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The role of ASCs in new payment models — Bundled payments

There are many new payment models in healthcare today from bundled payments to accountable care organizations and other risk-sharing initiatives. Where do ambulatory surgery centers fit in?

Scott Becker, JD, CPA, publisher of Becker’s Healthcare and partner at McGuireWoods, moderated a panel at the Becker’s ASC Review 22nd Annual Meeting--The Business and Operations of ASCs covering the topic. The panel included McKinsey & Company Associate Sharat K. Kusuma, MD; Senior Vice President, Payer & Employer Strategies at United Surgical Partners International Marian Lowe; and CEO of Physicians Endoscopy Barry Tanner.

“A lot of ASCs have significant physician ownership and as we talk about bundled payments it will be interesting to see how bundling impacts the surgeons’ profitability,” said Dr. Kusuma. “In the absence of physician incentives, I worry bundling arrangements will not incentivize taking total joints to the outpatient setting. There is a lot of medical management to change the technique for outpatient total joints, and if you want this to grow, you have to make sure the surgeons are incentivized to do so.”

The commercial payers have different incentives for bundling payments than government payers. Commercial payers drive business to facilities with the contracts and that can be beneficial for ASCs because the contracted rates are lower than the hospital. Medicare does retrospective bundles. Medicare sets a rate, and if the episode of care costs more than the set rate, providers owe Medicare the difference; if the care costs less than the bundled rate, providers distribute the remaining amount among key stakeholders.

The bundled rate is based on historical performance, which means inefficient providers are rewarded more for cleaning up their act while already efficient centers have less room for improvement. Medicare announced CCJR for 75 facilities starting next year and all physicians working at those hospitals are de facto participants.

“The question is, will physicians act like they’re in a bundled program or continue to participate as an independent physician because only the hospital is at risk?” asked Ms. Lowe. The Medicare bundles are focused on the inpatient setting whereas more commercial payer initiatives are pushing these procedures outpatient.

“I think there is a lot greater understanding today than there was two or three years ago on safety and advocacy,” said Ms. Lowe. “Payers are more comfortable today moving cases outpatient. The payers’ biggest partner in most markets is the hospital so they are slow to move volume but they are doing so in some cases.”

Bundled payments are on the precipice for orthopedic surgeries, but less common among gastroenterology procedures. Mr. Tanner said that while bundled payments are a big topic for discussion at specialty meetings, new initiatives aren’t prevalent.

“In GI, we are high volume and low reimbursement. As a company, we do 270,000 procedures per year, but in any given market we don’t have enough volume to get the attention of large payers,” he said. “We are hearing more on the GI center where physicians are working on new payment models for a large disease state, something like Crohn’s Disease where BCBS is spending around $300 million per year with 90 percent of that spend occurring in the hospital and it doesn’t need to be.”

Bundling is a possibility for colonoscopy and could move more cases into the ASC because hospital outpatient departments aren’t historically set up for efficiency. “In the hospital, staff are doing other things than endoscopy, and ASCs have control over their own staff,” says Mr. Tanner. “The staff at endoscopy centers know why you’re there and procedure times are about the same, but outcomes are better and costs are lower.”

However, to meaningfully move cases from the hospital to the ASC, Mr. Tanner argued the hospital needs a financial incentive for participating in the savings. “The hospital can’t always come up on the short end of the stick,” he said. “The hospital needs an exchange as part of the savings process. The exchange has to be fair to all parties.”

There are some provider groups considering going at risk with payers for certain procedures and it’s important to build upon the right infrastructure to accept a lump sum and distribute equitably among stakeholders. Ms. Lowe’s center is doing outpatient joint procedures; she reverse-engineered the outpatient program to ensure patients are up and moving quickly and then sent home to avoid as much after care as possible.

“You can generate a tremendous amount of savings for the physicians if you control after care,” she said. “On the Medicare side, it’s not just about patient selection, but also about finding the right anesthesia techniques, efficiency, infrastructure and support for patients when they get home.”

Patient education is also key for outpatient surgeries to work. “Tell the patient they are going home the same day of surgery; set that expectation upfront and let them know that pain control is different, there won’t be a lot of narcotics, so they’ll recover from the procedure quicker,” said Dr. Sharat. “There are a lot of little things to execute to make the transition go well.”

The bundled payments include the facility fee, physician fee and anesthesia fee in addition to any other aftercare. Providers with control over most aspects of the bundle are more comfortable entering into these agreements.

“Our company is at a disadvantage because we own ASCs so we have influence over one step of the care, but pathology isn’t an ASC-approved procedure. We can influence those costs but we don’t control it,” said Mr. Tanner. “To the extent we can influence the physician component, we have more data put together to orchestrate bundles going forward, but we can’t do that with a single-pronged approach just from the ASC.”

More articles on surgery centers:
8 tips form an expert panel on transitioning into the ASC administrator role
The ASC industry today and tomorrow: 10 key thoughts
Switching to a new ASC management software system: 4 thoughts

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