Chris Bishop, senior vice president, acquisitions and business development for Blue Chip Surgical Partners, discusses profitability and clinical efficacy of spine in ambulatory surgery centers.
Q: To begin, could you discuss a few factors that make spine profitable for surgery centers?
Chris Bishop: The first thing I would say is that spine is the fastest-growing specialty shifting from the inpatient to the outpatient setting. It's important for surgery centers — not just Blue Chip facilities, but all surgery centers — to think about the 0 percent volume growth for facilities last year and the predicted 0-1 percent growth for this year. I think spine is an area where growth can occur. Our growth this year is up 16 percent in our centers that are one year or older, and I think it's in large part because we've invested the time in recruiting available spine surgeons. All surgery centers should move this specialty to the top of their prospect lists.
One thing to be mindful of with spine is that Medicare does not currently reimburse for spine cases in the ambulatory setting. However, managed care — your United, Aetna, Cigna and Blue Crosses of the world — are beginning to negotiate spine codes to be performed in an ambulatory setting in many states. Managed care is actually telling us that even with these rates for spine that we find reasonable, they're still realizing tremendous savings over what they're seeing at the hospital.
Essentially, as CMS and Congress begin to focus even more on cost reduction, bringing these procedures into ambulatory settings will make even greater economic sense.
Q: What is the cost to adding outpatient spine to a facility?
CB: We estimate around $300,000 or so in equipment for a center that's not currently doing musculoskeletal. Over half of that goes to two pieces of equipment: the C-arm, which costs about $100,000, and a microscope, which is another $100,000. You can end up spending more or less on those items depending on whether they're new or refurbished. If you're already doing pain or orthopedic cases, you most likely have one or two C-arms, so there's a $100,000 expense you don't have to incur. The facilities that are already doing musculoskeletal also have nursing staff that are comfortable with spine cases.
Now that we've identified the required capital investment, the next question is what kind of volume is necessary to make spine feasible. We like to see a minimum of 150 cases added [per year]. If you think that the average spine surgeon is only going to perform about 75 spine cases that are clinically appropriate for the outpatient setting, we can earn an attractive return on investment. That volume may sound lower than most other specialties but you have to remember that average spine reimbursement may amount to three to four times greater than other specialties.
Q: Should centers look to add 150 spine cases in the first year, or is that a number to build to?
CB: It's expensive to add a single surgeon. It's hard to justify a $300,000 investment in equipment for one spine surgeon that does 75 cases, so we try to bring two or three orthopedic spine surgeons and neurosurgeons that end up investing in the center and using the center at the same time. One of the big challenges in approaching spine, historically — and when I say historically, I mean the last three to five years — is that when you've started to see this shift, centers have unilaterally pursued neuro or orthopedic spine. The two specialties are starting to merge in their approaches.
Q: Do you see a reason for that historical divide between the specialties?
CB: It's been more of a philosophical difference. Orthopedists have really been more of a lower-spine-up kind of a approach, while neurosurgeons — because they're brain surgeons as well — tend to have more of a top-down approach. With technology improving, you're beginning to see both specialties merge their approach through minimally invasive techniques.
Q: What are the greatest concerns payors have about moving spine into the ASC setting?
CB: Clinically, it has to be the right fit, and the surgeon and the facility pursuing this have to understand how to perform spine. That's why it's important to have a surgery center that understands the challenges associated with outpatient spine, and a big part of that includes anesthesia. Anesthesia has to understand the risks associated with that kind of patient and to work closely with the spine surgeon in developing the post-operative protocols. When we have an existing ASC contemplating adding spine, we put them in touch with experienced anesthesiologists, spine surgeons and clinical coordinators that have already done this for a number of years. We find a peer-to-peer approach seems to work best.
If I have an anesthesiologist in a facility that's contemplating adding spine, but he doesn't have experience doing spine in an outpatient setting, we put him in touch with a more experienced anesthesiologist. Physicians can discuss what you do to minimize blood loss intraoperatively, what your protocols are to minimize pain and how quickly the patient follows up with the physician back in the office. How many hours postoperatively do you like to see the patient recover for an ACDF procedure or a discectomy? What are your inclusion criteria for the surgery center so you can minimize the prospect of a patient having to transfer to the hospital postoperatively? These are characteristics that are better discussed surgeon to surgeon
Q: How do you transfer that information to payors to convince them of the efficacy of spine in the outpatient setting?
CB: We've been the first surgery center provider in three or four states where we've done constructed spine centers, so we've been the educator with managed care groups as to why outpatient spine is clinically safe. [We've also educated payors] on the cost benefits associated with shifting spine to the outpatient setting. We will often start with the chief medical officers for the managed care group and have our lead spine surgeon discuss the clinical efficacy and safety of outpatient spine. Once we clear that initial clinical holder, contracting folks get pretty interested in what we're talking about from a savings perspective.
These cases tend to be big-ticket items in a hospital setting, and we take a similarly unique approach in that we will take the risk for the implants. Instead of doing a cost-plus-carve-out arrangement, we just bundle the implant into total reimbursement. That puts the responsibility on us to negotiate and it means the payor doesn't have to process two separate invoices.
Q: How do you make sure you don't lose money on those cases without the carve-out for implants?
CB: That's the beauty of the financial incentive for the surgeon. At the hospital, he or she wants to use whatever they trained on — whatever golf course or spine course their vendor took them to most recently. In the surgery center setting, you may have vendor A that charges $5,000 for an ACDF set of implants, while vendor B charges $2,500. All of a sudden, it's the surgeon's money buying those implants. For the first time, he has a financial incentive to negotiate or utilize the less expensive implant system. The vendors may believe there are nuances of each implant system that provide a great benefit, but a good surgeon can often decipher that and figure out from a value perspective the best fit for the patient.
Q: Which spine procedures are currently most appropriate for the ASC? Are there any you see moving into the outpatient space over the next few years?
CB: The most common that seem to work well are discectomies, laminectomies and anterior cervical disc fusions. Those are the three that we find are most common. There are several others that surgeons will perform in the ASC setting, but these three procedures probably comprise more than 50 percent. Discectomies are probably the number one procedure, followed by laminectomies. ACDF tends to be a higher-acuity case, so it depends on physician comfort, but it also has the highest reimbursement if you can negotiate it properly. If you can negotiate your implant system costs and manage those effectively, these procedures can be profitable.
We actually have a couple of partners [who have talked] about disc replacement and larger fusion cases being done minimally invasively. I think you'll begin to see these kinds of procedures get FDA approval and shift to the outpatient setting. Outpatient spine is the fastest growing specialty shifting to the ASC setting. If you think about specialties like ophthalmology, GI and orthopedics, most of their cases have already shifted and are predominantly outpatient specialties now. It's possible that within 5-10 years, greater than 50 percent of spine could be performed in the outpatient setting.
Q: You have mentioned that some payors are more reticent to accept spine in the ASC. Do you think payor acceptance is inevitable several years down the road?
CB: I do think it's inevitable, but it's moving slowly. We recently spoke with the senior executives of a California managed care group, and they don't currently contract with spine for surgery centers — but they are highly interested in understanding how best to approach this opportunity. It's inevitable, and it's just a matter of how quickly it happens. As we see out of network benefits continue to erode, more managed care groups may show interest.
Q: Do you think the same is true for Medicare approval?
CB: Yes. The hospitals will obviously fight it because they would prefer Medicare spine cases continue to be performed in the hospital setting. But as you see widespread acceptance by managed care, there will be more pressure on Medicare to take advantage of cost savings on spine cases. We recently saw this play out with total joints — that was a hospital stand-off for a number of years, and three years ago, they began total joint arthroplasty as a Medicare-approved procedure for surgery centers. It's only a matter of time.
Q: What are the biggest challenges and risks to adding spine to a surgery center?
CB: I think the biggest challenge is insuring that you understand how to perform spine clinically safely. You must make sure you're getting good counsel from experienced surgeons or anesthesiologists or facility operators that have done this before. Don't try to recreate the wheel because it leaves you open to mistakes. Find out from centers or surgeons that have been doing this for a number of years — find out what they've learned. There's no reason to make the mistakes that other surgeons have made. That's the risk you run if you don't do your homework before you add spine.
You also want to make sure you understand the reimbursement piece. You could go and invest $300,000 and find out that your managed care group in your state or market will not reimburse for spine care. We bought some surgery centers that had spine codes included, but they were $1,000, so those facilities were going to lose substantial sums of money. You really need to understand the reimbursement picture before you can justify adding spine. You don't want to invest $300,000 in equipment and start getting spine surgeons eager and then find out you won't get paid for it.
Research the out of network environment as it relates to spine in your market. If it is attractive, you have a financial basis to begin, while working with managed care to identify a fair reimbursement methodology where the healthcare system benefits from the lower-cost ASC setting.
Learn more about Blue Chip Surgical Center Partners.
Related Articles on Spine:
Surgery Center Coding Guidance: Posterior Laminectomy or Laminotomy
Study: Spinal Manipulation Provides Little Improvement in Chronic Back Pain
Study: Lyrica Pain Drug From Pfizer Effective for Spinal Pain
Q: To begin, could you discuss a few factors that make spine profitable for surgery centers?
Chris Bishop: The first thing I would say is that spine is the fastest-growing specialty shifting from the inpatient to the outpatient setting. It's important for surgery centers — not just Blue Chip facilities, but all surgery centers — to think about the 0 percent volume growth for facilities last year and the predicted 0-1 percent growth for this year. I think spine is an area where growth can occur. Our growth this year is up 16 percent in our centers that are one year or older, and I think it's in large part because we've invested the time in recruiting available spine surgeons. All surgery centers should move this specialty to the top of their prospect lists.
One thing to be mindful of with spine is that Medicare does not currently reimburse for spine cases in the ambulatory setting. However, managed care — your United, Aetna, Cigna and Blue Crosses of the world — are beginning to negotiate spine codes to be performed in an ambulatory setting in many states. Managed care is actually telling us that even with these rates for spine that we find reasonable, they're still realizing tremendous savings over what they're seeing at the hospital.
Essentially, as CMS and Congress begin to focus even more on cost reduction, bringing these procedures into ambulatory settings will make even greater economic sense.
Q: What is the cost to adding outpatient spine to a facility?
CB: We estimate around $300,000 or so in equipment for a center that's not currently doing musculoskeletal. Over half of that goes to two pieces of equipment: the C-arm, which costs about $100,000, and a microscope, which is another $100,000. You can end up spending more or less on those items depending on whether they're new or refurbished. If you're already doing pain or orthopedic cases, you most likely have one or two C-arms, so there's a $100,000 expense you don't have to incur. The facilities that are already doing musculoskeletal also have nursing staff that are comfortable with spine cases.
Now that we've identified the required capital investment, the next question is what kind of volume is necessary to make spine feasible. We like to see a minimum of 150 cases added [per year]. If you think that the average spine surgeon is only going to perform about 75 spine cases that are clinically appropriate for the outpatient setting, we can earn an attractive return on investment. That volume may sound lower than most other specialties but you have to remember that average spine reimbursement may amount to three to four times greater than other specialties.
Q: Should centers look to add 150 spine cases in the first year, or is that a number to build to?
CB: It's expensive to add a single surgeon. It's hard to justify a $300,000 investment in equipment for one spine surgeon that does 75 cases, so we try to bring two or three orthopedic spine surgeons and neurosurgeons that end up investing in the center and using the center at the same time. One of the big challenges in approaching spine, historically — and when I say historically, I mean the last three to five years — is that when you've started to see this shift, centers have unilaterally pursued neuro or orthopedic spine. The two specialties are starting to merge in their approaches.
Q: Do you see a reason for that historical divide between the specialties?
CB: It's been more of a philosophical difference. Orthopedists have really been more of a lower-spine-up kind of a approach, while neurosurgeons — because they're brain surgeons as well — tend to have more of a top-down approach. With technology improving, you're beginning to see both specialties merge their approach through minimally invasive techniques.
Q: What are the greatest concerns payors have about moving spine into the ASC setting?
CB: Clinically, it has to be the right fit, and the surgeon and the facility pursuing this have to understand how to perform spine. That's why it's important to have a surgery center that understands the challenges associated with outpatient spine, and a big part of that includes anesthesia. Anesthesia has to understand the risks associated with that kind of patient and to work closely with the spine surgeon in developing the post-operative protocols. When we have an existing ASC contemplating adding spine, we put them in touch with experienced anesthesiologists, spine surgeons and clinical coordinators that have already done this for a number of years. We find a peer-to-peer approach seems to work best.
If I have an anesthesiologist in a facility that's contemplating adding spine, but he doesn't have experience doing spine in an outpatient setting, we put him in touch with a more experienced anesthesiologist. Physicians can discuss what you do to minimize blood loss intraoperatively, what your protocols are to minimize pain and how quickly the patient follows up with the physician back in the office. How many hours postoperatively do you like to see the patient recover for an ACDF procedure or a discectomy? What are your inclusion criteria for the surgery center so you can minimize the prospect of a patient having to transfer to the hospital postoperatively? These are characteristics that are better discussed surgeon to surgeon
Q: How do you transfer that information to payors to convince them of the efficacy of spine in the outpatient setting?
CB: We've been the first surgery center provider in three or four states where we've done constructed spine centers, so we've been the educator with managed care groups as to why outpatient spine is clinically safe. [We've also educated payors] on the cost benefits associated with shifting spine to the outpatient setting. We will often start with the chief medical officers for the managed care group and have our lead spine surgeon discuss the clinical efficacy and safety of outpatient spine. Once we clear that initial clinical holder, contracting folks get pretty interested in what we're talking about from a savings perspective.
These cases tend to be big-ticket items in a hospital setting, and we take a similarly unique approach in that we will take the risk for the implants. Instead of doing a cost-plus-carve-out arrangement, we just bundle the implant into total reimbursement. That puts the responsibility on us to negotiate and it means the payor doesn't have to process two separate invoices.
Q: How do you make sure you don't lose money on those cases without the carve-out for implants?
CB: That's the beauty of the financial incentive for the surgeon. At the hospital, he or she wants to use whatever they trained on — whatever golf course or spine course their vendor took them to most recently. In the surgery center setting, you may have vendor A that charges $5,000 for an ACDF set of implants, while vendor B charges $2,500. All of a sudden, it's the surgeon's money buying those implants. For the first time, he has a financial incentive to negotiate or utilize the less expensive implant system. The vendors may believe there are nuances of each implant system that provide a great benefit, but a good surgeon can often decipher that and figure out from a value perspective the best fit for the patient.
Q: Which spine procedures are currently most appropriate for the ASC? Are there any you see moving into the outpatient space over the next few years?
CB: The most common that seem to work well are discectomies, laminectomies and anterior cervical disc fusions. Those are the three that we find are most common. There are several others that surgeons will perform in the ASC setting, but these three procedures probably comprise more than 50 percent. Discectomies are probably the number one procedure, followed by laminectomies. ACDF tends to be a higher-acuity case, so it depends on physician comfort, but it also has the highest reimbursement if you can negotiate it properly. If you can negotiate your implant system costs and manage those effectively, these procedures can be profitable.
We actually have a couple of partners [who have talked] about disc replacement and larger fusion cases being done minimally invasively. I think you'll begin to see these kinds of procedures get FDA approval and shift to the outpatient setting. Outpatient spine is the fastest growing specialty shifting to the ASC setting. If you think about specialties like ophthalmology, GI and orthopedics, most of their cases have already shifted and are predominantly outpatient specialties now. It's possible that within 5-10 years, greater than 50 percent of spine could be performed in the outpatient setting.
Q: You have mentioned that some payors are more reticent to accept spine in the ASC. Do you think payor acceptance is inevitable several years down the road?
CB: I do think it's inevitable, but it's moving slowly. We recently spoke with the senior executives of a California managed care group, and they don't currently contract with spine for surgery centers — but they are highly interested in understanding how best to approach this opportunity. It's inevitable, and it's just a matter of how quickly it happens. As we see out of network benefits continue to erode, more managed care groups may show interest.
Q: Do you think the same is true for Medicare approval?
CB: Yes. The hospitals will obviously fight it because they would prefer Medicare spine cases continue to be performed in the hospital setting. But as you see widespread acceptance by managed care, there will be more pressure on Medicare to take advantage of cost savings on spine cases. We recently saw this play out with total joints — that was a hospital stand-off for a number of years, and three years ago, they began total joint arthroplasty as a Medicare-approved procedure for surgery centers. It's only a matter of time.
Q: What are the biggest challenges and risks to adding spine to a surgery center?
CB: I think the biggest challenge is insuring that you understand how to perform spine clinically safely. You must make sure you're getting good counsel from experienced surgeons or anesthesiologists or facility operators that have done this before. Don't try to recreate the wheel because it leaves you open to mistakes. Find out from centers or surgeons that have been doing this for a number of years — find out what they've learned. There's no reason to make the mistakes that other surgeons have made. That's the risk you run if you don't do your homework before you add spine.
You also want to make sure you understand the reimbursement piece. You could go and invest $300,000 and find out that your managed care group in your state or market will not reimburse for spine care. We bought some surgery centers that had spine codes included, but they were $1,000, so those facilities were going to lose substantial sums of money. You really need to understand the reimbursement picture before you can justify adding spine. You don't want to invest $300,000 in equipment and start getting spine surgeons eager and then find out you won't get paid for it.
Research the out of network environment as it relates to spine in your market. If it is attractive, you have a financial basis to begin, while working with managed care to identify a fair reimbursement methodology where the healthcare system benefits from the lower-cost ASC setting.
Learn more about Blue Chip Surgical Center Partners.
Related Articles on Spine:
Surgery Center Coding Guidance: Posterior Laminectomy or Laminotomy
Study: Spinal Manipulation Provides Little Improvement in Chronic Back Pain
Study: Lyrica Pain Drug From Pfizer Effective for Spinal Pain