Orthopedic surgeons are pushing the boundaries of what can be done outside the hospital. But as increasingly complex procedures move into ASCs, the biggest obstacles may have less to do with what surgeons can perform than what their facilities can afford.
From multilevel spinal fusions to revision joint replacements, procedures once largely confined to hospitals are becoming part of the outpatient landscape. Yet reimbursement constraints, technology expenses and the difficulty of standardizing surgical operations are complicating the next phase of growth.
During a panel at Becker’s 32nd Annual The Business and Operations of ASCs conference in Chicago, orthopedic surgeons and industry leaders described a widening tension between clinical capabilities and financial sustainability.
“The barrier is profit margins and reimbursement,” said Raghu Reddy, chief administrative officer at Southfield, Mich.-based MiOrtho Surgery Center.
For ASC operators, the challenge is no longer simply convincing surgeons to bring more complex cases outpatient. It is determining which procedures can be performed safely, supported operationally and reimbursed at a level that makes them sustainable.
The cases are moving. The economics are more complicated.
Earl Kilbride, MD, an orthopedic surgeon at Austin (Texas) Orthopedic Institute, said his practice is increasingly performing procedures such as polyethylene exchanges and selected revision knee surgeries in ASCs.
“The big thing is you have to watch your implant cost, depending on the payer,” he said.
Justin Hohl, MD, an orthopedic spine surgeon and managing partner at The Spine Institute in Murray, Utah, said more than half of his practice has transitioned to the ASC setting. His outpatient cases include lumbar fusions and selected three-level cervical procedures.
Most of his ASC lumbar fusion patients return home the same day, although the option for an overnight stay remains available.
But the ability to perform those procedures does not necessarily make them financially attractive. Dr. Kilbride noted that commercial reimbursement arrangements can make certain complex procedures profitable for hospitals while leaving ASCs with losses on the same cases.
A revision knee replacement, for example, may generate favorable reimbursement under a hospital’s cost-plus contract while leaving an independent surgery center struggling to cover implant expenses.
For Mr. Reddy, that distinction is central to deciding which procedures to introduce. Before expanding an ASC’s case mix, his organization evaluates projected volume, equipment requirements, procedure costs and profitability. Surgeons drive clinical decisions, while administrators provide the financial analysis needed to determine whether expansion makes sense.
Even when a procedure is appropriate for outpatient care, the numbers can change the conversation.
The price of keeping up with surgeons
Technology is creating another challenge for orthopedic ASCs, particularly as younger surgeons enter practice with extensive training in robotics and navigation.
Mr. Reddy said some newly trained surgeons have expressed uncertainty about performing total knee replacements without robotic assistance. That puts surgery centers in a difficult position. Advanced equipment may be increasingly important for recruiting physicians and attracting surgical volume, but the investment can be substantial.
Dr. Hohl described how his center approached that dilemma when a younger partner wanted access to robotic technology. Rather than spending $500,000 to $1 million to purchase a system, the center arranged a per-case payment structure.
“I’m a cheap date for the ASC because I don’t need a robot and I don’t need navigation,” Dr. Hohl said. His colleague could use the technology without the facility taking on the full upfront capital expense, although the arrangement increased the cost of individual procedures.
Dr. Kilbride said his center has a Mako robotic system, but only one of its four total joint surgeons uses it. He questioned whether the technology delivers a favorable return on investment for every case. Still, he acknowledged that its value extends beyond immediate procedural economics.
Patients increasingly ask about robotic surgery, and access to the technology can influence where surgeons choose to practice. That leaves ASC leaders weighing costs that are relatively easy to measure against potential benefits, such as recruitment and patient demand, that are harder to quantify.
The surgeon preference problem
Even without major technology investments, reducing orthopedic surgery costs can prove difficult.
Mr. Reddy said his organization, which includes approximately 53 surgeons, has struggled to standardize supplies across specialties. After roughly 18 months of trying, one of his biggest achievements was persuading the hand surgeons to use the same carpal tunnel blade.
“I have not been able to standardize one item yet,” he said, describing the broader challenge.
The difficulty reflects a longstanding reality in orthopedic surgery: Physicians often have deeply established preferences for instruments, implants and surgical techniques. Those differences can limit an ASC’s ability to consolidate purchasing, negotiate vendor pricing and streamline inventory.
Dr. Hohl said the six spine surgeons at one of his centers use different approaches, making complete standardization unlikely. Instead, he believes facilities should prioritize consistency in the areas that matter across every procedure, including staffing, turnover times, preoperative preparation and postoperative recovery.
Dr. Kilbride said even relatively straightforward clinical preferences can be difficult to align, noting that surgeons may disagree on the medications used during total knee replacement. The discussion highlighted an important distinction for ASC operators: Standardizing the delivery of surgical care may be more achievable than standardizing every surgeon’s technique.
What it takes to move more complex cases
The transition also requires investments that extend beyond equipment purchases.
Dr. Hohl recalled feeling apprehensive when he first began performing spine procedures at centers that were still building their capabilities.
Some lacked familiar instruments or surgical technicians experienced with his procedures. Over time, acquiring the necessary equipment and arranging for an experienced scrub technician to assist helped resolve those concerns.
“Now I go there completely comfortable,” he said.
He identified three essential requirements for expanding complex spine surgery in ASCs: appropriate equipment, experienced personnel and strong anesthesia partnerships.
Dr. Kilbride emphasized the importance of maintaining consistency between hospital and outpatient settings. “The only thing that’s different for me is the color of the room,” he tells patients.
He said his surgical teams, equipment and implants remain consistent regardless of where a procedure takes place. But operational readiness also depends on the facility itself.
Older surgery centers may lack the sterile processing capacity or physical space needed to support higher volumes of complex orthopedic procedures. In some cases, disposable instruments and alternative supply arrangements can help facilities adapt without extensive renovations. For ASC leaders, that means evaluating the entire surgical operation before adding cases, rather than assuming a procedure can move outpatient simply because it is clinically feasible.
The reimbursement question no one can escape
Despite the advances in surgical techniques and outpatient capabilities, panelists repeatedly returned to the financial pressures facing independent orthopedic practices and ASCs.
Mr. Reddy expressed frustration that reimbursement has not necessarily reflected the cost savings associated with shifting procedures away from hospitals. He questioned whether continued payment pressure could eventually force smaller independent orthopedic groups to seek larger partners simply to remain financially viable.
Dr. Kilbride pointed to bundled payment arrangements as one potential opportunity, although their value depends on contract terms and an organization’s willingness to assume risk.
Mr. Reddy said self-funded employers in his market have shown growing interest in bundled and episode-based orthopedic care, creating another potential source of volume and revenue for outpatient organizations.
Still, those opportunities require careful attention to costs. During an audience discussion, Mr. Reddy described a center that had gone seven years without receiving a payer rate increase, even as expenses continued to rise.
The challenge is particularly difficult when vendor prices, staffing costs and other operating expenses increase faster than reimbursement. Surgery centers can improve efficiency, negotiate supply agreements and pursue additional volume. But those strategies have limits when payment rates fail to keep pace with the resources required to deliver care.
For orthopedic ASCs, the next phase of expansion may therefore demand a different measure of success.
The question is not simply how many procedures can move out of hospitals, or how sophisticated outpatient surgery can become. It is whether surgery centers can build the staffing, infrastructure and financial model needed to sustain that growth.
At the Becker’s 32nd Annual Meeting: The Business and Operations of ASCs, taking place October 29-31 in Chicago, ASC leaders, surgeons and healthcare executives will explore strategies to drive growth, enhance operational performance, navigate reimbursement challenges and prepare for the future of ambulatory surgery. Apply for complimentary registration now.
