Medicaid is under scrutiny as Republican lawmakers eye big healthcare budget cuts for this year. Five ASC leaders joined Becker’s to discuss how they’re preparing for these cuts.
Question: With potential Medicaid cuts on the horizon, how concerned are you about their impact on ASCs, and what steps are you taking to prepare?
Shakeel Ahmed, MD, CEO of St. Louis-based ASC group Atlas Surgical Group. It’s the proverbial straw that breaks the camel’s back. Profit margins in our industry are already razor-thin, and I suspect we may soon reach a point where at least some smaller centers can no longer afford to care for the majority of Medicaid and Medicare patients. Small ASCs routinely operate on an EBITDA of 10% or so. And those would be the worst hit. That would be a true travesty, considering this industry was originally designed to support the healthcare economy by providing low-cost care and shifting elective procedures into a more convenient and cost-effective setting.
For now, we’re focusing on being extremely savvy and strategic with supply management and cost containment. In addition, we are also working on being more efficient with turnover times and staffing, and selective in choosing the right surgical services and subspecialties for our ASCs across the board.
Heather Cobb, RN. Administrator of Momentum Specialty Surgery (Wichita Falls, Texas): Coming from a clinical leadership role at a hospital, into a financial leadership role at a surgery center was an eye opener to the issues everyone faces with Insurance companies and the reimbursement rates. Medicaid is already one of many insurances that have low reimbursement rates for ASCs, that barely cover the cost of the surgery depending on the coding. Medicaid only reimburses one CPT code for surgery, making it harder for ASCs to accept Medicaid patients unless we can work together with our vendors and the physicians to keep our case cost at a minimum to improve the margins of Medicaid cases. If Medicaid continues down the path of lowering reimbursement rates, then it will prove difficult for ASCs to provide affordable care to their community, possibly shifting those cases to a Hospital where the reimbursement could be much higher. With all this in mind when you look at the increase in the cost of supplies and staff, along with lower reimbursement rates, it can become difficult for ASCs to maintain positive margins on the patients they see.
Les Jebson. Regional Administrator at Prisma Health (Greenville, S.C.): Proposed Medicaid cuts could impact ambulatory surgery centers and a multitude of other healthcare delivery settings. There are always concerns with potential changes from any payers. Data analysis of historical volume trends by procedure and payer allow us to anticipate the fiscal impact of any payer changes, including Medicaid.
Sean Gipson. Division CEO and President of Remedy Surgery Center (Hurst, Texas): The potential cuts to Medicaid funding are a definite concern for the ASC market. Medicaid plays a significant role in the reimbursement structure for many centers. These centers often tend to consist of underserved populations. Medicaid cuts will reduce revenue streams for ASCs, leading to financial strain, particularly for those that rely heavily on Medicaid patients. Some specific areas where cuts could have an impact include financial viability, access to care and operational challenges. Financial viability is a great concern for ASCs serving the Medicaid population. These ASCs might struggle to stay profitable if Medicaid reimbursement rates drop, especially since Medicaid typically reimburses at lower rates than private insurers, thus reducing an already tight margin. Reduced reimbursement could force ASCs to limit or terminate these services, impacting patient access to timely and cost-effective care. Lastly, Operational challenges are also a concern with Medicaid cuts. Financial pressures could lead to staff reductions, less investment in technology or infrastructure, and diminished quality of service.
How does one prep for such sweeping cuts? When thinking about this issue, here are five steps that I might take to prepare.
One of the first moves that I’d make, as an operator, is I’d quickly reevaluate the diversification of my payer mix. Expansion of the patient base beyond Medicaid to include more private insurance or self-pay patients could help balance out potential losses. A second move would be streamlining operations to reduce costs without sacrificing quality of care.This could involve improving scheduling systems, reducing overhead costs, or enhancing supply chain management.
A longer-term action would be advocating. ASCs might need to engage in lobbying efforts and advocate for the importance of Medicaid funding for their operations, helping policymakers understand the impact of cuts on both providers and patients. An additional step would be to improve care quality and outcomes. Demonstrating high-quality outcomes can help strengthen relationships with private insurers, potentially leading to higher reimbursement rates and attracting more patients.
Lastly, exploring alternative revenue streams would be another longer term fix. Some ASCs might look into offering additional services, such as specialized outpatient care or wellness programs, to create new or additional revenue sources.
We never want to hear that our reimbursement is being reduced as operators in the ASC market, as we already work under some extremely tight margins. However, reduced reimbursement is not a thing that we haven’t already had to manage from the past, and this will not be the last. The key is knowing what to do to help combat the effects of change and reduce the burden on your center(s). This is an important responsibility that we have to do as operators in an ever-changing healthcare market.
Pradnya Mitroo, MD. President of Fresno (Calif.) Digestive Health. Our first ASC does not see MediCal patients because the reimbursement would not cover the costs. In our new ASC, since it’s in partnership with the hospital, we are negotiating to get better rates so we can serve these patients in an outpatient setting. In our office, we started talks through our MSO with our largest Medicaid provider to negotiate better rates and improve denial rates so we can still be able to see these patients in the office without losing money on it.