Five ASC leaders joined Becker's to discuss how a potential economic downturn could affect ambulatory healthcare space growth.
Editor's note: These responses were edited lightly for clarity and length.
Anupam Pradhan, MD. Chair of Orthopedic Surgery at Southwest Joint Replacement and Sports Medicine (Dallas): The last few years have been interesting as far as our ambulatory surgery growth. After COVID-19, there was such a pent-up demand for surgery that our centers were busy and schedules were packed. After that initial rush, things got back down to normal. This past year was steady, but probably a little more muted than previous years and years prior to COVID-19.
As far as the economic downturn, I think there's still a lot to be played out. Interest rates were high and began coming down at the end of last year but seem to have stabilized. It'll be interesting to see where they go and how that affects the economy overall. I think the Fed seems to be slowing down on their anti-inflationary policy, and that usually is good for the economy. CMS still drives a lot of the decision-making as to what can get taken to ambulatory surgery. They recently approved shoulder replacement for accepted outpatient procedure codes, and this should help drive more to surgery centers in general. Hopefully we see at least stable to slight growth for ambulatory surgery in general.
David Baskin, MD. Professor of Neurosurgery at Weill Cornell Medical College and Texas A&M Medical School (Houston): There is a lot of economic uncertainty in 2024. We don't know if the economy is going to go up, down or sideways. Assuming there is a downturn, this will, of course, affect all walks of life. The question is whether there will be more emphasis for ambulatory surgery to save cost, in which case we may not see as much of a downturn. On the other hand, ambulatory surgery often is for conditions that are more elective and patients may choose to delay it.
Michael Davis, MD. Professor and Chief of UNM Health Sciences System's Division of Urology (Albuquerque, N.M): An economic downturn will have an impact on the growth of ASCs, although likely not as impactful as was seen in the past three years. While there are challenges imposed by increasing labor costs, administrative expenses and materials, there are also factors that may contribute positively to the growth of ASCs.
Technology advances in revenue cycle management play a critical role in ASC operations. The development of AI in the realm of revenue cycle management could have a positive impact on margins and decrease the costs of labor and administration associated with ASCs and revenue cycle management. Technology will make the revenue cycle management more efficient when it comes to billing and coding, reduce errors and result in faster reimbursements.
Increased costs of labor, administrative expenses and supply are likely to reduce the profitability of ASCs. Despite this, the growth of ASCs is being driven by their increasing role in healthcare delivery. ASCs offer surgical procedures at significantly lower rates compared to hospitals, which is beneficial to payers and patients. Due to this trend, and some procedures that were traditionally hospital based moving into the ASC realm, like robotic surgery, there will be expansion of ASCs into the future. Therefore, the economic downturn will likely have a bigger impact on hospital margins and less so on ASCs, making this a cost-effective alternative for payers in certain areas of surgical care.
As seen by the effect of the COVID-19 pandemic, the economy will adversely impact healthcare revenue in times of a downturn. ASCs will obviously be negatively impacted by the increased costs associated with things like inflation, interest rates, labor, administrative costs and costs of capital. The fact that they provide a less costly alternative than hospital-based surgical care will contribute to their growth into the future and lead to more innovation in an industry that is trying to decrease costs without adversely affecting quality of care.
Eugenio Hernandez, MD. Senior Vice President of Clinical Affairs for Gastro Health (Miami): Most economists do not believe there will be a significant economic downturn in 2024. We share that viewpoint and do not think ambulatory growth will be substantially impacted this year. If anything, a potential economic downturn may soften the labor market and could drive more people back into the workforce.
Shannon Simmons. Program Manager of Ambulatory Infection Prevention & Control for Christus Health (Dallas): Historically, economic crisis has had a major impact on the use of healthcare services due to the documented relationship between employment, healthcare access and health outcomes. However, with the escalation and expansion of ambulatory healthcare facilities patients are choosing outpatient medical care for lower costs, greater accessibility and perceived better patient experiences. Ambulatory healthcare services have been speculated to grow exponentially this year as costs to both patients and payers can be significantly less in this segment of healthcare. For example, ASCs often have lower operating costs than their hospital counterparts primarily due to the reduced expenses associated with fewer staff, less supplies and smaller facilities. This economic opportunity has enticed healthcare systems, who have been known to primarily operate hospitals, to procure partnerships in the ambulatory healthcare space to capitalize on this shift in healthcare services. Healthcare systems buying into the ambulatory healthcare space may contribute to the aggressive growth of ambulatory healthcare facilities in the coming years, as these systems strategize to combat the projected economic downturn.