"Ambulatory Surgery Centers: The State of the Industry," a new webinar produced by ASC Communications, publisher of Becker's ASC Review, and sponsored by GE Healthcare, discussed the consolidation trend in the ASC industry and the impact of accountable care organizations, healthcare reform and ongoing efforts to cut the federal budget on ambulatory surgery centers. The program's presenters were Brian Mathis, vice president of strategy at Surgical Care Affiliates; Orrin Marcella, manager of government relations, and Julie Dietz, national manager for surgery centers at GE; and Scott Becker, publisher of Becker's ASC Review and a partner at McGuireWoods in Chicago.
Downward pressures on ASCs favor consolidation
Mr. Mathis said three factors are holding back ASCs' case volume growth right now: the high unemployment rate, rising use of high deductible policies and a trend toward employing physicians at hospitals. A Kaiser study found that for each 1 percent increase in unemployment there is a 1.1 million decrease in people with employer-sponsored insurance. He noted that physician employment, which makes it harder for ASCs to recruit physicians, shows no signs of abating, as it did in the late 1990s.
Mr. Mathis said these downward pressures on ASCs favor consolidation of the industry. Larger systems have many advantages over single ASCs, such as possessing the technology to generate precise data that can convince payors to increase rates. In these highly competitive times, "you need to be able to track every single case," he said. Systems also have a leg up in physician recruitment. Mr. Mathis noted that administrators at many independent ASCs have a clinical background and recruitment "is not really within their comfort zone."
He noted that there are about 100,000 physicians in the United States who might be eligible to take an ownership stake in an ASC. With a little over 5,000 ASCs in the country, there are about 20 physicians who could be partners in each ASC – the right number of physician-investors for a typical surgery center, he said. This is an indication that the market is saturated, and factoring in issues including high unemployment, rising deductibles and the increase in physician employment, the result has been that continued growth in the number of ASCs has abated dramatically and remains just over 0 percent this year.
Things ASCs must do now
Mr. Mathis offered a number of suggestions for steps ASCs should take now. He stated the importance of ASCs reporting on the National Quality Forum-endorsed quality measures developed by participants in the ASC Quality Collaboration (more information can be found at www.ascquality.org). More than 1,200 ASCs are presently reporting on some or all of these measures every quarter, and Mr. Mathis said it would be valuable for all other ASCs to start reporting on them sooner rather than later. The expectation is that reporting these measures may eventually become a CMS requirement for every ASC. "Reporting quality measures "is something that will position us as an industry to be able to compare ourselves to the HOPDs when we're talking to CMS," he says. "It is continuing to build out the clinical quality data we as an industry can report on and be very proud of in terms of our outcomes."
To overcome challenges including pressures to establish a strong clinical reputation, a tough volume environment, increases in costs and flat to declining commercial and Medicare rates, he said ASCs can excel by making improvement in three areas:
1. Clinical systems. This should be first priority, Mr. Mathis says. ASCs need to understand their quality outcomes and share this information with patients, physicians, payors and their health system.
2. Costs and revenues. ASCs need to develop an understanding of the costs and revenues of every case. "When you have this sort of margin pressure, you need to have the systems to be able to track the profitability of every single case and be able to work in partnership with your physicians to optimize every case," Mr. Mathis said. "What is the information you're going to be able to put in front of the payor to ask for appropriate reimbursement for each of those cases?"
3. Physician recruitment. To address volume concerns, he said you must have a mechanism to create a "heat map" of every single physician in the market who could be recruited. "You have to take a deep look and understand every single doctor in the market and you have to have the right capabilities to recruit," he said. "You have to have the right people in place to take that heat map and understand what are the cases you want to find and be able to go out, build the relationship and recruit the doctors."
Long-term sustainability for ASCs will come from development of these systems, which will help position ASCs as providers known for delivering high quality care and low costs, Mr. Mathis said. "Just as we're providing high quality care, we also think we play a pivotal role in improving healthcare in America by providing high quality care at lower costs," he said. "This is a winning solution in our minds and we need to position it that way more broadly."
A view from Washington
Medicare and Medicaid payments have been spared for now in Congress' new debt-ceiling agreement, but under the plan there will be another round of $1.5 trillion in cuts this November that could affect healthcare, said Mr. Marcella. "If you're part of a healthcare sector that has been targeted before, you will probably be targeted again," he said. "If you have beaten back a threat once, you'll probably have to do it again."
The surgery center industry has high hopes for the ASC Quality and Access Act of 2011, which Mr. Marcella said has 20 cosponsors in the House and four in the Senate. But considering all the budget cutting in Washington, a provision in the bill to move ASCs to the hospital market basket index would probably not pass because it involves extra spending. On the other hand, he said the quality reporting part of the bill has better chances of passage.
Mr. Marcella analyzed four ways states are reacting to healthcare reform. Using a map developed by Harris Interactive, he discussed states as the following:
1. Active implementers — States like Vermont, Massachusetts and Oregon have legislators and governors who are very aggressive with implementing healthcare reform.
2. Passive aggressive — Due to issues such as division on party lines, states like Virginia and Texas have been erratic in implementing healthcare reform, moving ahead with some aspects of reform but not moving ahead with others.
3. On hold — These are states taking a "wait and see" approach when it comes to reform.
4. Send it back — States like Florida are fighting healthcare reform. They are saying,"heck no, we won't go, we're going to send it back, we don't care that there's money here, we're not going to implement and that's that," Mr. Marcella said.
He then analyzed a map identifying which states are suing the government over the healthcare reform bill. He noted that some states suing the government are also active implementers. "Things are kind of crazy out there in states, and the states are where this is really going to play out," he said.
Mr. Marcella concluded his portion of the presentation by discussing what is likely to happen to happen with healthcare reform. He noted the following:
- Full repeal cannot happen until there is a a Republican takeover of the White House and the Senate.
- 'Repeal and replace' tactic taken by Republicans will not accomplish anything significant.
- Oversight and investigations are not very robust
- States are the labs for reform. "Some will do it will, some will not try, some will struggle, especially with the Medicaid expansion," Mr. Marcella said.
- Increase in access may or may not lead to increase in volume. "That's the big 'X' factor," he said. "That really depends on some of the things like, 'Is the penalty for not buying insurance strong enough? Are people really going to follow the individual mandate? Are the subsidies in the exchange going to be strong enough for people to have good health insurance?' This is all unknown."
- Supreme Court ruling could come at the end of the year and tell whether the individual mandate to purchase insurance is constitutional or not.
- Congress has moved away from healthcare reform and on to deficit reduction and entitlement reforms.
GE Healthcare activity
Ms. Dietz described how the company is bringing together its HIT and Performance Solutions areas under same leadership. The company is also focusing on patient safety, home health and, with its acquisition of Clarient, personalized medicine.
She shared two GE websites where ASCs could go to learn more information. They are hosted at http://nextlevel.gehealthcare.com/government-health-policy-brief, which provides analysis and links pertaining to reform, and www.gehealthcare.com/reimbursement, which focuses on reimbursement.
'Scary time' for ASCs brings opportunities with it
Mr. Becker said this has been "a scary and uncertain time" for ASCs. While ASC turnarounds still command a high volume of business, the "deals move at a slower pace and are harder to close." There are opportunities though. Certain sectors that deal with ASCs, such as equity funds and hospitals, are very bullish, and new niches have been created. For example, as hospitals convert ASCs into HOPDs and set up co-management deals with physicians, now there are companies that manage the co-managers, he said.
Mr. Becker said ACOs continue to be a challenge for surgery centers. Hospitals organizing ACOs may not allow outpatient surgical volume to go to outside their walls. "It's uncertain if there is spot for the independent ASC in an ACO," he said. After encountering a flurry of criticism when it introduced proposed rules for ACOs a few months ago, the administration is rethinking its plan and implementation may slow down. "The most optimistic thing you could say about ACOs is that they won't move that fast," he said.
About the webinar sponsor: GE Healthcare
GE Healthcare offers transformational medical technologies and services throughout healthcare, including surgery centers. These include: anesthesia delivery systems, patient monitors, various supplies and accessories, information management, fluoroscopy devices, compact ultrasound solutions, consulting services focusing on workflow efficiency, facility and patient financial services and equipment maintenance. Learn more at www.gehealthcare.com.
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