From: Becker Scott <becker@beckersasc.com>
Subject: [Becker's ASC E-Newsletter] Consolidation of Payors Harms ASCs: UnitedHealth Group Acquires Sierra Health Services; Five Trends and Developments Affecting the Orthopedic and Spine Device Market
Reply: becker@beckersasc.com
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February 28, 2008
In This Issue
Consolidation of Payors Harms ASCs: UnitedHealth Group Acquires Sierra Health Services
Five Trends and Developments Affecting the Orthopedic and Spine Device Market
News and Notes
Companies to Watch
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Consolidation of Payors Harms ASCs: UnitedHealth Group Acquires Sierra Health Services

UnitedHealth Group has completed its acquisition of Sierra Health Services, according to published reports.

The continued consolidation of payors, as evidenced by this type of acquisition, has a very negative impact on surgery centers. Such consolidations provide payors with much greater leverage in negotiating reimbursement paid to ASCs. This increased leverage in certain communities is leading to unilateral and significant reductions in pay to ASCs.

The acquisition also would have resulted in a 94 percent controlling stake of the Medicare Advantage health insurance market in the Las Vegas area had the U.S. Department of Justice not required United to divest assets of its Medicare Advantage business as a stipulation for approval of the acquisition.

United and Sierra were the first and second largest sellers of Medicare Advantage plans in the Las Vegas area, which include approximately 82,000 people enrolled in the plans. United is the largest health insurer in the U.S., reporting revenues of approximately $75 billion. Sierra is the largest health insurer in the Las Vegas area, reporting revenues of $1.9 billion.

Under the settlement between United and the DOJ to allow the acquisition to proceed, United must attempt to sell the assets related to its Medicare Advantage business to Humana Inc. If the two payors cannot come to an agreement, United will be required to find another purchaser.

"This divestiture ensures that senior citizens and others will continue to benefit from competition between sellers of Medicare Advantage products," says Thomas O. Barnett, assistant attorney general in charge of the DOJ's Antitrust Division, in a DOJ statement. "We are committed to preserving competition in the health insurance industry because this competition spurs insurers to lower prices, enhance services, and offer innovative new products."

Ion Healthcare
Five Trends and Developments Affecting
the Orthopedic and Spine Device Market

Here are five noteworthy developments in the budding orthopedic and spine devicemaker industry:

Growth of gender-specific implants. Gender-specific devices, or devices designed with the female anatomy in mind, are in-vogue since the first such device, a knee implant designed specifically for the female anatomy, was approved by the FDA in 2006. The demand for gender-specific knee implants in particular is high and expected to increase. Over 400,000 knee replacements are performed in the United States each year and two-thirds of knee replacement patients are women. Although knee replacements are the first foray into gender-specific devices, it is expected that orthopedic devices for hips, shoulders and other parts will continue to be developed and marketed.

Debate over minimally invasive surgery. New approaches to joint replacement are publicized as superior because they are minimally invasive. Minimally invasive, in simple terms, means making an incision that is much smaller than those made in traditional joint replacement surgery, usually measured as one-half the traditional size incision or less. While minimally invasive procedures are generally desirable, this marketing claim raises certain issues.

The purported core positives to minimally invasive procedures are that they can lead to better cosmetics, less discomfort and less blood loss. On the negative side, such techniques can impair the surgeon's visual field, provide for limited implant and device choices and lead to certain other challenges. There are also other longer-term uncertainties that are still being explored.

Increase in implant costs. The growth in the number of different implant products available has increased costs, as noted by John Barnard, MD, of the Orthopedic Center of Central Virginia. Physicians have to sift through an increased volume of information to determine the optimal approach for their patients, and this learning curve takes time. With the competition among the devicemakers and the anticipated growth in demand for implants, this trend is likely to continue.

Surge in devicemaker IPOs. Devicemakers are capitalizing on the demand for joint replacements through an increased number of initial public offerings. Last year was a record year for IPOs for healthcare providers, devicemakers and technology companies. From January to November 2007, 11 device companies filed plans for IPOs. MedAssets was the latest example in December 2007.

Concerns over potential Anti-Kickback. Several well-publicized legal cases highlight the risks devicemakers face. Although these manufacturers must necessarily market their products to physicians who decide which devices to use, the federal Anti-Kickback Statute, 42 U.S.C. 1320a-7b(b)(1)(B), constrains the manufacturers' business practices in trying to promote their products.

One recent example of this legal risk is the indictment of Arkansas neurosurgeon Patrick Chan, MD, for violation of the federal Anti-Kickback Statute. The four-count indictment was filed in the United States District Court for the Eastern District of Arkansas in October 2006. The indictment charged that from January 2004 until June 28, 2006, Dr. Chan demanded that distributors for four medical supply companies pay him 50 percent of their commissions on the sales of any products he used in his neurosurgery practice. The indictment alleges that Dr. Chan received approximately $7,000 to $8,000 per month for two and a half years. On Jan. 3, Dr. Chan pleaded guilty to one count of violating the Anti-Kickback statute and is awaiting sentencing.

Note: This article shares just a few of the thoughts and insights from a larger article discussing the events shaping this rapidly growing industry that will appear in the May/June issues of Becker's ASC Review. The longer article also discusses new spine devices, conflict of interest, and the ramifications of the recent Supreme Court ruling in the Riegel v. Medtronic case.

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News and Notes

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Thank you, sponsors. We are down to 20 exhibits remaining out of nearly 73 for the June meeting. We are also delighted to have great sponsors for the meeting. The lead sponsors include the following:

  • Senior Leadership -- VMG Health is recognized by leading healthcare providers as one of the most trusted valuation and transaction advisors in the United States. VMG's experience is unparalleled and their credentials are unmatched. Whether circumstances call for a comprehensive valuation, the sale or acquisition of a facility, or joint-venture development assistance, VMG Health offers a unique and in-depth understanding of the relationships, requirements and business issues that surround today's healthcare facilities. Along with performing hundreds of ASC valuations each year, VMG maintains the most comprehensive database on ASC financial benchmarking statistics. VMG's annual benchmarking study, the Intellimarker, provides decision makers with real information to measure and improve the value of their centers. For healthcare organizations seeking to grow, maximize profitability or form new relationships, having a partnership with financial experts who thoroughly understand the value drivers in today's healthcare industry is absolutely essential. For more information, e-mail Jon O'Sullivan or visit VMG's Web site.

  • Conference Tote Bags -- Surgery Consultants of America and Serbin Surgery Center Billing are a leading management and billing firm for ASCs. With the Medicare ASC payment changes and the ever-changing complexity of ASC billing, many ASCs are looking for solutions to their billing and collection needs. Serbin Surgery Center Billing was founded in 2001 to provide the answer to this much-needed service. SCB concentrates on the unique needs of surgery centers and provides expert and accurate coding, billing, collections, and managed care negotiations solely to the ASC industry. The company's certified and experienced coding, billing, and collection personnel bill and collect over $25 million per month due to their extraordinary attention-to-detail in all aspects of the reimbursement process. SCB's extensive knowledge of payor responsibilities and managed care contracting ensures you'll receive the highest reimbursements possible. By outsourcing to SCB, ASCs can eliminate the headache and necessary evil of billing and collections while simultaneously realizing additional benefits. Claims are processed more rapidly, collections are improved, and office staff is not burdened with patient billing questions. For more information, contact SCB at (866) 889-7722.

  • Conference at a Glance -- National Surgical Care, a nationwide owner and operator of ambulatory surgical centers, focuses on addressing the needs and problems confronting surgery centers across the country. These challenges, which include increasing competition, complex legislative issues and a difficult managed care contracting environment, threaten both the growth and profitability of surgery centers. NSC's experienced management team offers a high degree of knowledge, skill, understanding and strategic resources for its centers. NSC specializes in the acquisition and operational enhancement of existing surgery centers and the development of new surgery centers in partnership with hospitals and physicians. Aligning with NSC allows physicians to realize some of the value they have created and gain the resources of a skilled management team. Physicians can then spend more time focusing on patient care as NSC focuses on the business. Currently, National Surgical Care operates 21 surgery centers across the country. Contact Rick Pence at 866-866-2116 at rpence@natsurgcare.com.

  • Friday Evening Networking Reception -- Headquartered in Nashville, Tenn., Symbion is a leading provider of high quality surgical services across many specialties. Led by one of the industry's most experienced management teams, the company was founded in 1996 to acquire, develop and operate outpatient surgery facilities in partnership with physicians, hospitals and health systems. Through continued capital investment and flexible partnership arrangements, Symbion's network has grown to include 54 short-stay surgery centers and three surgical hospitals across 23 states. In each of its locations, the company works to create highly efficient, quality focused environments designed around the needs of both patients and physicians. Visit Symbion on the Web for more information.

  • Labeled Bottled Water -- Foundation Surgery Affiliates is a healthcare management organization specializing in project development, innovative facility design, partner recruitment and facility operations for ASCs, medical office buildings, surgical hospitals and bariatric hospitals and healthplexes. Foundation, established in 1996, is founded on the values of excellence, leadership, integrity and compassion. It is committed to continually delivering the highest quality of services for its physician partners and patient care in the industry. More information about FSA can be found at www.foundationsurgery.com.

  • Friday Morning Networking Break -- Facility Development and Management is a for-profit LLC that provides consultative, developmental and managerial services for outpatient ambulatory surgical centers throughout the United Sates. The primary objectives of Facility Development and Management are to identify business opportunities; formulate project plans; guide and direct facilities through the planning, construction, set-up and licensure phases of the project; and provide ongoing administrative and clinical support. The company serves as an agent of change helping to formulate policy on providing outpatient ambulatory services that will be reflective of quality surgical services for physicians and consumers. Facility Development serves as a resource for innovative physicians and institutions on a national level. To learn more, visit the Web site today.

  • Badge Lanyards -- Founded by I. Naya Kehayes, MPH, Eveia Health Consulting & Management is comprised of a team of seasoned professionals who are experts in reimbursement management, managed care contracting, and business management with a specialization in ASCs and surgical practices. Its senior management serve as advisors to national corporations and provide leadership in health policy initiatives related to reimbursement on behalf of ASCs at both state and federal levels. Eveia's services include contracting and contract analysis, acting as administrator and manager, customizing revenue management, financial analysis, and enhancing and maximizing the financial position of clients. In addition, Eveia implements training and reimbursement calculators, and it provides feasibility studies, payor due diligence, fee schedule development and coordination of business related activities. Eveia has serviced more than 100 clients in 25 states since its inception in 1998. For more information, call Eveia at (425) 657-0494, or visit www.eveia.com.

  • Cyber Cafe -- QSE Technologies is a premiere IT systems integrator serving the ambulatory healthcare industry for more than five years. QSE manages all aspects of IT infrastructure design, configuration, installation and ongoing tech support for new and existing ASCs nationwide, including computer servers, data storage and backup systems, local and wide area networking (including secure WiFi), firewalls, broadband internet access, data cabling, security software, workstations and laptops (including tablets and slates), secure remote access and HIPAA Security compliance. QSE works closely at the earliest conceptual stages with ASC management and development companies, architects, physician owner groups and hospitals to design and implement technology infrastructure systems that support both today's and tomorrow's healthcare information technology needs. For more information contact QSE's co-founder and CEO, Marion K. Jenkins, PhD, at (877) 236-0795, or via e-mail, or visit QSE's Web site.

Let us help you pick the most effective sponsorship for you and your company. We have a handful of sponsorships remaining, including semi-exclusive sponsorships in the financing, information tech and construction categories, and Thursday evening's networking reception and Saturday morning's networking break. For information on sponsorships or exhibition space, e-mail Jessica Cole or e-mail Dan Bragaw.

E-Weekly special offer. We find that consistent exposure to the business community and potential customers is critical to the efficient and successful use of advertising dollars.. The combination of repetitive e-newsletter ads to complement your print advertising and/or exhibiting helps ensure that, when you talk to people about your business, they are familiar with your company; this allows you to get closer to success more quickly. Advertising together with your business development people also allows you to open more doors sooner. We are providing the opportunity to buy 17 e-newsletter ads for $5,100, a 25 percent discount from the regular price. If you are interested in this offer, please e-mail Jessica Cole or e-mail Dan Bragaw for details and circulation figures. This offer is limited to four advertisers for eight-and-a-half consecutive weeks (two issues per week).

Job opening: Regional operator -- West Coast territory -- needed. Meridian Surgical Partners, a national ASC development and management company headquartered in Nashville, Tenn., seeks an experienced professional to serve as a regional operator overseeing a West Coast territory. Qualified applicants must have at least five years of industry experience. Responsibilities to include clinical operations, financial/budget oversight, physician recruitment and partner/board relations for multiple facilities. Position will require travel and offers an excellent benefit package and salary commensurate with experience. Qualified applicants please e-mail resume and cover letter to Susan Baker.

Handling Complex Orthopedic and Spine Procedures in an ASC audioconference. ASC Communications will present an audioconference, "Handling Complex Orthopedic and Spine Procedures in an ASC," on Wednesday, March 19, at 2 p.m. Central. Attendees of the 60- to 90-minute program will learn

  • which spine procedures can be safely and properly performed in an ASC;

  • which knee, hip and shoulder procedures can and can't be performed in an ASC;

  • how to assess patient selection criteria for spine and advanced orthopedic procedures;

  • how to determine which special safety procedures an ASC should have in place as it handles more complex spine and orthopedic procedures; and

  • the requirements for reimbursement for more advanced spine and orthopedic procedures.

Speakers include Dr. John Caruso, who has more than 16 years' neurological surgery experience; Dr. Phillip A. Davidson, the founder and CEO of Tampa Bay Specialty Surgery Center; and Mr. Jeff Leland, the CEO of Blue Chip Surgical Partners. Attendees can earn 1.5 CME or AEU credits. If you are an orthopedic physician, neurosurgeon, ASC administrator, ASC director of nursing, medical director or anesthesiologist, this program is not to be missed. Registration is limited to 60 attendees.

There are four easy ways to enroll:

Make checks payable to ASC Communications.

Excellent upcoming events. Please note there are two great upcoming events we have planned for ASCs.

First, there is ASC Communications' 6th Annual Orthopedics, Pain Management and Spine Driven ASC Conference, June 19 to 21 in Chicago. This year's conference will be an outstanding event for clinical and business issues, and will feature national political commentator Tucker Carlson as keynote speaker. For more information or to register, visit our Web site.

Second, save the date for the Ambulatory Surgery Centers -- Improving the Profitability of and Establishing ASCs -- Business and Legal Issues, presented by ASC Communications and the ASC Association. The conference will be held Oct. 23 to 25 at the Sheraton Hotel and Towers in Chicago. Stay tuned for more information.

Becker's ASC Review special offer. The Becker's ASC Review is published six times a year. To receive a hard copy delivered and never miss an issue, subscribe. As a special introductory offer, if you sign up for a two-year year subscription to the ASC Review between now and March 15 for $299, you'll also receive a free registration to the March 19 audioconference on handling complex orthopedic and spine procedures in your ASCs, a $199 value. To subscribe, either fax this form to (866) 678-5755 or mail to ASC Communications, 315 Vernon Ave., Glencoe, IL 60022. Please mark on the subscription form "special offer -- free audioconference," and be sure to check two-year subscription.

As a bonus, each subscriber will also receive a PDF version of the entire and extremely useful VMG Health Intellimarker, the single best benchmarking resource. Please call (214) 369-4888 for more information on VMG Health, a leading healthcare valuation firm.

Testimonial -- Meridian
Companies to Watch

We are delighted to highlight the following companies in this week's E-Weekly.

RMC Medstone Capital. RMC MedStone Capital is the new kid on the block with a long-standing history of exceptional performance. Combining the strength of several industry standards like Mike Lipomi, Tim Noakes and the Stanislaus Surgical Hospital of Modesto, Calif., with one of the leading real estate companies in Dallas, RM Crowe, has resulted in a very strong team. MedStone has strength in operations and management as well as the financial strength to make the transaction happen. In addition to fine tuning your operations, the MedStone team will restructure debt and seek out innovative financing solutions to your daily needs resulting in more efficient cash flow. You can see more information on MedStone at www.MedstoneCapital.com or call Mike directly at (209) 602-3298. If you are a surgery center or hospital looking for a corporate partner or interested in expanding or converting to a hospital, call RMC MedStone capital.

Physicians Capital. Loans for ASC buy-ins -- to help bring new physicians into a partnership -- are among the unique financing options offered by Physicians Capital. This Nashville-based firm provides loans based solely on the future cash flow of a surgery or diagnostic center. Existing physician partners can get loans against the cash flow value with no loss of control or ownership interest and no need to pledge personal assets. Start-up capital and turn-key financing are available for corporate partners without chasing multiple financing sources. Learn more at www.PhysiciansCap.com or call 615-342-0824.

Acclarent. Acclarent is dedicated to developing innovative solutions for ENT specialists and their patients. The company's initial focus has been on achieving the goals of sinus surgery with novel, endoscopic, catheter-based tools known as Balloon Sinuplasty devices. The Sinus Balloon Catheter is gradually inflated to gently restructure the previously blocked nasal passage, maintaining the integrity of the sinus lining and restoring normal sinus drainage and function. Through its Balloon Sinuplasty technology and the associated Relieva product portfolio, Acclarent offers ENT patients alternatives to conventional endoscopic surgical approaches. FDA clearance was completed in 2005 and today, Balloon Sinuplasty technology is available in both the United States and many countries worldwide. For more information, call (877) 775-2789 or (650) 687.5888 or e-mail Acclarent.

Implantable Provider Group. Implantable Provider Group (IPG) works with providers, facilities, manufacturers and commercial payors to fully manage all aspects of high-cost implantable medical devices. The company's Implantable Device Management solution simplifies the complex procurement, contracting and billing associated with these devices, thereby streamlining the process and normalizing costs for all parties, while also delivering many valuable ancillary capabilities. IPG focuses on large, fast-growth medical implant markets, such as cardiology, neurology and orthopedic implants. For more information about IPG, visit www.IPGSurgical.com or call Michael Jones at (866) 753-0046.

 
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If you have any questions on any of the items listed in this letter, please contact Scott Becker at (312) 750-6016 or by email at sbecker@mcguirewoods.com.

 
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