ASCs are facing a trifecta of pay issues — anesthesia stipends, rising expenses and stagnant reimbursements.
"With stagnant, slow-moving or declining reimbursements, coupled with rising supply and staffing costs, there is little financial flexibility to accommodate [anesthesia] stipends while maintaining sufficient profitability to offer distributions that attract and retain physician partners," Debra Cooner, administrator and CEO of Birmingham, Ala.-based OSE Surgery Center, told Becker's. "As a result, profit margins are experiencing a noticeable decline."
Here's a breakdown of the three challenges
1. Payer reimbursements
Although CMS slightly boosted ASC reimbursement rates in its final rule for 2024, many ASC leaders argue it is insufficient to offset rising costs.
"CMS is not afraid to increase our costs by requiring reporting on patient satisfaction through only their chosen vendors. Our costs rose significantly for this," Tina Heinrich, administrator of Placerville, Calif.-based El Dorado Surgery Center, told Becker's. "Too bad they are so slow in increasing reimbursement amounts."
CMS approved a reimbursement increase of 2.9% for ASCs meeting quality reporting requirements next year. The adjustment is based on a projected hospital market basket percentage increase of 3.4%, offset by a 0.5 percentage point productivity adjustment. The final rule is 0.3% higher than the proposed rule.
Leaders also express frustration over the disparity in reimbursement rates between ASCs and hospitals.
"It is so frustrating that hospital outpatient departments can get better reimbursement for the same procedures done by the same physicians with the same quality of care, but the independent ASC receives less reimbursement than the HOPD," Kathy Weihman, administrator of Fowlerville, Mich.-based Genesis Surgery Center, told Becker's. "This does not seem fair, but that is what healthcare has become."
2. Anesthesia costs
Anesthesia stipends — an expense previously uncommon for ASCs — are becoming a significant financial burden as the provider shortage intensifies.
As anesthesia reimbursements rapidly decline, some ASCs are being asked by their contracted anesthesia groups for a stipend, or a minimum daily payment, to ensure anesthesiologists are fairly compensated and anesthesia groups maintain a reasonable profit margin.
"Anesthesia is now a cost for many ASCs that previously did not have to subsidize their providers," Traci Albers, CEO of Sioux Falls, S.D.-based Surgical Management Professionals, told Becker's. "With increasing anesthesia shortages, increasing salaries and stagnant reimbursement, ASCs are now subsidizing anesthesia."
While some leaders are looking to new solutions to mitigate the impact of the anesthesia stipend on their bottom line, many are struggling to keep up as reimbursements dwindle.
3. Riding expenses
Escalating expenses are further squeezing ASC margins. Physician-owned multispecialty practices' median medical and surgical supply cost per fulltime employee jumped 82% from 2013 to 2022, according to a report released in May by the Medical Group Management Association.
Carina Topf, RN, nursing director at Sioux City, Iowa-based Riverview Surgical Center told Becker's that the biggest financial challenge her team is facing is the "increase in cost of supplies, equipment and service contracts."
"Overall costs have risen — and sometimes doubled in certain areas — since 2020, post-COVID-19," added Will Brancamp, ASC administrator at Infirmary Health System. "This includes material and supply costs. Additionally, staffing growth in clinical positions has created a supply-and-demand situation with salaries."
Other administrators report similar challenges.
"While the impact of increased staffing costs varies by region, shortages with surgical techs and radiology staff, for example, are pushing salary costs upward," Vance Chunn, CEO of Mobile, Ala.-based Cardiology Associates, told Becker's. "Since COVID-19, supply and pharmaceutical costs have grown more rapidly than reimbursement, and I do not foresee that changing soon."