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Inflation hits ASCs, physicians hard

The cost of essential goods jumped 7 percent last year, outpacing the reimbursement increases to healthcare providers across the board.

ASCs will need to have candid conversations with commercial insurers about how inflation is affecting their business in the next year. These conversations may be uncomfortable, but payer executives have begun realizing the value of surgery centers and aim to move more patients into ASCs.

The Consumer Price Index reported gas prices were up nearly 50 percent year over year in December, while energy costs jumped 29 percent, and food prices were up 6.3 percent. New vehicle prices increased 11.8 percent, and household furnishings and operations were up 7.4 percent.

By comparison, physician services costs increased 4.3 percent last year, and hospital services costs were up 3.3 percent. Inflation also took a bite out of physician pay last year, as the average physician was only paid 1.5 percent more than in 2020.

CMS raised ASC payment rates by 2 percent for 2022, and surgery centers are seeing their supply and labor expenses soar as shortages in both sectors intensify. The labor market, in particular, will likely remain competitive this year, and with employees having to pay more for gas, food and other essentials, a 2 percent pay rate increase won't cover the difference.

"Although the 2 percent effective inflation rate update is appreciated, it falls far short of two important realities: First, it falls short of the latest inflation projections, which began to manifest in the first quarter and developed fully in the second quarter — time enough for CMS to have taken them into consideration; second, the tight healthcare worker labor market, combined with COVID-related attrition and vaccine mandate-related early retirements are forcing us to make significant adjustments to our wage scales, a cost that we will have to absorb until industry pressure forces payers to make concomitant adjustments," said Alfonso del Granado, administrator of Covenant High Plains Surgery Center in Lubbock, Texas.

There are independent ASCs across the U.S. struggling to make ends meet as costs increase and pay flattens. The opportunity for out-of-network contracts has dissipated for most surgery centers, and it could become more challenging to negotiate with payers as price transparency legislation goes into effect and more surgery centers post global prices online.

If ASCs aren't able to get pay bumps to cover increasing costs, they are more likely to sell to a hospital, take on private equity investments or join a chain. The less competitive healthcare landscape often boosts prices while lowering quality and patient satisfaction.

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