgical unit, Profit = 3,48,43,000–2,61,00,000 = 87,43,000/-. From this we can expect a net operating margin of 25% per annum. (87,43,000/3,48,43,000 × 100%). If fixed costs, including infrastructure and equipment, are counted as an investment, we can reduce 40% of the above values. Net operating margins will come down to INR 2,00,60,400/- and INR 34,97,200/- at each hospital.

Discussion

The concept of day surgery is not new. Physician James Nicholl of Glasgow’s Royal Hospital outlined the benefits of returning home the same day for both parents and kids, emphasizing the necessity of suitable home environments for the success of day surgery. Ralph Waters, an anesthesiologist in Sioux City, Iowa, reported on the “downtown anesthetic clinic” in 1919, a decade later. Minor surgical procedures allowed adults to return home within hours, marking the onset of the contemporary era of minimal stay surgery.

For calculating profits, the time horizon in years to measure is very important. For any large investments happen during the first two years, after that, the capital investment will be less. In CRISIL annual financial performance ratings on Indian hospitals, it has been projected in January 2024 report that private hospitals will have a 16–17% returns in the year 2025 with a positive outlook in India [6]. The financial feasibility has been planned even in intensive care unit plannings in Asian countries where, out of pocket payment for healthcare expenditure leads to their importance of pre-planning the infrastructure and also in hemodialysis area with three business models planned as an extension from a private academic medical institution [7, 8]. Hence, excess capital money waste will not happen during the construction of the hospital. The equipment requirements engulf major budget in the capital planning of the hospitals [9]. In the operating budget, as the procedures take place, the sterilization costs in CSSD of the hospitals will have to be constantly monitored [10].

Conclusion

The analysis shows that converting a significant portion of ENT surgeries to day-care procedures is feasible and profitable for both hospitals. The mono-specialty hospital has an estimated operating margin of 25%, while the large hospital has a higher margin of 45%. The key to achieving these margins is utilizing existing infrastructure and ensuring efficient use of manpower.

The higher operating margin in the tertiary care hospital is due to lower pay rates for doctors, which significantly reduces the overall costs. Both hospitals can successfully implement the day-care surgery model with substantial profits, improving operational efficiency and patient turnover.

Declarations

Ethical Approval

Institutional Ethics Committee taken (student research) Number: 463 / 2022, dated, August 26, 2022. There is no biological or personal health information of individual humans required in this study. Informed consent of the participants was not required.

Conflict of Interest

Authors declare that there are no financial and information disclosure conflicts. There were no competing interests with any party prior to this study.