Those individuals, like me, fortunate enough to work in the ASC industry over many years have long known surgery centers are the model for providing high-quality, low-cost care.
Now the rest of the healthcare industry is starting to recognize that as well.
The hospital industry, once adamantly opposed to the development and growth of ASCs, has in recent years increasingly embraced surgery centers. More hospitals are partnering with existing ASCs in joint venture surgery centers and some hospitals are building their own from the ground up. It is now increasingly common for hospitals to segregate their outpatient surgery into freestanding units that, while staying on the hospital license, mimic ASC operations. And as we all know, imitation is the sincerest form of flattery. In many areas, hospitals are moving away from the traditional "facility on the hill" model and developing alternative models for delivering care that are spread throughout their market, in more convenient and smaller facilities, and closer to where the patients and providers live. In these instances, ASCs are often the anchor tenant in a new medical office building in the suburbs.
Unlike a few years ago, ASCs are now also becoming sought after by payers, Looking for lower facility fees, many commercial payers are trying to steer their members toward ASCs. As the national ASC Association notes, "ASC prices are significantly lower than hospital outpatient department prices (HOPD) for the same procedure in all markets, regardless of payer." Other reasons for this new alignment include the low infection rate associated with procedures performed in ASCs, and extremely high satisfaction of patients and providers with the ASC experience. As we are seeing with new initiatives, such as the Global One Ventures/Blue Shield of California partnership on an ASC bundled fee program, commercial payers are starting to view ASCs as an integral part of their portfolio.
Another new fan of ASCs is the Centers for Medicare & Medicaid Services (CMS). As noted in our infographic on the history of ASCs, there are now more than 3,500 procedures on the CMS ASC-payable list. The first 200 procedures were approved in 1982; that figure shot up to more than 1,500 procedures only five years later. In just the past few years, a number of outpatient spine procedures have been added to the list, and CMS is considering other procedures to move off of the inpatient-only list, such as total knee arthroplasty. With a heightened interest in finding lower-cost alternatives for healthcare and increased technology improvements, it will be no surprise if the list of procedures approved for payment when performed in an ASC continues to grow each year.
There is also the matter of the recent site-neutrality provision. Included in the Bipartisan Budget Act of 2015 within Section 603, it essentially states that off-campus outpatient facilities acquired or established by hospitals on or after the date of enactment of the law (November 2, 2015) are not eligible for Medicare reimbursement under the outpatient prospective payment system (OPPS). These new off-campus HOPDs would be eligible for reimbursement from the ASC or physician payment systems, both of which typically pay less — sometimes substantially less — than the OPPS for like procedures. Implementation, which was recently approved, is scheduled for January 1, 2017. It has fueled increased interest in the development of ASCs rather than more HOPDs.
Data further supports the care migration to outpatient settings, including ASCs. From 1988 to 2015, the number of Medicare-certified ASCs more than quintupled, from 1,000 to 5,400, as the number of community hospitals declined. The number of procedures performed in ASCs has been on the rise as well, with surgery centers now performing more than 20 million surgeries annually, while the number of outpatient surgeries performed in hospitals is on the decline. The ratio of outpatients to inpatients in some health systems is at or approaching 10 to 1, and many hospitals are deriving a healthy majority of their revenue and profitability from outpatient care.
Also supporting the migration is renowned economist Michael Porter of the Harvard Business School. He is on a crusade to help find ways to address the nation's out-of-control healthcare costs and encourages the movement of low-acuity surgical cases to ASCs as a part of the solution.
What it all means
Healthcare policy makers and providers are focused on ways to reduce costs while maintaining quality. This is putting ASCs increasingly in the spotlight. The traditional inpatient-centric system is being replaced by one that delivers non-acute care in settings that better match the scope and acuity of the problem. Payers and patients are no longer willing to pay more for care than is necessary. Hospitals, CMS and commercial payers are increasingly considering the role ASCs can play in a value-based care strategy.
ASCs have long led the way in cost-effective, efficient ambulatory surgical care. They are becoming increasingly vital to any organization's successful outpatient surgery strategy, and should be viewed as role models for other providers trying to determine how best to navigate today's evolving reimbursement landscape that is shifting payment toward lower costs and rewarding quality rather than quantity.
From their inception ASCs have had to deliver care under one payment for each CPT code performed. They have never had the luxury of operating under a "cost-plus" reimbursement model, like hospitals did for many years. The lower overhead enjoyed by ASCs has enabled them to operate under a fixed fee reimbursement and still enjoy healthy profit margins. To maintain profitability and efficiency, well-run ASCs, expect their staff to know the costs of every supply used on a case, and cross-training is standard operating practice. Other healthcare providers, now getting squeezed by reimbursement reductions, can learn a lot from their ASC peers.
Those of us who have been in the ASC industry for a long time—some even as far back as 1970, when the first freestanding ASC opened in Arizona, or 1974, when the Federated Ambulatory Surgery Association was formed—are not surprised by the shift of care toward ASCs. We just wonder why it took so long. Fortunately, it would appear that the momentum driving the migration is showing no signs of slowing down.
Joan Dentler (jdentler@avanzastrategies.com) is president and CEO of Avanza Healthcare Strategies, which provides healthcare organizations with strategic guidance, with a focus on outpatient services and population health management. For more than 25 years Ms. Dentler has been consulting on, developing or operating ambulatory surgery centers, hospital outpatient services and community health initiatives.