10 Current Issues Affecting ASCs Nationwide

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As ASCs enter a period of declining reimbursement, regulatory changes and new ownership models, state ASC associations are attempting to guide their members through budgetary crises and confusing legislation. Leaders and members from six state ASC associations discuss 10 issues affecting ASCs nationwide.

1. Declining reimbursement rates. Across the country, ASCs are struggling because of rapidly declining reimbursement rates — a problem that many facilities unfortunately lack the negotiating clout to reverse. While most ASCs are struggling with the general trend of declining reimbursements, some states are currently seeing legislative changes that could lower reimbursement rates even further.

In Alabama, children who are ineligible for Medicaid but cannot afford private health insurance are covered under the ALL Kids program, a health insurance program for children under the age of 19. According to Donna Smith, president of the Alabama Association of Ambulatory Surgery Centers and administrator of The Surgery Center in Oxford, Ala., the program has been "phenomenal" in the past because it has historically reimbursed ASCs at Blue Cross Blue Shield rates.

"But we understand that because of Medicaid eligibility requirements being expanded, some of those kinds [that weren't previously covered] will fall under Medicaid and increase our Medicaid numbers," she says. Since Medicaid reimbursement rates are significantly lower than the current ALL Kids/Blue Cross reimbursement rates, she predicts ASCs will be forced to reject Medicaid cases for children — or accept reimbursement rates that force the ASC to absorb a loss.

2. Lack of reimbursement for implants.
Many state associations have seen their state's multi-specialty and orthopedic-driven ASCs struggling due to failure on the part of insurers to reimburse for implants. According to Ms. Smith, the cost of implants in Alabama is significantly higher than the reimbursement rate. "It means that either those cases have to be done at a huge loss, or they have to be sent to the hospital." In a state like Alabama, where the majority of licensed ASCs are multi-specialty facilities, this trend is a major problem for those facilities traditionally replying on orthopedics for revenue.

The same problem faces ASCs in Arizona and Minnesota. According to Stuart Katz, executive director of Tucson Orthopedic Surgery Center and an Arizona Ambulatory Surgery Center Association member, Arizona's Medicaid agency, AHCCCS, recently implemented legislative changes that curtailed coverage of operations that implant insulin pumps. "That change means people will have to go back to needles and insulin, and I don't think [AHCCCS] understands the long-term effects when patients are left to use [needles and insulin rather than implanted pumps]," he says. "They wind up in the hospital, which means the cost benefit isn't there in the long run."

Chris Squire, board member of the Minnesota Ambulatory Surgery Center Association, says the value of ASCs is wasted when payors fail to reimburse for implants. "Our hospital partners are great facilities, but for the more elective cases that can be done in an outpatient environment, we provide quality care and high patient satisfaction, and we can move cases in and out in a much more cost-effective way," he says. "To not get reimbursed seems counter-productive."

3. Low patient volume.
As a result of competition between ASCs and hospitals, as well as patient financial woes, many ASCs are experiencing decreased patient volume. According to Mr. Katz, Arizona ASCs — like many facilities nationwide — are suffering from the state's unemployment. He says around 20 percent of Arizona residents use AHCCCS, and many centers are struggling because residents lack the discretionary spending necessary to undergo ASC procedures.

Ms. Smith says while Alabama is "neck-and-neck" with the national unemployment rate overall, rural areas of the state have been affected at a rate higher than the national average. As patients struggle to pay their medical bills, Alabama ASCs are forced to consider options they might not have accepted in the past, such as long-term payment plans. "ASCs have to do more to compensate for the patient not having out-of-pocket money," she says. "They have to make sure they offer options that allow the patient to pay over time."

4. Impending infection control standards.
For many ASCs, the impending expansion of infection control standards poses a problem for financially strapped facilities. Unlike hospitals, ASCs often lack the financial resources to invest in technology necessary for quality reporting and staff members to oversee compliance. Mr. Katz says while Arizona ASCs are currently in a good position to meet upcoming infection control standards, the real issue lies with the people responsible for developing those standards. "If you have a bunch of bureaucrats back in Washington with no practice experience [developing the standards], some of [the standards] may be doable and some may be outrageous." He says ASCs are concerned CMS may publish a zero-tolerance policy for infections that ASCs would find impossible to meet.

Mr. Squire says before ASCs worry about following infection control regulations, associations should work with the state to interpret the guidelines. MNASCA is currently working with Minnesota's department of health to "get on the same page as to the expectations for current regulatory guidelines," he says. "If we have to report infection data within 30 days, [the state needs to understand] we're very dependent on physicians to report back data when we request it."

Mark Mayo, executive director of the ASC Association of Illinois, says his association is working with the Illinois Department of Health to create an adverse reporting mechanism that would let ASCs benchmark their quality control data against other facilities. "Rather than just look at what centers were doing, we felt [the department of health] needed to be more of a resource [to help centers improve]," he said.

5. Moratoriums on ASC development.
The New Jersey Association of ASCs is especially concerned with the moratorium on ASC development put forth by an amendment to the Codey Law, says Larry Trenk, president of the N.J. Association of ASCs. The amendment, which was issued in March 2009 and includes revisions to the N.J. anti-self-referral statute, also placed a moratorium on the issuance of new licenses to ASCs by the N.J. Department of Health and Senior Services. Some exceptions include changes of ownership of an existing center, relocation of an ASC to within 20 miles or, with DHSS approval, entities owned in whole or in part by a New Jersey hospital or medical school.

But for most ASCs, the moratorium means no new development. "The moratorium and reimbursement issues are going to have a major impact on the future development of ASCs," Mr. Trenk says. "You may see some centers purchased by outside companies or a hospital that will present them with better leverage in terms of managed care contracts."

6. Increased need for hospital/ASC partnerships.
Increased competition between hospitals and ASCs, in addition to declining reimbursement rates, is pushing ASCs in many states to consider joint ventures with hospitals. Mr. Squire says in Minnesota, "it's becoming increasingly difficult to survive without a system or hospital affiliation," which can give an ASC better access to managed care contracts and better GPO leverage.

Ms. Mims says the Texas ASC industry may start to notice a move toward partnerships with hospitals because of the increased emphasis on integrated care models and ACOs. "Most people believe that standalone entities, including ASCs, hospitals and even physician practices, are not going to be able to survive healthcare reform without integration of healthcare models," she says. She adds physicians and ASCS that are aligned with hospitals will be in a better position to implement EMR going forward as well.  

Mark Mayo, executive director of the ASC Association of Illinois, says that as more hospitals merge and partner with each other, independent surgery centers may be excluded from physician referrals and see drops in patient volume. But he says a hospital joint venture does not have to be the answer. As 32 million Americans receive coverage for the first time in 2011, presumably individuals will seek treatment for conditions they were not able to get coverage for in the past. He says in order to take advantage of this patient influx, ASCs must work to build relationships with primary care physicians. "We need to provide information to those PCPs who feed cases into surgical practices," he says. "I see that as a way to grow interest in surgery centers, and I think it's an excellent opportunity to partner with physicians."

7. Challenges to out-of-network facility reimbursements.
In some states, out-of-network facilities are facing new laws that reduce OON reimbursements or place caps on OON reimbursement rates. In New Jersey, OON ASCs have historically benefited from very lucrative reimbursement rates, receiving on average three times the reimbursement for being OON than in-network. But that trend may be about to change: New Jersey insurance carriers have recently announced plans to tie OON network reimbursement of ASCs to Medicare. Mr. Trenk says if insurance companies are successful in curtailing or controlling the OON insurance level, the power will shift dramatically from ASCs to payors. If insurance companies gain extreme leverage over OON ASCs, he predicts in-network ASCs will also be adversely impacted. "If the most they're going to pay you is a certain percentage of Medicare if you're OON, who's to say they're not going to pay the same thing for in-network?" he says.

According to Ms. Mims, Texas insurance companies are pursuing similar plans. At a recent ASC conference, Ms. Mims heard discussion about Blue Cross Blue Shield announcing OON rates will be tied to Medicare rates. "If these changes occur, that could affect all the facilities that have historically been OON," she says.

8. Cuts to ASC supply budgets. In states across the country, tight ASC budgets mean administrators must look to staffing and supplies — the two most expensive items on a center's budget — to cut costs. Ms. Smith says Alabama ASCs have responded to the economic downturn and tighter budgets by going through distributors to achieve savings on janitorial and office supplies as well as medical supplies. "Those are supplies we [traditionally] didn't purchase with a medical distributor," she says. She says working with a distributor for those supplies can save ASCs money at a time when keeping supply costs low is essential for a center's financial stability.

9. Inconsistency between federal and state rules. In Arizona, the state association is attempting to change an Arizona rule requiring ASCs to document the patient's history and physical on the chart the day before the procedure. "Medicare allows the H&P to be on the chart prior to admission, and Arizona says it has to be on the chart the day before, so there is an inconsistency there," says Mr. Katz. Unfortunately, Arizona Gov. Jan Brewer instituted a moratorium on all new rule-making by state agencies in Jan. 2009 in order to avoid costly, burdensome and unnecessary rules — a decision that prevents the Department of Health Services from changing the H&P rule.

Mr. Katz says the rule should be changed to ensure ASCs do not have to cancel surgeries unnecessarily. "[Physicians] have to assess the patient prior to surgery anyway," he says. "It's not as if it's the first time they're seeing the patient." He says the AASCA would like Gov. Brewer to temporarily lift the moratorium on rulemaking to allow the rule change.

10. Attempts to grow association membership and influence. In order to tackle the changes coming through healthcare reform, many state associations recognize the importance of growing their membership to more accurately and effectively represent the state's facilities. In New Jersey, where membership sits at around 30 percent of all ASCs, the NJAASC would like to increase membership to 50 percent over the next year through an extensive membership drive.

Mr. Katz says the Arizona association has increased membership by lowering dues, a strategy that associations with available finances might consider. "If you lessen dues, you'll create more members," he says. "When we say we want everybody involved, we mean it."

For states with an already-high percentage of ASC membership, the next task may be to connect with other state associations on common issues. The Alabama Association, which boasts a membership rate of 80 percent of freestanding ASCs in the state, holds an annual ASC conference that brings together ASCs from Alabama, Mississippi, Louisiana and northern Florida — states that share similar issues facing ASCs.  

MNASCA is working with state legislators to grow awareness of the value of ASCs in state government, according to Mr. Squire. "A lot of it's about education and getting legislators to understand how the healthcare delivery system works," he says. "We're letting them know what our challenges are and how regulatory burdens can add cost without bringing many substantive changes."

Read more about issues impacting ASCs nationwide:

-5 Issues Shaping the Future of Illinois ASCs

-5 Critical Issues Affecting Minnesota ASCs

-5 Issues Affecting the Future of Alabama ASCs

-5 Regulatory and Operational Issues Affecting Arizona ASCs

-4 Significant Challenges Facing Texas ASCs

-5 Issues Affecting the Future of New Jersey ASCs

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