The growing danger of shrinking ASC reimbursements

ASC reimbursements in many markets are not keeping up with the rising cost of inflation and general costs of living. 

Raghu Reddy, chief administrative officer of Cumberland-based SurgCenter of Western Maryland, spoke with Becker's about what could happen if this trend continues. 

Editor's note: This response was edited lightly for brevity and clarity. 

Question: How does policy need to change for ASCs to thrive?

Raghu Reddy: The policy has been tilted towards hospital outpatient departments for many years. Now, the industry in general understands the fact that HOPDs have higher risk, hence higher reimbursement. Yet, as the ASC industry has matured, through different partnerships, regardless of the type of syndication, that gap has widened in terms of the acuity and the risk of cases, or taking at a fraction of the cost to the overall healthcare system and to the patient. So that's not being addressed in the sense that HOPDs continue to receive substantially higher reimbursements when compared to ASCs, despite the approval and migration of a plethora of cases across most specialties. 

On the flip side of that equation, most freestanding ASCs are facing the increased cost of doing business, and the inflation has never been adjusted, especially from the private payers. If anything, we are facing more hurdles trying to get prior authorizations on time, unnecessary requirements and medical necessity being established for procedures that are bogging us down administratively. While going through the whole circus here, we're still coming up short because costs are escalating, but not the reimbursement. The whole purpose of setting up an ASC by the physician investors — to thrive in a political or financial environment — is slowly but surely getting diluted. So that is a difficult proposition for a lot of centers to maintain a strong positive operating margin. 

Another upcoming issue in the ASC industry is anesthesia reimbursements shrinking significantly. A lot of ASCs are now having to swallow that hard pill of an anesthesia subsidy, whereas before most ASCs had never even heard of an anesthesia subsidy. Right now, this is becoming a routine affair that's cutting into profits. 

Like any other healthcare entity or any other small business, ASCs are required to maintain staff satisfaction and the costs incurred through staffing and wages. On the surface, the number of ASCs will grow. But a mature ASC that has been around for 12-13 years like ours, whether in a very competitive ASC market or a rural market, is going to struggle against these declining reimbursements unless they have access to a plethora of physicians and can continue to operate profitably.  Maintaining profitability in areas where there's a lot of competition to recruit physicians, or in rural areas where there is loss of physicians due to retirement, is going to get very tricky and complicated. It already has.

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