Jeremy Hogue, CEO of Sovereign Healthcare in Orange County, Calif., lists the four biggest challenges for ambulatory surgery centers and what can be done to address each one.
1. Bad economy. "The economy is still very much in recession, with high unemployment, lower incomes and lots of uncertainty," Mr. Hogue says. "That influences how patients behave." Many have lost their insurance, and those who still have coverage are putting off physician appointments. They may not feel they have the money for the copayment, or they may not want to take off from work.
"They often think of outpatient surgery as more elective than their physicians do," he says. The undeniable result is that patient volumes are down nationally and in almost every region of the country. "Some doctors are as busy as ever, but the great majority have lower volumes," Mr. Hogue says. "We don't see this changing in any meaningful way until the economy turns around, which is going to take some time, unfortunately."
What can be done: The answer is to make decisions as if current conditions are the new normal, rather than viewing them as a short-term slump, Mr. Hogue says. Make basic changes in ASC operations, such as restructuring the staff. Consider opening the center four days a week instead of five. Consolidate with another centers to maximize efficiencies. "There will be centers that can't make it, and they will be merged into other centers," Mr. Hogue says. But even with all this contraction, do not lose sight of opportunities to grow, such as recruiting new physicians.
2. Changes in health plan benefit design. Another trend throttling utilization is the growing number of insurance policies that have very high deductibles, in the range of $5,000. This forces some patients to live with conditions they would have sought care for if the charges were covered.
"The patient with a very high deductible has become the equivalent of a cash-pay patient," Mr. Hogue says. The out-of-pocket amount the high-deductible patient pays may be at or near the full cost of many ASC procedures. The trend to high deductibles spells trouble for surgery centers, because it is more difficult to collect from a patient than from an insurer. "The center's relationship with patients changes when they are paying virtually the entire bill," he says. Since ASC patients usually aren't repeat customers and have no particular loyalty to the center, it becomes very difficult to collect the bill after surgery.
What can be done: "We try our best to work with patients, " Mr. Hogue says. "After all, it's not as if they can get a better deal somewhere else." When large amounts are due, it is important to collect the patient's entire responsibility up front. "When they say they can't pay up front," he asks, "do you really think it's going to be any easier 30 days or 60 days from now?"
3. More limited out-of-network benefits. Out-of-network arrangements are fading away in many parts of the country. Because in-network payments are generally much lower, centers hope to make up for their losses with higher in-network volume. In the old days, if that proved to be money-losing, the center could always move back out-of-network, but as that option disappears, the center's leverage with payors also disappears. Centers can no longer walk away from unfavorable terms. Payors know this and have become more insistent on lower rates. "As out-of-network goes away, plans are doing all they can to keep rates low," Mr. Hogue says.
What can be done: Out-of-network is still an option in many markets, and even when it is not, centers can find new opportunities for leverage. "The challenge is to develop a keen understanding of your market," Mr. Hogue says. "Find ways to create leverage with your doctors, develop alignment strategies and look for other opportunities."
4. The return of gatekeepers. The independent practice associations of California, which take insurance risk from payors, could be a preview of how accountable care organizations and similar payment arrangements will impact ASCs. From his base in Orange County, Mr. Hogue has a great deal of experience with California IPAs, which have been taking on risk for many years and are now growing in influence.
IPAs impact ASCs in two ways. Primary care physicians in these organizations can act as gatekeepers to control ASC utilization, and the IPAs themselves can negotiate low rates with ASCs. "The combination of the two is a big deal," Mr. Hogue says. Fewer referrals and lower rates could threaten the ability of many ASCs to remain profitable, especially where these organizations have a large market share.
What can be done: The answer is to be proactive. Every market has its own dynamics that will dictate a center's strategy. Identify potential leverage points with IPAs and other organizations and use them. For example, "we have doctors in our centers that are key participants in these organizations," Mr. Hogue says. "We use their strength and that of the ASC to make a compelling argument that we need to be reimbursed fairly." Also, ASCs that align closely with one of these organizations may be able to add more physicians and expand volume. "That could turn the dynamic into a win," he says.
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