Nine ASC leaders joined Becker's to discuss the financial issues pressuring ASCs.
Question: What financial pressures or reimbursement challenges are most concerning for ASCs right now?
Editor's note: This response was edited lightly for clarity and length.
Traci Albers. CEO of Surgical Management Professionals (Sioux Falls, S.D.): There are many financial pressures affecting ASCs. I will address the most pressing ones related to:
1. Expenses: While supplies and staffing have always been the top two expenses, the rate at which they are increasing has accelerated. In addition, anesthesia is now a cost for many ASCs that previously did not have to subsidize their providers. While the impact of increased staffing costs varies by region, shortages with surgical techs and radiology staff, for example, are pushing salary costs upward. Since COVID-19, supply and pharmaceutical costs have grown more rapidly than reimbursement, and I do not foresee that changing soon. Lastly, with increasing anesthesia shortages, increasing salaries, and stagnant reimbursement, ASCs are now subsidizing anesthesia.
2. Reimbursement: It also concerns me that commercial payers, in some markets, are not providing adequate reimbursement to keep up with these increased expenses. There is a disconnect between what benefits patients and payers (i.e., having procedures performed in a lower-cost setting like an ASC) and reimbursing us fairly to cover our costs and maintain a margin. It is also becoming more challenging to have any impact in payer negotiations. Unless an ASC is affiliated with a health system or larger management company, it makes it very challenging to work with payers to achieve reasonable reimbursement.
3. Physician recruitment and retention: Lastly, I am concerned with increasing physician employment deterring adequate succession plans for retiring ASC physicians. This poses several challenges. The first is replacing those volumes when a physician retires. Second, if there are no new volumes to replace retiring physicians, the buyout of those retiring physicians can be challenging unless an ASC has planned accordingly.
Jennifer Boese. Director of Healthcare Policy at CliftonLarsonAllen:
- Demographics: More of the population aging into Medicare could cause reimbursement pressures as these patients will move from commercial plans to Medicare.
- Margin compression: Reimbursements are always an issue, especially since physicians will see a Medicare payment cut (unless Congress steps in) come January 2025.
- Declining reimbursements coupled with higher expenses leads to margin pressures.
Due to the cost of healthcare, patients may elect to forego or delay elective procedures. - Joint ventures could occur, as independent ASCs could look to reduce their risk by taking on a JV partner.
- Ongoing consolidation and transactions in the ASC space, including larger ASC groups and private equity, could be an outgrowth.
Will Brancamp. ASC Administratory of Infirmary Health System. Overall costs have risen and sometimes doubled in some areas since 2020, post COVID -19. This includes material and supply costs. Additionally, staffing growth in clinical positions has created a supply/demand situation with salaries. The increase in anesthesia services needed is also sometimes leading to stipends or decreased number of anesthesia staff.
Debbie Cooner. Administrator and CEO of OSE Surgery Center (Birmingham, Ala.): A significant financial challenge facing ASCs today is the increasing requirement to provide substantial anesthesia stipends — expenses that were not typically incurred in the past. With stagnant, slow-moving or declining reimbursements, coupled with rising supply and staffing costs, there is little financial flexibility to accommodate these stipends while maintaining sufficient profitability to offer distributions that attract and retain physician partners. As a result, profit margins are experiencing a noticeable decline.
Vance Chunn. CEO of Cardiology Associates (Mobile, Ala.): Some of the financial issues or pressures impacting ASCs currently are reimbursement issues, rising costs, anesthesia coverage issues, contracting issues, and revenue cycle management. Additionally, capital investment and technology costs are adding to the challenges.
Reimbursement for procedures in ASCs is still developing. Some procedure reimbursements are well defined, but there are still considerable fluctuations and differences in the reimbursement for orthopedic and cardiac procedures among payers. The price points for many of these procedures are not stable. Rising supply costs with recent inflation challenges continue to test ASC operations.
Anesthesia coverage issues are significant in the ASC setting. There is a considerable shortage of anesthesiologists and certified registered nurse anesthetists, which is impacting scheduling and procedure volumes within hospitals and ASCs. Contracting issues and revenue cycle management also stress smooth operations in the ASC environment. Payers are still working out reimbursement for ASC procedures in orthopedics and cardiology.
Revenue cycle management for ASCs can also be a challenge with the disorder that exists among payers. ASC management companies and hospital-owned ASCs may have an advantage over ASCs owned by smaller organizations that may not have the bandwidth to excel at revenue cycle performance. With high interest rates, capital acquisition can also be challenging. Adding to that, the rapidly increasing cost of new technology makes the financial aspect of developing ASCs even more difficult.
Daniel Hatef, MD. Plastic Surgeon in Nashville, Tenn. Inflation has increased our costs of goods tremendously, and that is only going to continue. Although plastic surgeons are at an advantage because we can pass these costs along to patients instead of dealing with decreased reimbursements from insurance companies, that can only continue for so long. Coming together as multi-site mini-ASC MSOs will help defray this increase and allow us to operate more efficiently.
Leasa Hermanson, RN. Administrator of Ambulatory Care Center (Vineland, N.J.): The financial pressure to keep our doors open with decreased reimbursement and increasing costs — especially anesthesia — is on everyone's mind. The shift of payers to the Medicare fee structure, and the difficulties negotiating carve-outs or implant coverage, makes case-costing paramount. Margins are tight, and everyone from the front office to the scrub tech needs to be aware of the importance of efficiency and optimizing resources.
Carina Topf, RN. Director of Nursing at the Riverview Surgical Center (Sioux City, Iowa): The increase in cost of supplies, equipment and service contracts.
Kathy Weihman. Administrator of Genesis Surgery Center (Fowlerville, Mich.): I would say low reimbursements combined with higher costs and lack of supplies is the biggest pressure on most ASCs. It is so frustrating that hospital outpatient departments can get better reimbursement for the same procedures done by the same physicians with the same quality of care, but the independent ASC receives less reimbursement than the HOPD. This does not seem fair, but that is what healthcare has become. I am sure you are hearing these same things from many ASC administrators. We all just want to take great care of our patients but also receive the payments we deserve for that care.