Publisher's Letter October 2013 ASC
1. Ophthalmology, orthopedics and GI remain strong and reasonably independent. These specialists have largely avoided hospital employment and often remain successful in independent
or group practice.
2. Surgeons are performing spine procedures in ASCs, but see consistent payer problems. Medicare does not reimburse for spine in ASCs and commercial payers are slow to negotiate rates. Payers also often deny coverage for some spine procedures. According to HealthCare Appraisers 2013 ASC Valuation Survey, 94 percent of ASC management companies find orthopedic spine to be a desirable specialty.
3. Hospitals will face increased layoffs and financial pressure, which may actually start to weaken them as competitors. Hospitals may be required to slow down their efforts to hire physicians. Independent physicians remain the lifeblood of ASCs.
4. High deductible plans will make for very long winters. Patients will increasingly delay surgery, which will reduce surgery center revenues.
5. Remaining lean is very critical. An ASC’s total operating expenses consume 75 percent of its net revenue, according to VMG Health’s 2011 ASC Intellimaker Survey. The management of
expenses in a time of decreased revenue becomes more important than ever.
6. Great payer contracts (as good as possible) and great billing and collection are more important than ever. Top three ambulatory care procedures that are unexpectedly denied are proton treatment with simple comp; proton treatment intermediate; and cataract surgery with IOL 1 stage, according to RemitDATA.
7. Where you are is critical:
a) Small town – minimal independent physicians. A low number of independents indicates a small physician pool for surgery centers.
b) Larger town – more independents. A higher number of independents indicates more potential for surgery center case volume.
c) CON states – new hospital joint ventures. There are currently 27 states with CON regulations for ASCs, according to the National Conference of State Legislatures. We are seeing increased development activity in some CON states.
d) Hospital employment. The number of physicians employed by hospitals has risen 6 percent since 2012, according to a Jackson Healthcare survey.
e) Market reimbursement – good or bad. Market reimbursement varies widely across the country. Fifty-one percent of ASC leaders report reimbursement as the biggest challenge they face in their centers, according to a 2011 Provista Report of ASC Survey Findings.
8. Anesthesia – profiting is still a gray area. The Office of the Inspector General commented on two types of anesthesia services for ASCs earlier this year in the Department of Health and Human Services advisory opinion 12-06 finding both situations would be in danger of violating the federal anti-kickback statue.
9. Pathology deals are gray and sometimes black. Opportunities to profit from ancillary services such as pathology are under increasing scrutiny.
10. Redemptions and non-competes still cause litigation. These areas account for the highest percentage of litigation in regards to surgery centers.
11. Out-of-network is a challenge, but easier in some markets. Opportunities for out-of-network reimbursement are becoming rarer, but certain markets allow surgery centers to effectively leverage OON reimbursement. Currently, 27 percent of management companies have no threshold for OON volume that they will accept in their centers, according to HealthCare Appraisers
2013 ASC Valuation Survey.
12. A great administrator remains key. A great administrator is very important to ASC success. The average salary for an ASC administrator is $109,184, according to VMG Health’s 2011 Intellimaker survey.
13. Per click lithotripsy deals are still very prevalent. These can be argued to be in exchange for business development as opposed to for actually being the best distributor or renter. There have been some OIG investigations regarding per click lithotripsy agreements.
14. A hospital partner may or may not help in managed care. Hospital joint venture or acquisition doesn’t automatically guarantee higher managed care contract rates.
15. Hospital-employed physicians should be permitted to invest. However there are some caveats. Some hospitals now allow employed physicians to invest in surgery centers or retain previous investments, depending on the situation.
16. SCA going public. Surgical Care Affiliates filed for an initial public offering of up to $100 million in stock. Earlier this year, the company acquired Health Inventures.
17. Direct-to-consumer marketing is strongest in pain, plastics and spine. These specialties have been marketing directly to a receptive patient population with noticeable success.
18. HIPAA, healthcare compliance, billing and coding audits take up more time than ever. New regulations increased administrative duties at ASCs to avoid compliance issues and prepare
for the transition to ICD-10.
19. There are 5,000-plus acute-care hospitals; 5,400-plus Medicare-certified ASCs; 1,500 to 1,700 chains invested. This landscape will change as healthcare reform unfolds over the next few years.
20. Medicare reimbursement flat to minimally lower. ASCs have experienced a cut in Medicare reimbursement due to sequestration, and CMS has proposed increasing Medicare reimbursement for ASCs by 0.9 percent in 2014. 21. Commercial reimbursement – if high, it is more at risk. Third party payers are becoming more aggressive in trying to cut reimbursement to ASCs.
22. ASCs may increasingly look to employ physicians. Some chains already employ physicians directly or through related practice organizations. As competition for independent physicians increases, ASCs by necessity may employ physicians.
Very truly yours,
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