Steve Sheppard, CPA, COE, is managing principal for real estate and operations at Medical Consulting Group in Springfield, Mo.
Q: In the past 4-6 months, you have seen growing interest in developing de novo surgery centers. Where is the growth?
Steve Sheppard: In the past four months, we've been engaged by 3-4 new clients for de novo work. These projects are eye centers and multispecialty centers. In addition, we have an orthopedic and a gastroenterology center on the drawing boards. These projects are all over the country, from Virginia to Hawaii. In comparison, 2009 and 2010 were very slow for our ASC development group. To compensate, we increased our involvement in center management and billing and collection services at that time.
Q: Why is the de novo market heating up?
SS: It's been a matter of pent up demand and growing confidence in the ASC market. A number of projects have been in the pipeline for quite some time and potential investors have decided to move forward and develop new centers. In the past year, there has been some clarity in the marketplace. It turned out that ASCs were not really impacted by the healthcare reform legislation. The sky wasn't going to fall on ASCs, and people who had been deferring projects could push forward with them.
Q: Are there any long-term factors behind growth of ASC volume?
SS: A bigger percentage of cases can now be brought into the ASC. More and more procedures are migrating into surgery centers. In addition to spine, there are more endoscopic procedures and greater numbers of outpatient cases in specialties like gynecology, general surgery and urology. Not so long ago, laparoscopic cholecystectomies were not yet approved Medicare outpatient procedures. In otolaryngology, endoscopic sinus surgery is migrating into the ASC. In podiatry, we're now starting to see more complicated endoscopic ankle surgeries done in surgery centers.
Q: What role has technology played in this growth?
SS: Technology has progressed. In ophthalmology, for example, the femtosecond laser is being introduced for cataract surgery. The major hurdle is reimbursement. You currently can't get paid for it, except on a very limited basis. Medicare, which is the primary payor for 65-75 percent of all cataract surgeries, won't pay any additional amount for femtosecond cataract procedures. I believe the marketplace will find a way to absorb the femtosecond laser, though it's hard to figure out how it would work.
Q: Do accountable care organizations play any role in this new growth?
SS: I don't think so. ACOs are an unknown. My personal opinion is that growth of ACOs is going to be slow. The regulations are so complex that it will be difficult to put these organizations together. To me, ACOs look like a capitated plan that has been loaded up with lots of regulations. The government is taking a model that failed 20 years ago and making it even more difficult to execute.
Q: Do specialties have a role in ACOs?
SS: ACOs appear to be principally directed toward primary care and may almost ignore specialty medicine. Of all the surgical specialties, it strikes me that eye care is the most problematic for ACOs. If you include eyeglasses and contact lenses, eye care is a huge business that would be hard to fit it into an ACO. There are so many delivery points for eye care services –– not just in ophthalmology, but also optometry and commercial eyeglass shops.
Q: How could ongoing efforts to reduce the federal deficit affect ASCs?
SS: What they are going to do in Washington involves a great deal of speculation at this point. If they decide to lock healthcare into a certain percentage of GDP, it would be silly, because healthcare spending is going to grow. The baby boomers are a very difficult, demanding bunch of people. They're not going to sit idly by and let the quality and availability of healthcare be diminished, just because some folks in Washington say we're only going to be spending a certain percentage of the GDP on healthcare.
My personal opinion is that the federal government isn't asking the right questions about healthcare. The planning horizon of people in Washington is something like 12-15 months. They are not looking out at the horizon. Of the deficit reduction proposals for healthcare spending currently being considered, I don't see one that is going to work in the long run. We have to reform Medicare. Right now, it is a universally applied entitlement, no matter what your income or health status is.
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