Year in Review: The 10 Biggest Ambulatory Surgery Center Stories of 2013
1. PPACA, health insurance exchanges and the start of a long winter.
The Patient Protection and Affordable Care Act mandated health insurance exchanges opened for enrollment on Oct. 1, under much scrutiny. The exchanges, state-run and federal, launched on the same day as a two-week government shut down.
Though the exchanges had a bumpy takeoff, the individual mandate for health insurance coverage does begin Jan. 1, 2014. ASC leaders have been faced with the possibility of a large influx of patients as previously uninsured individuals gain coverage and the question of how this will affect patient volume and payer mix. The future is hardly clear on this matter and healthcare stakeholders continues to hold their breath, waiting to see what will happen.
In addition to the individual mandate, employers with 50 or more employees will be required to offer health insurance coverage. This provision of the PPACA was intended to take effect Jan. 1, 2014, but was pushed back to 2015. Though this seems like a reprieve, ASC owners and operators still need to consider how this mandate will affect them. FTEs are included when counting employees. Applicable large employers that do not offer coverage for employees will face a fine.
Patient deductibles are rising and as patients shoulder more of the responsibility for their healthcare costs they become cautious. ASCs may face a long winter as patients wait to meet their deductibles before undergoing an elective procedure. Instead of coming to an ASC in the early months of the year, patients may be waiting until spring and summer.
2. The advent of ACOs and narrowing networks.
It remains to be seen where exactly ambulatory surgery centers will stand with accountable care organizations, but the shift in care delivery models will affect the industry. This year, 24 percent of physicians are in an ACO or plan to join one within a year, up from just 8 percent last year, according to Medscape's 2013 Physician Compensation Report.
In late 2011, federal agencies released two waivers to exempt ACOs from prosecution for violation of existing healthcare laws. Regardless of whether or not ASCs join an ACO, the effects of these waivers will be felt, according to a Physicians Endoscopy report. One waiver addresses antitrust laws, and allows competing providers such as ASCs, to provide coordinated care. The second waiver addresses fraud and abuse laws, and incentivizes physicians to find new care approaches, which could include ASC referrals. The waivers suggest that surgery centers will be able to share some previously confidential pricing information. ASCs that choose not to join may have protection against the market power of ACOs.
As ACOs continue to form and the landscape of care delivery changes, ASCs may have to reconsider current strategies. Large out-of-network volumes may no longer be viable. ASCs that don't find a seat at the table may face a drying well of referrals and increasing pressure to remain successful.
3. Physician employment.
Currently 68 percent of physicians own or have an ownership stake in a practice, but less than half of these physicians intend to remain in private practice, according to a Jackson Healthcare report. These physicians are planning to sell their practice, retire or simply leave the medical field. Of the physicians planning to sell, 12 percent are surgeons.
Physicians in ASC specialties, such as orthopedics, appear to be slower to join the trend of hospital employment. Approximately 71 percent of orthopedic surgeons are in private practice, according to an American Academy of Orthopaedic Surgeons census report.
4. Increased hospital interest in ASC acquisitions.
Consolidation has been a buzzword in healthcare this year. Health systems and hospitals are merging and picking up physician practices along the way. Healthcare merger and acquisition activity experienced a 20 percent increased in the third quarter of 2013, compared to the same period last year, according to Healthcare M&A News report. As hospitals and health systems feel the effects of rising costs and bite of reimbursement pressure, the low-cost, high-quality of environment of ASCs are becoming attractive.
Over the past five years, three-way surgery center joint ventures between physicians, a management company and hospital have become increasingly popular. This year, 50 percent of management companies reported selling a controlling interest of a surgery center to a hospital or health system, according to HealthCare Appraisers 2013 ASC Valuation Survey.
From the ASC perspective, hospital partnerships have the potential to provide powerful reimbursement leverage and a measure of shelter from an increasingly competitive market.
5. CMS: ASC payment update and physician payment cuts.
In December, the Senate passed the Bipartisan Budget Act of 2013, a two-year plan that seeks to extend sequestration cuts and delay the steep payment cut that physicians face. The House passed the bill last week and it will now move to President Barak Obama.
This year has been fraught with concern over the sustainable growth rate and what the cuts will mean for healthcare. There have been widespread calls from the medical community for SGR repeal, from groups such as the American Medical Association, the American Academy of Orthopaedic Surgeons and American Society of Gastrointestinal Endoscopy.
The ASC industry has long spoke out about the disparity in reimbursement between ASCs and hospital outpatient departments. ASC reimbursement as a percentage of HOPD reimbursement has been steadily declining since 2003. That year, ASC were reimbursed 87 percent of what HOPDs received, but that percentage dropped to 56 by 2011, according to VMG Health's 2011 ASC Intellimaker report.
An analysis from researchers of the University of California-Berkeley Nicholas C. Petris Center on Health Care Markets and Consumer Welfare reported that ASCs saved Medicare $7.5 billion from 2008 to 2011 and the savings generated by ASCs are expected to reach more than $57.6 billion over the next decade.
In late November, CMS released the final payment rule for physicians and ASCs. ASCs will receive a 1.2 percent increase in payment, while physicians would receive a 20.1 percent cut, a reduction that has been temporarily staved off by the recently passed bipartisan budget plan. A little more than half of ASC leaders, 51 percent, think reimbursement is the biggest challenge that their centers face, according to a Provista report of ASC Survey Findings.
6. SCA goes public.
In early September, Surgical Care Affiliates filed an initial public offering of up to $100 million in stock. This announcement came just months after SCA acquired Health Inventures, a national surgical and physician services company operating more than 20 ambulatory surgery centers in partnership with 10 health system partners nationwide.
SCA announced the close of its IPO on Nov. 4. The IPO included 9,777,778 shares of common stock. Underwriters purchased 1,466,666 additional shares. The total IPO was 11,244,444 shares. The shares are listed under the symbol SCAI on the NASDAQ Global Select Market.
SCA announced system-wide net operating revenues increased 18 percent in the third quarter of 2013 compared to the same period last year. The company also reported cash flow from operations increased 7 percent in the nine-months ending Sept. 30. SCA reported that net patient revenue per case grew 9 percent over the same period last year and 8 percent for the nine months end. The company currently owns or operates 167 ambulatory surgery centers in partnership with 2,000 physician partners and 42 health systems.
7. Upcoming ICD-10 deadline.
The deadline for the transition to ICD-10 is Oct. 1, 2014. Physicians and ambulatory surgery centers have been in various stages of preparation throughout this year, but CMS is adamant that there will be no further delays to the deadline. ICD-9 has 3,859 codes, but ICD-10 will have approximately 87,000 codes.
Nearly all of plastic surgeons, 98 percent, have the documentation necessary to make the switch from ICD-9 to ICD-10, while only 48 percent of gastroenterologists have the necessary documentation, according to an AAPC Client Services report. CMS, amongst many organizations, offers a number of tools to aid in the preparation process.
Workers' Compensation claims are exempt from HIPAA, therefore exempt from the switch to ICD-10, but it may make sense for providers to fully embrace the new code set, rather than maintaining separate systems, according to a Claims Journal report.
If providers remain unprepared after Oct. 1, they may see reimbursement take a hit, according to a MediGain report. Holly Louie, chair of the Healthcare Billing and Management Association's ICD-10/5010 committee testified before Congress that the economic stability of the healthcare reimbursement system is heavily contingent upon the successful transition to ICD-10.
8. New legislation.
In June, United States House of Representatives John Larson (D-Conn.) and Devin Nunes (R-Calif.) introduced the Ambulatory Surgical Center Quality and Access Act of 2013 in the House of Representatives. The bill proposed transitioning reimbursement for ASCs to the hospital market basket update from the Consumer Price Index for All Urban Consumers.
The bill also seeks to create value-based purchasing for ASCs, require CMS to disclose information used to deny procedures from being performed in the ASC setting and calls for the addition of an ASC voice on the Advisory Panel on Hospital Outpatient Payment.
Several elements of the ASC Quality and Access Act of 2011, the predecessor of the current legislation, were enacted by CMS, according to an Ambulatory Surgery Center Association report.
The Electronic Health Records Improvement Act, H.R. 13331, includes a three-year exemption for ambulatory surgery centers regarding the HITECH Act. The bill is designed to allow additional time for the development of ASC-specific standards for electronic health record adoption and HITECH Act compliance, which requires physicians to record at least 50 percent of patient encounters with an EHR that is meaningful use compliant. Under currently enacted legislation, physicians that do not meet this 50 percent requirement are subject to Medicare payment penalties. As of yet, there are no meaningful use certified EHRs for ASCs.
9. Careful eye on physician relationships and behavior.
This year, physician and industry relationships have been placed under increased scrutiny. In August, the Physician Payment Sunshine Act took effect. Physician and industry interaction will be published on the CMS website starting in Sept. 2014. Physician-owned distributorships have also come into question this year. In March, the Health and Human Services Office of the Inspector General released a Special Fraud Report focused on PODs.
In November, the OIG released an advisory opinion which may further discourage relationships whereby non-anesthesia providers can profit from anesthesia relationships. The opinion overall may further discourage a host of anesthesia provider relationships.
10. CMS quality reporting requirements.
The new quality reporting requirements for ASCs took effect on Jan. 1, which requires ASCs to include quality data G-codes on claims including Medicare as the primary or secondary payer. Prior to Jan. 1, ASCs were required to use G-codes only with claims including Medicare as the primary payer.
Due to QualityNet system delays, the original ASC quality reporting deadline was moved back to Aug. 23. ASCs that failed to report 2012 volume data for select procedures and verify use of surgery checklists are now subject to Medicare payment reductions.
In November, CMS announced 98 percent of the ASCs participating in the Ambulatory Surgical Center Quality Reporting Program met requirements and will receive the full 1.8 percent annual payment update for the 2014 calendar year. The ASCs that did not meet ASCQR requirements will see a 2 percent reduction in annual payments for the calendar year of 2014.
Physicians were faced with an Oct. 15, deadline for participation in the Physician Quality Reporting System. The program was previously optional, but became mandatory this year. Non-participation will result in a 1.5 percent Medicare payment reduction in 2015 and the penalty will increase to 2 percent in 2016.
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