Geopolitical upheaval, economic trends and more are affecting surgery center operations.
Ten things to know:
1. Inflation is hitting essential goods hard, with overall costs up 7 percent last year. Energy costs jumped 29 percent, and gas prices were up 50 percent. At the same time, physician services costs increased 4.3 percent, and the average physician pay was up 1.5 percent. The steep increase in supplies and energy is gobbling up more ASC budgets, while payer reimbursement growth remains low.
2. Construction backlogs have derailed ASC expansions and new center development, adding time and costs to these projects. The Construction Backlog Indicator showed an eight-month backlog as of January, with the biggest backlogs in the South. The high demand for construction projects, both residential and commercial, also increases prices.
3. There will be supply chain disruptions amid Russia's invasion of Ukraine. Some medical device companies ceased operations in Russia when the conflict began. Supply chain company Premier anticipates the conflict's disruption in crude oil and natural gas production will affect the global supply and pricing of plastics used to make healthcare products, including trays, syringes, sharps containers and more.
4. Oil prices are soaring to their highest rate since 2008 as the United States and Europe consider sanctions against Russia related to the country's invasion of Ukraine. Oil prices exceeded $130 a barrel March 7, according to The Wall Street Journal. The price increase means ASCs will spend more on energy, and gas prices will increase for workers and patients.
5. The global computer chip and semiconductor shortage hit medtech companies that rely on the technology to develop new machines, including CT scanners, telemetry monitors and portable ultrasound machines. Healthcare providers had monthslong delays in receiving the technology, and prices increased to manufacture this capital equipment, already a huge expense for ASCs. Fujifilm told The Wall Street Journal it paid a broker $65 for a part that typically costs $1.49. Without equipment that works, ASCs aren't able to provide the best treatment for patients.
6. Bad weather can easily disrupt an ASC's operating schedule, closing the center for one or more days during a snowstorm or other inclimate weather. Severe weather has forced ASCs to shut their doors for weeks at a time. Several ASCs have temporarily closed in the last year due to snow, hurricanes, electrical outages and more. In 2017, ASC chain Nobilis Health reported revenue dropped 15 percent in one quarter because a hurricane in Houston forced several centers to close operations for an extended period.
7. Target, Walmart, Amazon and other large retailers are raising minimum wages for employees, and healthcare workers are leaving the field for more lucrative roles in other industries. These companies are raising minimum wage to $15 per hour or more, while the national minimum wage remains $7.25. ASCs operate on a tight budget, and some are straining to keep staff wages competitive without being able to charge more for services.
8. The unemployment rate dropped in February to 3.8 percent, according to the U.S. Bureau of Labor Statistics — good news for ASCs. Unemployed people often don't have health insurance and delay or skip needed surgeries and treatments. But if a recession hits, unemployment is likely to rise quickly and plateau for an extended period.
9. Many states are planning to cut income taxes as the pandemic wanes and economic recovery takes hold. Thirteen states are considering income tax cuts this year, and 16 enacted cuts last year, according to The Wall Street Journal. The tax cuts would help ASCs grappling with increased wages and other staffing costs.
10. Medical office property sales declined by 12.7 percent in 2020 during the pandemic, but rebounded last year when COVID-19 closures receded. Investors see medical properties, including ASCs, as great investment opportunities, especially since surgery will never be remote. The price for medical offices increased 3.7 percent during the pandemic, according to a report from CRBE, a commercial real estate services and investment firm. Physicians are selling while the market is hot and making millions. Two New York cardiologists sold their medical office building in early March to an investor for $11.5 million.