Jared Leger, president and CEO of Arise Healthcare, discusses major issues facing the ASC industry, as well as what surgery centers can do to combat challenges like hospital employment, declining reimbursement and the disappearance of out-of-network.
Q: What, in your opinion, are the most significant issues facing the ASC industry at the moment?
Jared Leger: ASCs face two significant and intertwined challenges right now: recruiting and retaining physicians while simultaneously increasing case volume at a time when new talent is tough to attract. With more and more physicians integrating into hospital systems, either through direct employment or alignment models, independent physicians are becoming harder to find. ASCs in a specific market often find themselves targeting the same pool of prospective physicians.
ASCs need to focus on:
1. Increasing procedures from their existing physician utilizers.
2. Seeking and finding new opportunities to bring inpatient surgeries into their outpatient environments.
3. Assisting ASC physicians in building their referral patient base at the ASC, in a legally compliant manner.
4. Measuring the ASCs costs and working to reduce them in ways that doesn’t compromise patient care.
Q: Surgery center experts talk a lot about the death of out-of-network reimbursement, and recent legal battles between insurers and surgery centers seem to back that up. What do you think is driving the decline of out-of-network reimbursement, and do you believe it has a future for ASCs?
JL: Out-of-network reimbursement is not dead; however, we are seeing reduced payments and maneuvers by the insurance carriers to make it difficult to treat patients on an out-of-network basis. It's being driven by the pressures insurance companies and employers are facing to contain costs.
Higher out-of-network deductibles and co-insurances, increased HMO-only insurance products being sold to employers, and reasonable and customary fee schedule payment maximums will continue to make the out-of-network model difficult.
Q: What do you see as the most profitable areas of growth, in terms of procedures, for ASCs? Where could centers be expanding that has yet to be realized?
JL: Adding new cases — whether by increasing volume or new procedures — is the only area of growth for ASCs, in my opinion. Trying to show even moderate growth by increasing net revenue per case on the same book of business is very difficult. Payment rates are not going up.
We have focused on looking for cases that are routinely performed in an inpatient setting and focus on the barriers preventing them from moving them to an outpatient setting. We look at the clinical side: Is it clinically safe and appropriate to be done at an ASC? Do we have the proper equipment? Since oftentimes these are more intensive procedures, we analyze the economics as well. We measure the case costs and ask ourselves if each payor's reimbursement rate is enough to cover our costs.
Q: The last few years have seen a wave of hospital-ASC joint ventures, as ASCs seek greater negotiating clout and hospitals seek market share. Is there a life for independent surgery centers in the next 10 years, and if so, what does it look like?
JL: While there will always be independent surgery centers, their numbers will continue to decrease, in my opinion. It is very difficult for an independent surgery center to obtain favorable managed care reimbursement rates. The decision for an ASC to sell to a national company or hospital is often based on a better reimbursement structure post-transaction.
Sometimes revenues on the same book of business will dramatically increase because the reimbursement rate per case is higher with the hospital or national company’s contract. Since hospitals and national companies will continue to receive more favorable payor contracts than independent ASCs, I think we will continue to see the trend of aligning with hospitals.
Q: More and more physicians are choosing hospital employment rather than independent practice. How can ASCs attract this new generation of physicians, if they are indeed different from the entrepreneurial physicians of the past 50 years?
JL: I agree we are seeing a trend of physicians accepting hospital employment. The concept is pitched as safe, secure and stable. For many new physicians in particular, the arrangement has appeal. However, I believe some physicians are born with an entrepreneurial spirit – and with that, a desire to build something of value both clinically and economically.
The hospital employment model will not work long-term for an entrepreneurial-minded physician. Time and experience often builds confidence and a loyal patient for a physician. It's often at that point in a physician's career they feel ready to strike out and build something of their own. ASCs should constantly be working to nurture relationships with physicians even before they might seem ready to become independent, then recruit such physicians as quickly as possible if they decide to strike out on their own.
Q: How do you believe the Supreme Court's decision on healthcare reform affects the ASC industry?
JL: Overall, I think the Supreme Court's decision to uphold the healthcare reform bill will strengthen the ACO model. ACOs can hurt ASCs if we are not demonstrating our value. As long as ASCs have a seat at the ACO table, and are able to show our cost-savings and quality data, there's no reason to think there won't always be an appropriate place for us within the healthcare system. With the big push to lower healthcare costs and the fact that ASCs provide lower cost surgery care with better outcomes, ASCs are positioned quite well as an industry.
Learn more about Arise Healthcare.
Related Articles on ASCs:
22 Surgery Centers With 5-Plus Operating Rooms
3 Steps to Improving Patient Flow
32 Statistics on Surgery Center Operating Expenses
Q: What, in your opinion, are the most significant issues facing the ASC industry at the moment?
Jared Leger: ASCs face two significant and intertwined challenges right now: recruiting and retaining physicians while simultaneously increasing case volume at a time when new talent is tough to attract. With more and more physicians integrating into hospital systems, either through direct employment or alignment models, independent physicians are becoming harder to find. ASCs in a specific market often find themselves targeting the same pool of prospective physicians.
ASCs need to focus on:
1. Increasing procedures from their existing physician utilizers.
2. Seeking and finding new opportunities to bring inpatient surgeries into their outpatient environments.
3. Assisting ASC physicians in building their referral patient base at the ASC, in a legally compliant manner.
4. Measuring the ASCs costs and working to reduce them in ways that doesn’t compromise patient care.
Q: Surgery center experts talk a lot about the death of out-of-network reimbursement, and recent legal battles between insurers and surgery centers seem to back that up. What do you think is driving the decline of out-of-network reimbursement, and do you believe it has a future for ASCs?
JL: Out-of-network reimbursement is not dead; however, we are seeing reduced payments and maneuvers by the insurance carriers to make it difficult to treat patients on an out-of-network basis. It's being driven by the pressures insurance companies and employers are facing to contain costs.
Higher out-of-network deductibles and co-insurances, increased HMO-only insurance products being sold to employers, and reasonable and customary fee schedule payment maximums will continue to make the out-of-network model difficult.
Q: What do you see as the most profitable areas of growth, in terms of procedures, for ASCs? Where could centers be expanding that has yet to be realized?
JL: Adding new cases — whether by increasing volume or new procedures — is the only area of growth for ASCs, in my opinion. Trying to show even moderate growth by increasing net revenue per case on the same book of business is very difficult. Payment rates are not going up.
We have focused on looking for cases that are routinely performed in an inpatient setting and focus on the barriers preventing them from moving them to an outpatient setting. We look at the clinical side: Is it clinically safe and appropriate to be done at an ASC? Do we have the proper equipment? Since oftentimes these are more intensive procedures, we analyze the economics as well. We measure the case costs and ask ourselves if each payor's reimbursement rate is enough to cover our costs.
Q: The last few years have seen a wave of hospital-ASC joint ventures, as ASCs seek greater negotiating clout and hospitals seek market share. Is there a life for independent surgery centers in the next 10 years, and if so, what does it look like?
JL: While there will always be independent surgery centers, their numbers will continue to decrease, in my opinion. It is very difficult for an independent surgery center to obtain favorable managed care reimbursement rates. The decision for an ASC to sell to a national company or hospital is often based on a better reimbursement structure post-transaction.
Sometimes revenues on the same book of business will dramatically increase because the reimbursement rate per case is higher with the hospital or national company’s contract. Since hospitals and national companies will continue to receive more favorable payor contracts than independent ASCs, I think we will continue to see the trend of aligning with hospitals.
Q: More and more physicians are choosing hospital employment rather than independent practice. How can ASCs attract this new generation of physicians, if they are indeed different from the entrepreneurial physicians of the past 50 years?
JL: I agree we are seeing a trend of physicians accepting hospital employment. The concept is pitched as safe, secure and stable. For many new physicians in particular, the arrangement has appeal. However, I believe some physicians are born with an entrepreneurial spirit – and with that, a desire to build something of value both clinically and economically.
The hospital employment model will not work long-term for an entrepreneurial-minded physician. Time and experience often builds confidence and a loyal patient for a physician. It's often at that point in a physician's career they feel ready to strike out and build something of their own. ASCs should constantly be working to nurture relationships with physicians even before they might seem ready to become independent, then recruit such physicians as quickly as possible if they decide to strike out on their own.
Q: How do you believe the Supreme Court's decision on healthcare reform affects the ASC industry?
JL: Overall, I think the Supreme Court's decision to uphold the healthcare reform bill will strengthen the ACO model. ACOs can hurt ASCs if we are not demonstrating our value. As long as ASCs have a seat at the ACO table, and are able to show our cost-savings and quality data, there's no reason to think there won't always be an appropriate place for us within the healthcare system. With the big push to lower healthcare costs and the fact that ASCs provide lower cost surgery care with better outcomes, ASCs are positioned quite well as an industry.
Learn more about Arise Healthcare.
Related Articles on ASCs:
22 Surgery Centers With 5-Plus Operating Rooms
3 Steps to Improving Patient Flow
32 Statistics on Surgery Center Operating Expenses