10 Top Concerns for Surgery Center Physicians in 2012

As the trend of physician employment and physician practice acquisition continues at a rapid pace, surgery center physicians are struggling to determine where they will fit in the future of healthcare. They know that surgery centers provide a high-quality service at a cost that hospitals and their outpatient departments cannot match — but reimbursement reductions and increased regulatory burdens seem to indicate that the rest of the world hasn't caught on. Here, five surgery center physician leaders discuss their top concerns for surgery center ownership and participation in 2012.

1. Decreasing reimbursements.
Surgery center reimbursement continues to lag behind hospital reimbursement for the same procedure, adversely affecting distributions to ASC physician-investors. Larry Patterson, MD, medical director of Eye Centers of Tennessee and the Cataract and Laser Center in Crossville, Tenn., says declining reimbursement is always a concern for surgery center physicians, who are forced to produce ever-increasing volume to make up for loss of revenue. "We're being asked to get less and less money, and yet the government is giving us more and more burdens and regulations," he says. "You can only go so far in cutting costs and increasing volume."

T.K. Miller, MD, medical director of Roanoke Orthopedic Center and Roanoke Ambulatory Surgery Center in Virginia, says ASC physicians have little choice when it comes to dealing with governmental rate reductions. "Whether we feel [CMS fee schedules] are appropriate, they are what they are, and we have to work with them," he says.

He adds that fee schedules also trickle down to private insurance, adversely affecting specialties like GI and pain management that have recently suffered from cuts to Medicare rates.

2. Regulatory changes. Updates to the Medicare Conditions for Coverage have left some surgery centers with mountains of paperwork and significant changes to make in preparation for CMS surveys. Dr. Patterson says he has seen the Conditions for Coverage interpreted in different ways by different surveyors, making it difficult for his surgery center to know exactly how to meet the standards.

He says one of the requirements impacts sterilization in ophthalmic facilities by requiring that providers not compound drugs in the surgery center. He says some surveyors have interpreted the mixture of dilating drops and antibiotics immediately prior to surgery as a form of compounding. "Some surveyors claim that's compounding, but it's not," he says. "Instead of putting two or three drops in someone's eye, you're mixing them together in a separate container. Anyone with any amount of sense would realize that what we're doing causes no harm." He says while documentation is a major stressor for administrators struggling to meet CMS requirements, the actual changes to surgical practice are more time-consuming and frustrating.

He says while documentation is a major stressor for administrators struggling to meet CMS requirements, the actual changes to surgical practice are more time-consuming and frustrating.

3. Hospital employment of physicians. Physician recruitment continues to present a challenge for surgery center physicians, who need colleagues to bring case volume to keep their centers financially healthy. Physicians are increasingly seeking hospital employment as a shelter from reimbursement reductions and regulatory burdens, and even those physicians that would choose ASC investment do not have the available capital to invest. "Physician recruitment has been challenging and will, in my opinion, continue to be competitive," says Urfan Dar, MD, manager and medical director of Theda Oaks Surgery Center in San Antonio. "New graduating physicians do not have the resources available to invest in an ASC and tend to see employee positions with salary guarantees."

Richard Kube, MD, CEO, founder and owner of Prairie Spine Institute in Peoria, Ill., says gone are the days of creating volume by adding a groundbreaking service line that no one else in the community offers. "Five years ago, spine was one of the frontiers in ASCs, but at this point, ASCs have evolved to the point where a lot of physicians in your community are doing those cases in surgery centers," he says. "Those physicians have been gobbled up, too."

He says rather than recruit more physicians, ASCs must focus on driving more patients to the ASC to make their existing physicians busier. He says his practice has focused on building relationships with primary care physicians in the community in order to drive referrals — rather than new surgeons — to the ASC.

4. Hospital acquisitions of surgery centers. Hospitals are increasingly purchasing surgery centers to improve relationships with local physicians, provide a convenient surgical option for their providers and increase market share. Dr. Patterson says this trend means many surgery center physicians are facing a choice: sell all or part of their ASC to a hospital, or try to survive on significantly less reimbursement than a hospital outpatient department receives for the same cases.

"Hospitals are buying up surgery centers because hospitals are reimbursed handsomely for outpatient cases in comparison to [freestanding ASCs]," he says. "The government doesn't realize the problem they've created. The disparity in payments between hospitals and surgery centers is huge, and now that hospitals are buying surgery centers left and right across the country, the cost of medical care is only going to get higher."

He says freestanding surgery centers may struggle to compete with hospital-owned surgery centers in the same community, as the hospital-owned ASCs will often have the benefit of hospital-influenced contracts, electronic medical record software and other advantages.

5. Medicare quality reporting program. Dr. Patterson says the Medicare quality reporting program, which is expected to start in the fourth quarter of 2012, is a cause for concern for smaller surgery centers without the software to track quality data. "Small, single-specialty facilities like ophthalmic centers generally don't have a lot of experience with quality reporting," he says. "We don't have EMR in our surgery centers, we're strapped for resources and if we have to report on every claim by the end of 2012, that's going to be tough."

Unfortunately for ASCs without the capacity to collect data, surgery centers that do not report data to the Medicare program in 2012 will pay for their neglect down the road. An ASC that does not successfully report data to the Medicare program in 2012 will receive a 2 percent reduction in Medicare payments in 2014, and failure to report in subsequent years will affect future years' payments in the same way. In 2012, surgery centers only have to worry about reporting the required data, but surgery centers may be penalized for poor quality outcomes in the years to come.

6. Cost of implants. Dr. Miller says orthopedic-driven surgery centers may no longer enjoy insurance contracts that accept the costs of implants as dictated by suppliers. In the past, he says insurance companies would accept increases passed along over the course of the year and negotiate carve-outs to accommodate the cost of implants in the contract. He says as insurance companies become less willing to accept additional costs, surgery centers may have to try a new strategy. Dr. Miller says there is sufficient overlap in the orthopedic implant market that it is possible to select a primary implant vendor and negotiate reduced costs based on that relationship. Of course, this requires consensus from ASC physicians and careful ongoing assessment of case costs on the part of the ASC administrator.

"For orthopedic- and spine-based centers, this will be an area of significant change from the status quo," he says. Dr. Miller says surgery centers must assess every new implant for a "traditional" procedure for cost feasibility. New implants and old implants may be similar, but that does not necessarily mean they cost the same amount.

7. Electronic medical records. Jason Lockette, MD, an otolaryngologist at Shoals Outpatient Surgery in Florence, Ala., says integration of EMR systems will become more of an issue as more physician practices incorporate them. "It will be difficult for the standalone center to offer the same amenities — ease of access to lab, path and operative notes — that a hospital with an integrated network of employed physicians can," he says.

He adds that most surgery centers would benefit from an affordable computer software system to monitor and track supplies and case costs because a manual process makes it difficult and costly to follow such metrics.

Dr. Miller believes one of the top challenges of 2012 will be integrating the ASC EMR with the physician practice EMR. "Integration of an ASC's EMR and physician users' EMR systems has combined, exponential benefits," he says. "The ability to access records, templated notes and computer-based scheduling — with templated scheduling sheets — can provide huge dividends in reduced costs associated with perioperative assessment, reduction in case cancellations, OR equipment picks, implants needs and par levels and transcription costs."

8. Availability and cost of staff. Dr. Lockette cites "increasing supply and labor costs" as one of the most pressing concerns for next year, and salary surveys seem to support this fear. Registered nurse salaries increased 1.1 percent from 2009-2010, according to data from the ASC Association salary survey — and small surgery centers may be hit the hardest. According to data from VMG Health, nurses in ASCs with 1-2 ORs earn more than their counterparts in ASCs with three or more ORs. Surgery centers may be forced to cut into physician distributions to offer staff competitive salaries.

Steven Shin, MD, a physician with Kerlan-Jobe Orthopaedic Clinic in Los Angeles, says the availability of properly trained nurses and surgical technicians is also a concern. As competition increases for practitioners in short supply, surgery centers will have to get creative with their benefit packages and environment perks to attract the best talent. Most ASC physicians agree that competent, consistent staff members are one of the most attractive parts of working at a surgery center.

9. Accountable care organizations and healthcare reform.
Accountable care organizations remain an unknown for most surgery center physicians, as the integrated care models are designed for larger health systems and the outcome of federal healthcare reform has yet to be decided. While some physicians are preparing for a world with the Affordable Care Act as law, others are hoping it will be overturned by the Supreme Court or effectively eliminated by the electing of a Republican president in 2012.

Dr. Miller says whatever happens to healthcare reform, ACOs are still a cause for concern for surgery centers. "How will ASCs position themselves for an appropriate 'piece of the pie'?" he says. "Simply being the low-cost and most efficient provider may not be enough."

Surgery center physicians who hope to take advantage of Medicare ACOs and commercial look-a-likes should start conversations with their local hospitals now to determine how ACOs will affect their community and whether surgery centers will have a chance to participate in the model.

10. Investments in specialty-specific technology. ASC physicians agree that investments in clinical technology will be a major concern for the next year, as surgery centers struggle to compete with local hospitals and ASC physicians desire the latest equipment. Dr. Miller and Dr. Dar agree that more pain centers will expand their repertoire to include ultrasound-guided multi-side regional blocks and selective injections, which can reduce x-ray exposure in pain management. For these purchases, calculating return on investment is critical to determining whether the ASC has sufficient revenue and case volume to offset the cost of the equipment over time.

Dr. Patterson believes ophthalmic ASCs will grapple with whether to invest in a femtosecond laser over the next few years — a significant issue, considering the lasers can cost around $400,000 up front, with an additional "click" fee per case. He personally believes that femtosecond lasers are not financially feasible for most surgery centers at the moment. He discussed a return on investment model that showed a surgery center would have to perform 493 cases a year to break even on the laser purchase, even if the surgery center charged each patient $950 per case. He says while the technology may improve the physician experience of the cataract procedure, it does not necessarily improve clinical quality to any significant degree — at least not yet. "We all want to be the first one to say, 'We do laser cataract surgery,' but I don't think you'll get a competitive advantage by having the laser," he says.

Related Articles on ASC Operations:
10 ASC Must-Reads From the Week of Nov. 21
8 Tricks to Save More Money at Your Surgery Center
8 Ways to Involve ASC Physicians in Physician Recruitment

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