For independent ASCs, the economics of survival have never been more precarious.
Reimbursement rates have not kept pace with inflation, staffing costs have surged and some commercial payers have effectively closed the door on negotiations.
Suzi Cunningham knows this reality firsthand. As administrator of Advanced Ambulatory Surgery Center in Redlands, Calif., she has been fighting that battle on multiple fronts simultaneously, and she is finding that the walls are closing in.
She joined Becker’s to discuss how broken payer contracts are pushing ASCs to the breaking point.
“The payers simply will not negotiate,” she said.
Within the last 30 days, Ms. Cunningham received a message from a commercial payer announcing it was not opening contract negotiations with any ASCs.
“They said they value us but cannot afford to pay us more, and that any open discussions were being closed out,” she said.
In addition, ASCs are permitted to approach insurance companies for renegotiation only every three years. Advanced Ambulatory Surgery Center has waited two and a half years and is still being paid 2022 rates, predating the inflationary surge that has driven up the cost of everything from surgical supplies to labor.
Ms. Cunningham said she has pursued every available avenue. She brought in a contracting consultant, a former SCA Health executive with deep payer relationships. She is also working with Nimble, a firm that specializes in ASC contracting strategy.
“Three separate efforts, and none of us can move the needle,” she said.
Other leaders agree that negotiations with payers are hitting a wall.
“Payers are gaining leverage through tighter reimbursement models, increased prior authorizations and more aggressive rate negotiations,” Cori Rist, RN, administrator of Atlanta-based Optimum Spine Center, told Becker’s. “They’re also using more data to drive utilization management and contracting strategy.”
The contract stalemate has forced Ms. Cunningham to look inward. She has been conducting a case cost study, breaking down profitability by physician and by subspecialty. While this work began as an efficiency exercise to identify scheduling problems — such as surgeons who disappear between cases or arrive late — she found that certain specialties are financially underwater.
“In hand surgery, I’m seeing profitability at minus 98%, minus 101%, minus 209%,” she said. “I am paying to perform surgery.”
In searching for leverage, Ms. Cunningham has found that only terminating contracts has had success.
“When I terminated our contract with one commercial payer — they were a small slice of our business, so I could afford to — I eventually got someone to listen and reached a reasonable agreement,” she said. “That lever works, but for larger payers, it’s much harder to pull.”
With no meaningful contracting progress and certain service lines running at a deep loss, her board is now moving toward hard-line case acceptance criteria, or refusing cases the center cannot afford to perform, and allowing those patients to seek care at the hospital instead.
“That’s the only real pressure point left,” she said.
The longer-term stakes, Ms. Cunningham said, go beyond her own center.
“They’re going to run independent ASCs out of business,” she said. “Or they’re going to force us into joint ventures and mergers — with large ASC management companies or hospital systems — because those entities have the contracting leverage and economies of scale that a small independent operator simply doesn’t have.”
The industry is increasingly consolidating. Nearly 2,000 ASCs are now affiliated with a national chain — a sign of how much of the market has shifted away from physician-owned independence. Chain operators now control about 33.5% of freestanding ASCs, with the remaining 66.5% still held by independents.
What frustrates her most is what she sees as economic irony in payer behavior.
“The irony is that payers are being penny wise and dollar foolish,” she said. “We are the best value in healthcare. We do surgeries more efficiently, with better outcomes, lower infection rates and a dramatically better patient experience.”
Commercial insurance prices were 78% higher in hospital outpatient settings compared with ASCs in 2024, according to a Health Affairs study. The study found commercial prices for 13 common outpatient procedures averaged $1,489 higher in HOPDs than ASCs. For comparison, Medicare rates were 97% higher in HOPDs for the same procedures.
A Blue Health Intelligence analysis found procedures performed in HOPDs can cost up to 58% more than in ASCs or physician offices. For example, colonoscopies cost 32% more in hospital settings compared to ASCs.
And when payers’ short-term cost calculations drive volume back into the hospital system, they will pay the price, she said.
“When payers force us into hospital partnerships, they will pay far more — and they are doing it to themselves,” she said. “We serve our communities. We specialize. We negotiate hard with vendors. We provide exceptional care at a fraction of the cost. And payers are slowly squeezing that out of existence.”
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