EndoEconomics: Ask the Experts - A Question and Answer Editorial on Issues Related to ASCs

The following question and answer editorial appeared in EndoEconomics, a journal published by Physicians Endoscopy. Participants in the Q&A are William Thompson of Hall Render Killian Heath and Lyman; Scott Becker and Jessica Smith of McGuireWoods; and Craig Jeffries.

Q: What are the primary changes the Obama administration seeks for u.s. healthcare in the coming years, including potential timing and the odds of passage?

Thompson: During the presidential campaign, one of Sen. Obama's priorities was healthcare reform. Obama's reform includes expanding access to coverage, cost containment, and improving quality and performance. His plan also has a greater focus on modernizing the healthcare industry through use of information technology. He likely will extend insurance to all children and require employers, with the exclusion of small employers, to offer coverage or contribute an amount to a public plan — a so-called "play or pay" system. President Obama's plan is designed to strengthen employer coverage, make insurance companies accountable and ensure patient choice of doctor and care without government interference. It is likely that healthcare providers, including ASCs, will experience more patients accessing their services and experience less uncompensated care; however, increased competition and cost pressures could translate into lower reimbursement rates for all providers. Health care reform could be considered and initially paid for under the economic stimulus package. It may be the right year for healthcare reform to pass in 2009. I would place it at slightly better than 50 percent likelihood to pass.

Becker and Smith: Passing universal healthcare coverage legislation will be likely the initial and primary effort of the new administration. One method of attaining universal healthcare coverage is through a single payor system. Passage of single payor universal healthcare coverage poses the greatest risk to the current healthcare landscape. It is unlikely, however, that the new administration will be able to gain sufficient Congressional and public support for a true single payor concept. It is more probable that we will see either passage of a push for a universal healthcare coverage program that does not involve a single payor concept. Chances are reasonably high that the new administration will successfully push for universal healthcare coverage of some type – for example, along the lines of Massachusetts' program. The Obama administration will also, on a longer term basis, evaluate methods of reigning in the overall cost of healthcare as a percentage of the gross national product. Medicare and the Social Security system are the programs that pose the most acute cost-related problems. Implementing significant changes to these two programs poses a political challenge, however. Historically, Congressional support wanes for such reform when specific legislation is under consideration due to pressure from constituents. Seniors, healthcare providers, and a wide variety of other interest groups have active coalitions that lobby against reductions in benefits and/or reimbursement. Therefore, the ability of the Obama administration to achieve sweeping reform in this area is not certain.

Jeffries: It is pretty clear that the primary objective is to assure access to high quality healthcare to everyone in America. This will address the uninsured and underinsured. Their current vision favors a plan that strengthens employer coverage; makes insurance companies accountable; ensures patient choice of doctor and care without government interference; builds on the existing healthcare system; and uses existing providers, doctors, and plans. They want patients to be able to make healthcare decisions with their doctors, instead of being blocked by insurance company bureaucrats. While there is a strong desire to move quickly to define broad changes that can be implemented, the reality of our economic situation and the need to have Congress in agreement will make the process unfold in starts and stops throughout 2009. Legislation will be enacted early this year to expand SCHIP and to address physician payment under Medicare. Anyone interested in more details should visit the Obama Web site: http://change.gov/agenda/health_care_agenda/

Q: Is Tom Daschle friend or foe of the ASC community?

Thompson: Sen. Daschle is a friend of healthcare reform and likely ASCs. His nomination as Secretary of HHS reinforces President Obama's interest in healthcare reform. Sen. Daschle favors an efficient, technology based system which is a key component of ASCs. Daschle's book, Critical: What Can We Do About The Healthcare Crisis, calls for bold and comprehensive reform aimed at creating more efficient and effective delivery of care. On balance, I would consider Sen. Daschle a friend of the ASC community.

Becker and Smith: Tom Daschle cannot be characterized as either a friend or foe of the ASC community at this time. He can, however, be fairly characterized as an enemy of physician-owned hospitals.

Jeffries: The simple answer is that Tom Daschle opposes physician ownership because, in his view, it results in increased patient volumes for surgery. A recent report by McKinsey identified fee for service reimbursement as an underlying problem causing increased volumes as well. That having been said, if you closely examine the direction Daschle wants healthcare change to go in as it relates to surgery and procedures, ambulatory surgery centers (including endoscopy centers) are a terrific model. They are high quality, are patient preferred with high satisfaction, have efficient structure and systems, lower costs passed on to the government and the consumer, and have a high level of access to Medicare beneficiaries.

Q: With all the massive government funding for bailouts recently, do you foresee potential unscheduled near term cuts in physician professional fees or ASC facility fees as a measure to save the government money?

Thompson: Yes, government funding for rescue plans will affect all levels of governmental expenditures, including healthcare. Again, the details are unknown but modifying professional and facility fees most likely will be on the table. Potential cuts or flatlining could be considered for either rescue or health reform discussions. Given that one goal of Obama's health reform initiative is to ensure coverage for a greater number of patients, it is likely that hospitals, physicians, ASCs, and other providers will be paid less in the long term. Both quality and efficiency will be important to ASCs' payment structures, and it is likely reimbursement will be tied to certain quality and/or outcome measures.

Becker and Smith: We do not believe that near-term cuts are likely. However, in the long run, some type of reimbursement reduction is likely. As discussed earlier, Medicare costs consume a rapidly increasing portion of the overall federal budget. A balanced budget and reduction in our federal deficit will likely not be possible without some type of reform.

Jeffries: The highest priorities for legislation in 2009 that are broadly supported by the Obama administration and the Congress include a replacement of the current Medicare physician payment method with a more stable system that does not require congressional rescues every few years. The goal of the new payment system will be to bring year-to-year stability in predicting Medicare prices for physician services with a likely heavy dose of payment incentives for reporting quality data to CMS and for utilizing electronic health records. Congress is unlikely to tinker with the CMS implementation of the ASC payment system during the last two years of transition to the new payment system. However, they may act on recommendations related to inflation increases. The MedPAC is actively considering a recommendation to Congress to reduce the annual ASC payment inflation increase. Variations under consideration include less than a full increase in the inflation rate, or providing the increase only if certain actions are taken by the ASC – submitting a cost report, spending money on electronic health record technology, and further quality reporting ideas.

Q: Do you foresee any major changes to ASC regulations occurring in 2009?

Thompson: Under the Medicare Improvements for Patients and Providers Act (2008), CMS is studying a change in payment systems to value based purchasing for all physician and professional services. It aligns payment more directly to the quality and efficiency of care rather than on a per unit basis and will affect professional fees. Commercial payers also are implementing "pay for performance" reimbursement plans. Such plans likely will be extended to the ASC setting. Other than reimbursement changes, I do not foresee any sweeping regulatory changes that will adversely affect ASCs.

Becker and Smith: We do not.

Jeffries: New Medicare conditions for coverage for ambulatory surgery centers will become effective May 18, 2009. This is the first major change in these Medicare rules since 1982 and has a number of potentially disruptive challenges. The ASC Association and AORN have a number of resources that detail these changes. At the state level, 2009 will continue the trend in many states that are looking at new requirements to report quality and financial data to the state, including "never events" and infection. Other changes worth tracking at the state level are changes in workers compensation payment, certificate of need, and restrictions on physician ownership.

Q: Who are the key ASC-friendly congressional members that deserve support from the ASC community?

Thompson: Generally speaking, House and Senate Republicans are less likely to impose additional regulations on the healthcare industry, including any additional regulations that would affect physician ownership of ASCs. Senate Finance Committee Chairman Max Baucus (D-Mont) and Senate Finance Committee ranking minority member Chuck Grassley (R-Iowa) are key leaders in the Senate of healthcare reform. House Ways and Means Health Subcommittee Chairman Fortney Pete Stark (D-Calif) is a leader of reform in the House. Representative Jim McCrery (R-LA) and Representative Joe Barton (R-TX) recently supported the Ambulatory Surgery Center Association's efforts to head off CMS' proposal to redefine "ambulatory surgery center" in a way that would have prohibited the provision of any overnight recovery care in Medicare-certified ASCs, even for non-Medicare patients. Sen. Mike Crapo (R-Idaho) has supported higher payments for ASCs. Most importantly, individuals associated with ASCs should take the time to educate their political representatives as to the key role ASCs play in the delivery system and the political and regulatory issues they face.

Becker and Smith: The Ambulatory Surgical Foundation and the Ambulatory Surgery Association are two great resources for determining which Congressional members deserve support from the ASC community. Please call (703) 836-8808 to discuss this question.

Jeffries: ASC friendly members of Congress do not materialize out of thin air. Like the development of your ASC and the recruitment of physician owners this is a result of hard work with thought and planning. Earning the attention of your U.S. Senators and U.S. Representative does not require your full attention. But a few hours a month and possibly a little help from your friends go a long way toward developing and maintaining a friend in Congress. Moreover, the ASC industry needs more ASC friendly members of Congress to understand the value of physician owned high value centers. An important part of the consulting I have been doing in 2008 is related to strengthening the ability of physician owners and their management company partners to effectively develop ASC friendly members of Congress.

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Mr. Thompson is president and managing partner of Hall, Render, Killian, Heath & Lyman. He concentrates his practice on financial relationships among healthcare providers, including hospitals, physicians, and health systems. He provides advice and counsel on a national basis regarding mergers and acquisitions, joint ventures, reimbursement issues, and network integration. Bill also counsels clients on a number of state and federal healthcare regulatory matters, including fraud and abuse, the Stark Law, antitrust, tax-exempt, and compliance issues. He has been named in "The Best Lawyers in America" under the Health Care Section for ten years running. He has become a counselor and confidant of hospital CEOs and physician leaders across the country, frequently speaks on topics dealing with healthcare issues, and has authored a variety of articles on health law topics. You can contact Mr. Thompson at bthompson@hallrender.com.

Mr. Becker is co-chairman of McGuireWoods' Health Care Department. He practices exclusively in the healthcare regulatory and transactional area. He devotes his efforts to surgery center, hospital and healthcare provider related transactions, joint ventures, securities, contracting and regulatory matters. He provides counsel to hospitals, ambulatory surgery centers, surgical hospitals, pharmaceutical companies, multi- and single-specialty medical practices, and a wide variety of healthcare industry entrepreneurs. He provides service on a national basis to privately held and publicly traded companies relating to healthcare transactional and regulatory matters, including counsel under the Medicare/Medicaid Fraud and Abuse Statute, the Stark Act, and the Internal Revenue Code Sections 501(c) (3) and c (9).During the past several years, Mr. Becker has devoted a substantial majority of his time and efforts related to ambulatory surgery centers and to hospitals and health systems. His efforts have included structuring ambulatory surgery center joint ventures; providing legal opinions regarding the 501(c)3, fraud and abuse statute, self-referral and Stark implications of surgery center business and physician relationships; drafting and implementing private placements and joint ventures of surgical centers; procuring Certificate of Need determinations; reviewing reimbursement related issues; reviewing antitrust issues; negotiating business contracts; drafting and implementing compliance plans; negotiating private equity investments; and providing advice and counsel on a broad range of business and legal issues. He also has worked with magnetic resonance and other imaging facilities, as well as with cardiac catheterization facilities. You can contact Mr. Becker at sbecker@mcguirewoods.com.

Ms. Smith is an Associate at McGuireWoods in the firm's Health Care Department. She earned her B.A. in Political Science, College of the Holy Cross, Worcester, Massachusetts, and her J.D., cum laude, from Northwestern University School of Law, Chicago, Illinois. Ms. Smith was admitted to the Illinois Bar Association in 2008. Her professional affiliations include American Health Lawyer's Association. You can contact Ms. Smith tjsmith@mcguirewoods.com.

Mr. Jeffries, Esq., is the former fxecutive director of AAASC (American Association of Ambulatory Surgery Centers), and now consults with management companies, vendors, investors and others interested in the healthcare market with a specialized focus on the strategic impact of federal and state government and on the development of a proactive program to influence public policy to the benefit of the client company. He recently completed a comprehensive strategic planning review for a national healthcare association to review and reposition their public policy advocacy efforts. Jeffries is a healthcare lawyer with over twenty years experience leading growth oriented, highly regulated organizations in rapidly changing healthcare, pharmaceutical and distribution industries. You can contact Mr. Jeffries at craigjeffries@comcast.net or (423) 360-9024.

Note: This article originally appeared in EndoEconomics, a journal published by Physicians Endoscopy. Learn more about Physicians Endoscopy.