6 out-of-the-box opportunities to improve ASC profitability in 2017

As we close out 2016 and roll into 2017, ambulatory surgery center administrators are preparing for the challenges of the coming year. With the relentless evolutions and changes taking place in the healthcare industry, there is much to prepare for.

Key financial trends to watch out for in 2017
Chris Bishop, CEO of Regent Surgical Health, notes that the biggest trend in 2017 will be  similar to the transition of the past few years — the ongoing shift from fee-for-service to value-based care.

"It is no secret that there is a transition taking place in how we pay for healthcare in the U.S.," he says. "The two to three forms that I am most familiar with, such as ACOs, have had limited success but will continue to grow. Additionally, there will be a strategic shift toward population health initiatives and bundled payments."

The first big year of commercial bundled payments on an outpatient basis will be 2017, he adds. The outpatient bundled payment was tested on a minimal basis in 2016, and will be implemented with more frequency. This will force surgeons to take a bigger interest in the cost of cases, as bundled payment programs shift risk from the payer to surgeon.  

Increasingly, higher acuity procedures will be brought into the ASC setting, notes Mr. Bishop. Complex spine and total joint replacement cases are already becoming popular additions to surgery centers. Also, as Medicare adds codes for high acuity outpatient cases, other payers will be encouraged to follow suit.

"Medicare, through their inpatient bundle activity, is starting to recognize that some cases are appropriate in the outpatient setting," says Mr. Bishop. "Medicare has got to continue to bend the cost curve and as long as they experience high-quality joint replacement outcomes after being discharged same day or overnight from the hospital, they will start to add outpatient codes more rapidly."

Finally, Mr. Bishop says, the industry will see downward reimbursement pressure on physician-owned ASCs. The loss of out-of-network reimbursement is pushing ASCs to align with hospitals, which allows surgery centers greater leverage towards a fair market value reimbursement during payer negotiations.

"This is a flawed solution on the part of payers," he adds. "It is bad for competition, which is bad for everyone, consumers and payers."  If payers offer reasonable reimbursements for independent ASCs, it may slow the move to align with the large providers in the community.

Boosting ASC profitability

1. High-acuity cases. "Looking at our numbers in 2015 versus 2016, at Regent we have seen a 300 percent increase in total joint volume, and we think this will increase by 500 percent in 2017," says Mr. Bishop. Needless to say, Regent is investing heavily to grow in the TJR market. ASCs not considering TJRs are missing a major opportunity.

Surgeons are also big champions of outpatient TJR, he notes. They come back from the conferences and society meetings where they see how safely these procedures can be performed in the outpatient setting.

Additionally, outpatient spine procedures are gaining popularity, says Mr. Bishop. In January 2015, CMS approved nine ASC spine codes, including laminectomies and ACDFs. While these had been performed in ASCs for up to a decade beforehand, there was some hesitancy due to safety concerns and lack of payer contracts. However, evidence now exists to prove spine surgeries can be performed safely in the outpatient setting and payers are more willing to reimburse for spine in ASCs. Also, improved MIS techniques and postoperative pain management solutions are assisting the move of traditionally inpatient procedures to the outpatient setting.

"Some form of a bundled payment program will further stimulate the move from the inpatient to outpatient setting," says Mr. Bishop. "As surgeons take on more risk in terms of outcomes, you will also see a push towards reducing postoperative costs."

2. Implant pricing. The popularity of high-acuity outpatient procedures as well as the increase in bundled payment models will result in a downward pressure on implant prices. The rationale is that if a surgeon is an ASC owner, they have incentive to use a cost-effective implant solution, says Mr. Bishop. Surgeons haven't historically monitored implant pricing, but that is changing with the risk acceptance of bundled payments and ASC ownership.

3. Cybersecurity. "One thing that keeps me awake at night is the issue of cybersecurity," says Mr. Bishop. "When you think of improving profitability, you wouldn't normally lump this into this article, but a lot of our ASC brethren have been hit with ransomware attacks."

In July, Langhorne, Pa.-based Ambulatory Surgery Center at St. Mary sent letters to nearly 13,000 patients whose personal information may have been breached following a ransomware attack. In the letter, the ASC stated the hackers installed ransomware, which tried to prohibit the ASC from accessing files until it paid ransom.

If you start investing a lot of time and money in dealing with data breaches, that will negatively impact your profitability, notes Mr. Bishop. Also, it may harm your surgery center brand and thus, your case volumes. Cybersecurity insurance and other cyber defensive measures are a top priority for Regent's centers.

4. Revenue cycle management. Providing high-quality care is only part of the ASC profitability equation. The other side is contracts, billing and collections. Mr. Bishop says that many ASCs work very hard to deliver great care but don't pay as close attention to the blocking and tackling of their revenue cycle. Regent finds that they can often create a 5 percent to 30 percent increase in value from this key category by applying its 15 years of experience and expertise. "Our 11 years performing RCM exclusively for ASCs have equated to setting the gold standards in our industry, including setting a record recently of 28.6 days outstanding average for our facilities," says Regent's Vice President of Revenue Cycle Michael Orseno.

5. Staffing. Managing staffing at your surgery center effectively is key to a profitable ASC. Mr. Bishop suggests looking closely at your staffing practices to ensure you are paying fair market value and not over- or under-paying. He also notes that a chronic issue in the ASC industry  tends to be overstaffing.

"There is a mistaken concept that all four operating rooms in a four-OR ASC need to be staffed at all times," he says. "If you only have enough cases to fill two rooms, don't staff and run four rooms, shut down two rooms. This requires understanding physician partners who are willing to support schedule compression and the resulting, proper staffing model.
6. Reporting regulations. The increasing regulations focused on reporting remains a challenge for ASCs, albeit a challenge resulting in net positives, says Mr. Bishop. Additional reporting requirements and data sharing helps ASCs improve quality of care, which leads to improved profitability.

"Our industry is doing a better job of reporting data that supports our superior surgical outcomes," he says. "As CMS expands the criteria that they want to measure our ASCs by, centers that are lagging are forced to raise their capabilities. Ultimately, data drives better outcomes.

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