10 biggest challenges to ASC profitability in 2016

Ensuring ASC profitability in 2016 will require more out-of-the-box thinking than ever before due to declining reimbursements and the further fee-for-performance integration into care delivery.

"2016 is likely to bring further shifts towards value-based purchasing for ASCs," says Brian Mathis, senior vice president, strategy and payment innovation at Surgical Care Affiliates. "We have seen this take on many forms ranging from quality incentives for surgeons to bundled payments to full capitation. ASCs provide high quality care at lower cost so are well positioned to capitalize on this shift to value."

It is important that ASCs leverage their unique position to succeed in the new value-based landscape.

Here are some of the biggest challenges to ASC profitability in the coming year and how to overcome them:

1. Pressure on fee-for-service reimbursement. Increasingly, ASCs will face downward pressure on FFS from CMS and commercial health plans. ASCs willing to take on risk with commercial health plans are in a good position to overcome FFS challenges. Another way to combat those challenges is to add new service lines that increase the ASCs value to its community. "For example, [SCA] now has nearly 20 ASCs performing total joint replacements and the outcomes are fantastic," he says.

2. The push toward price transparency. The push toward transparency in patient care and pricing of procedures will continue, says Deb Yoder, RN, MHA, vice president of clinical services at Surgical Management Professionals. The more positive information patients have about cost savings and quality, the more likely they will be to choose an ASC environment for care rather than a hospital.

3. Hospital employment of primary care physicians and specialists. Increasing hospital employment of physicians will result in shifts in referral patterns. Mr. Mathis suggests partnering with health plans to design and implement a reimbursement strategy that encourages physicians, both primary care and specialists to remain independent. SCA has worked with numerous health plans to implement contracts that truly place a value on high quality, efficient care.

4. Increasing payroll costs. ASCs can keep payroll costs in check by ensuring that the costs are justified and reasonable in accordance with the region. Also, keep an eye on your staffing ratios to make sure they are appropriate for the work you are doing at the facility.  

"Payroll costs related to human capital is justified, but should not be allowed to run rampant," Ms. Yoder says. "One needs to understand where the expenses are and why the expenses are occurring."

5. Changes in state provider taxes and worker's compensation. Changes in taxes and regulations can come down the pike at any time. In January, The New York State Workers' Compensation Board adopted a new ambulatory fee schedule. The new schedule changes reimbursement methodology. Some providers are afraid that this would mean cuts to pain management reimbursement and reductions in orthopedic surgeon reimbursement rates. Connecticut was one of several states to introduce a provider tax on ASCs in 2015. The tax is set at 6 percent of revenue which will have a material impact on the earnings of ASCs across the state. ASCs can organize efforts through the Ambulatory Surgery Center Association and state-level ASC associations to ensure that their message is heard in an organized and impactful way, says Mr. Mathis.

6. Spike in supply costs. Coming into the New Year, vendors may be looking to increase implant prices. Additionally, ASCs adding new technology for current or proposed service lines may also be facing high supply costs. To keep these costs low, Ms. Yoder suggests reviewing the center's 20 costliest items to ensure they are contracted at an appropriate rate for region the facility is in.

7. Vendor negotiations. Vendors come to negotiations experienced and with background research. "Good negotiation cannot be done without homework completed," says Ms. Yoder. "One cannot go to the table unless one has a good understanding of products used, volumes, surgeon buy-in and support as well as alternative options. Vendors need to understand that if they cannot meet best pricing, surgeons may look to alternative options. The vendors will do their homework and we need to do ours."

Go into the negotiations with a strong understanding of service contracts and buried expenses. Vendors may lower capital costs, implant and disposable costs, but raise service contracts in the fine print.

8. Proving the quality and value of ASCs. Proving value requires a tremendous amount of resources as it involves educating primary care physicians and health plans about the quality and value of ASC surgeons and our ASCs, notes Mr. Mathis.

"This requires tracking quality metrics and being able to translate your costs into how much money is being saved for patients and payers," he says.

9. Effective surgeon engagement. Surgeons have many options for where they can perform cases. Keep track of the actual number of cases being performed versus the number that was expected. If a feasibility study was completed showing that 40 orthopedic cases can be performed in a month, and in reality only 10 are being performed on average, the bottom line will be affected. Keeping surgeons engaged is key for ensuring case volume doesn't dip below the expected amount.  

"Keep the volume transparent to the investors, but also ensure that the numbers are real and will be completed," Ms. Yoder says. "The 'if you build it, they will come' mentality doesn't always hold true."

10. Distractions from providing high-quality patient care. Sometimes, ASCs overly focus on reducing expenses. It's always important to manage expenses, but also focus on aligning your ASC and physicians with the community for the long term.

"When well-positioned in their markets, ASCs can play a pivotal role in achieving the triple aim for healthcare, which is, improving patient experience, improving population health and reducing costs," Mr. Mathis says.


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