Certificate-of-need laws require healthcare systems or providers to receive special approval from the state before expanding or building a new facility, and they vary by state.
Some healthcare leaders, and many in the ASC space, claim that these laws make it challenging for new, smaller providers to open their doors by imposing burdensome approval processes that favor larger providers.
This is one of many factors that often prompt ASC owners to partner with hospitals or larger health systems in order to open a new practice, as these partnerships can ease the CON approval process. These partnerships can also allow ASCs to gain better leverage in negotiations with payers and can prevent opposition from other potential competitors.
Hospitals and health systems are increasingly interested in ASC joint ventures. One survey from VMG Health found that 60% of health systems would consider a joint venture partnership with an ASC. And in 2023, 48% of hospitals had at least one ASC, according to Avanza Strategies' 2023 "Avanza Intelligence Hospital Leadership ASC Survey."
While these arrangements may help new ASCs work around CON denials, some have observed continued challenges in these partnerships down the line.
"I have seen certain hospital systems restrict their HMO patients from going to the ASC, even though they are part owners, to keep all the money in house. When hospital HMOs restrict patients to the hospital for surgery, costs increase for the patients," Patrick McEneaney, DPM, and CEO of Northern Illinois Foot and Ankle Specialists in Crystal Lake, Ill., told Becker's.
Illinois has CON laws and approvals can be "hard to come by," in the state, said Dr. McEneaney.
"You would think that because the hospital is a part owner, that you'd have access to their patients [and] their HMOs," he continued. "Depending on where you're at and which hospital you connect with, that's not always the case."
Health systems may choose to restrict their HMO patients within their own networks, even if the cost of the procedure may be lower for a patient if performed in the ASC. For example, cataract removal, a common outpatient procedure, has a $1,368 ASC facility and physician fee, compared to a $2,198 fee for HOPDs.
A July 2023 study by Rand Corp. also found that most physicians working in vertically integrated hospitals or health systems were 65% less likely to use ASCs for procedures, compared to physicians who were never a part of a vertically integrated system.
"Hospitals will restrict people who have HMOs to not be able to go to a surgery center that they may own, because they want to keep everything at the hospital and at hospital rates," Dr. McEneaney said. "Where it's better for the system and it's better for the patients to potentially be at a surgery center rate, that may not be allowed with the plan that they're in."
While many hospitals and health systems have formed productive and collaborative relationships with ASCs, there can still be tensions in competitive markets.
"Competitors, like hospitals, are on edge. They're in a definite defense position and employ tactics that are oftentimes anti-business, anti-competitive and keep the ASC industry from reaching its full potential," Shakeel Ahmed, MD, CEO of Atlas Surgical Group in St. Louis, told Becker's.
He said that in many markets, this can lead to hospital leaders opposing CON applications for ASCs.
"ASCs are at the short end of the stick for the certificate-of-need business, because you have to go to the state to apply for one," he continued. "In Illinois, not only do you need to get approval to open an ASC, but you also have to obtain approval for each additional specialty. Oftentimes the hospital will bring in the cavalry to oppose you. The hospitals own all the healthcare enterprises around them, and you will frequently see them show up with 30 to 40 letters of opposition."