Certificate-of-need laws vary by state and consequently can have a huge impact on ASC development in each region.
Michael Chwalek, senior financial analyst at Ambulatory Surgical Centers of America, joined Becker's to discuss the effect of certificate-of-need laws on the ASC industry.
Editor's note: This response was edited lightly for length and clarity.
Question: Can you talk a little bit about the effects that certificate-of-need laws have on the ASC industry as a whole?
Michael Chwalek: On the industry as a whole, I think certificate-of-need laws reduce the positive impact ASCs could have on the healthcare system. They restrict the number of ASCs through rationing and creating a significant barrier to entry. The time and legal and consulting fees required to gain certificate-of-need approval significantly increase the risk of starting a center. The ability of existing health systems to contest applications also significantly increases the risk, which also highly incentivizes joint ventures. I think this incentive gives larger health systems and hospitals more influence in the industry, for better or worse. Hospitals are in a tough position because they're paid more in the hospital outpatient department than the ASC setting, so it’s hard not to think that it limits the number of ASC cases.
Q: How will recent amendments to certificate-of-need laws in various states affect the ASC market?
MC: I think you’ll see an increase in ASCs and less joint ventures. I think there are independent surgeons that were discouraged by the certificate-of-need process who will come off the sidelines. They'll be encouraged by the reduced development time, reduced start-up costs and the elimination of potential denials. I think it also strengthens the surgeon's position with their health system by removing the system's veto power over a project. I think this leads to more ASCs, more surgeon influence and more ASC cases.