10 Top Concerns for Surgery Center Administrators in 2012

Low reimbursement, low volume, increasing physician employment, increasing regulatory requirements, increasing staff shortages, increasing market saturation: These are only a few of the issues affecting ambulatory surgery centers at the moment. While ASCs are still able to provide high-quality care at a lower cost than their hospital competitors, they are doing so under increasing strain from economic pressures, physician shortages and regulatory mandates. Here are 10 of the most pressing concerns for ASC administrators in 2012.

1. High deductibles. Patients are increasingly unable to pay for outpatient surgery because of the high deductibles included in their insurance plans, according to Lynda Simon, RN, administrator of St. John's Clinic: Head and Neck Surgery in Springfield, Mo. "We have young couples with insurance through their employer, and their deductible is $5,000," she says. "They have an annual income of $15,000-$20,000, and they're living on faith that medical bills or surgery will not be necessary."

High deductibles can be crippling for a surgery center because patients will either forego surgery due to the expense or undergo surgery and then allow the bill to be sent to bad debt. In order to keep days in A/R at an industry benchmark of 35-40, surgery centers must work with patients to set up payment plans that allow the patient to pay a small amount over a period of time.

Otherwise, the business office will spend too much time chasing down patients who owe money, often with very little result at the end. But Ms. Simon says even payment plans can be problematic for patients with limited finances. "We are seeing increased bad debt because of more patients with a self-pay status," she says. "They sign up for payment plans with no intention of ever paying the bill."

2. Aging nursing population.
According to a 2011 survey of registered nurses by AMN Healthcare, the average age of registered nurses increased from 2010 to 2011, jumping from 48.5 to 49.2 years old. In 2011, 44 percent of nurses were 40-54 years old, and 36 percent of nurses were 55 or older. This means 80 percent of nurses were 40 or older, which poses a problem for ASCs recruiting nurses in the future.

In addition to the age issue, 71 percent of nurses said they were not confident that healthcare reform would increase the supply of nurses. "The workforce is aging out, and the nursing schools are not offering surgery rotations," Ms. Simon says. "I met a new grad and asked her how much time she spent in surgery during her training. The sobering answer: one day."

Margaret Acker, administrator of SOUTHWEST Surgical Center in Byron Center, Mich., agrees that nurse recruitment poses a problem for her surgery center in the coming years. "As most RNs aren't young, how are we supposed to recruit and retain qualified providers?" she says.

3. Increase of Medicare/Medicaid as a payor source. Two facts are certain: The baby boomer generation is hitting Medicare age, and expansion of healthcare coverage will add millions of Medicaid beneficiaries to state and federal payrolls. This means the number of patients with commercial coverage, who usually represent the most lucrative cases for surgery centers, is remaining relatively stagnant, while the number of federally covered patients is increasing.

"Medicare and Medicaid pay poorly," Ms. Simon says. "Additionally, insurance companies are looking to Medicaid and Medicare to base their calculations of reimbursement." Many surgery centers are moving away from payor contracts that base payment on a "percentage of Medicare," considering specialties such as GI and pain management have suffered hits from Medicare in recent years. Most surgery centers do not accept much Medicaid — VMG puts the percentage of payor mix at an average of 3 percent for 2011 — but the increase in covered lives may mean more Medicaid cases scheduled at ASCs.

4. Cutting staff costs while retaining staff. Staffing is one of the two biggest costs for surgery centers, meaning that cash-strapped ASCs must keep staffing costs in line in order to maintain profitability. Unfortunately, cutting staff hours can result in losing staff permanently to the local hospital or another surgery center. "How do we maintain our excellent standard of care if we lose staff because of flexing hours?" says Michelle Dickison, RN, CASC, administrator of Baptist Plaza Surgicare in Nashville. The most common remedies for high staffing costs include flexing staff hours, sending staff home on light days and cross-training staff members so they can perform more than one job (which, of course, costs money). While these tactics may be effective for saving money, they are often damaging to staff morale and retention.

Ms. Dickison also expressed concern over surgery center staff members who are struggling with house and car payments and other personal financial issues. "They are struggling with these things, and we are sending them home early," she says. "How do we continually motivate staff and create a positive work environment when we are asking for more in less amount of time?"

5. Maintaining high volumes. High volumes are essential for profitability at a surgery center. Ms. Dickison says it can be challenging to know how much the economy is affecting volumes, and how much the surgery center could be improving volumes with more effort. "Are we capturing all the volume that's expected?" she says. Mike Pankey, RN, administrator of Ambulatory Surgery Center of Spartanburg (S.C.), says he has seen a lack of self-employed physicians coming out of school. "Our independent physician population is aging rapidly here, and high unemployment rates have started to affect our volumes after two years," he says.

In many centers, volume depends on a few physicians who bring a majority of their cases to the surgery center. While this strategy can be profitable in the short term, dependence on a few physicians can cause major volume problems if one physician retires, dies or stops bringing cases to the center.

6. Patients waiting longer to undergo surgery. In a May New York Times report, several insurers discussed the "low level" of medical use in 2011, filling insurance company coffers while patients postpone care due to strained budgets. In 2010, about 10 percent of people covered by their employer had a deductible of at least $2,000, according to non-profit research group Kaiser Family Foundation, compared to just 5 percent of covered workers in 2008. When patients are more careful with their money, they are less likely to schedule elective surgery, creating volume problems for surgery centers.

Ms. Simon adds that when patients put off surgery for too long, the risk of complications becomes higher. "Patients are waiting longer to have necessary surgery," she says. "Sicker patients equal more co-morbidities, poorer outcomes, litigation and increased infections."

7. Regulatory issues. Accreditation and regulatory requirements are a constant battle for surgery center administrators as they attempt to update processes, policies and paperwork from year to year to meet standards. Brent Ashby, administrator of Audubon Surgery Center in Colorado Springs, says regulatory requirements are the biggest challenge for his surgery center this year. "From my perspective, one of the greatest challenges facing ASC administrators is keeping up with the ever-changing state and federal regulations," Mr. Ashby says. "In the past few years, we have seen numerous regulation changes by CMS and the Colorado Department of Public Health and Environment. Achieving and maintaining Medicare accreditation has become more difficult of late, [and] staying on top of this consumes more of my time than it has in the past."

In 2012, ASCs will be tasked with a new regulatory requirement: CMS' new quality reporting program for ASCs. Under the program, ASCs that fail to report required information will face a reduction in their Medicare payments. For example, beginning on Oct. 1, 2012, surgery centers will be required to report data on patient burns, patient falls, wrong side/side/patient/procedure/implant, hospital admissions and transfers and prophylactic IV antibiotic timing. 2013 will introduce two more measures: safe surgery checklist use in 2012 and 2012 volume of certain procedures. While these two measures will not be reported until 2013, ASCs must ensure they are using a safe surgery checklist and have a system in place to capture surgical volume data on Jan. 1, 2012.

8. Hospital employment poaching physicians. Ms. Acker says she continues to see hospitals employing physicians and thereby preventing them from bringing cases to the ASC. Many hospital employment contracts include a non-compete clause that prevents physicians from owning shares in a facility. This means that surgery centers, which depend on physician investment and case volume from those investors, may be dependent on their existing investors rather than being able to recruit new ones.

Greg Horner, MD, managing partner of Smithfield Surgical Partners, says even in California, where hospital employment of physicians is illegal, "medical foundations" allow physicians to integrate with large health systems without direct employment. He said while primary care physicians are the first targeted by hospitals seeking physician employees, specialists — particularly orthopedic surgeons, ophthalmologists, pain management and spine — are next on the list.

The significance of the issue differs from city to city: According to a June study from the Center for Studying Health System Change, Cleveland, Indianapolis and Greenville, S.C., are close to saturation in hospital employment of primary care physicians and specialists. In contrast, northern New Jersey and Miami face low physician interest in employment. The authors also found that while there are still strained relations between physicians and hospitals, more physicians are actively seeking employment and more hospitals are employing physicians than in the past.

9. Implementation of EMR.
The federal requirements for surgery center EMR are still unclear, and studies of physician practices indicate that smaller centers are probably behind in EMR implementation as well. According to a national Health Affairs study of small and midsize physician practices, only a quarter of practices used an EMR for progress notes, and fewer practices than that used an EMR to its "full potential."

Ms. Acker says she and her colleagues are unsure whether to implement an expensive EMR when they do not know yet what the requirements will be for surgery centers. Surgery centers are also tasked with investing in systems that are compatible with the systems installed at their physician practices.

10. Investment in new technology.
There are plenty of options for ASCs looking to invest in new technology in 2012 — the problem is whether they can afford it. Anesthesiologists performing orthopedic cases can benefit greatly from ultrasound-guided regional anesthesia, if the ASC can afford the ultrasound equipment necessary for the technique.

Ophthalmic surgery centers across the country are starting to invest in Alcon's LenSx femtosecond laser — an attractive option, if the surgery center can foot the $500,000 bill. Surgery center administrators must look carefully at return on investment to determine whether case volume will make up for the cost of the equipment.

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