With 2019 having just wrapped up, let's take a look back at some of the ASC industry's most significant developments and trends from the year past.
1. Total knee arthroplasty added to ASC-payable list
Following through on its proposal, the Centers for Medicare & Medicaid Services (CMS) finalized the addition of total knee arthroplasty (TKA) to the ASC-payable list beginning Jan. 1, 2020, when it released the 2020 final payment rule for ASCs and hospital outpatient departments (HOPDs) in November.
As I wrote in my review of 2018, the number of ASCs launching total joint programs and performing total joint procedures on non-Medicare patients was already on the rise. I even postulated that 2020 could be the year CMS added TKA to the ASC-payable list. Now that it was, we can expect ASC total joint volume to rise even further.
2. Six cardiac procedures added to ASC-payable list
TKA wasn't the only noteworthy addition to the payable list. CMS also approved six new cardiac codes, which follows its addition of a dozen cardiac catheterization procedures last year. Whereas CMS added diagnostic catheterization procedures for 2019, the agency added interventional procedures for 2020. This will undoubtedly give existing cardiac programs a boost — since ASCs can now diagnose and deliver treatment — and likely motivate some ASCs that were considering adding a cardiac program to take more concrete steps forward.
Ambulatory Surgery Center Association (ASCA) CEO Bill Prentice celebrated the additions of TKA and the cardiac codes, stating in an ASCA press release, "… adding TKA to our procedures list so soon after moving it from the inpatient-only list, as well as a number of cardiac codes, speaks well to the confidence that CMS has in the ability of physicians to use well-established patient selection criteria to move appropriate patients to the lower-cost ASC setting."
3. Total hips, spine procedures removed from inpatient-only list
ASCs with total joint and/or spine programs may only be a year or two away from getting a boost as CMS finalized the removal of total hip arthroplasty (THA) and six spine codes from the inpatient-only (IPO) list for 2020. These procedures may now be performed in the hospital outpatient setting. TKA and many other procedures now performed in ASCs were initially removed from the IPO list before eventually being added to the ASC-payable list.
4. CMS finalizes aligning ASC payments with HOPDs
Another significant development coming out of the 2020 final payment rule: CMS's decision to continue aligning the ASC payment update factor with that used to update HOPD payments (hospital market basket). CMS will use the hospital market basket to update ASC payments through 2023.
5. Significant regulatory burdens reduced
In September, it was announced that years of efforts by ASCA and the ASC industry had paid off when CMS finalized a rule eliminating several burdensome Medicare compliance requirements. Most significant for the ASC industry is that an ASC is no longer required to have a written transfer agreement or hospital admitting privileges for all physicians who practice in the ASC. Rather, an ASC is now required to periodically provide its local hospital with written notice of its operation and patient population served.
6. Number of ASCs growing faster
Thanks to a widening gap between new (de novo) ASCs opening and existing facilities closing or merging, the number of Medicare-certified surgery centers is increasing faster than in recent years. Data from MedPAC indicate that between 2012-2016, the average annual percent change in the total number of ASCs was 1%, but from 2016-2017, that figure increased to 2.4%. In addition, while 2016 saw 159 new ASCs opening compared to 90 ASCs closing or merging, 2017 had reported figures of 189 and 60, respectively. The number of ASCs that closed or merged declined each year from 2012 to 2017. It would not be surprising to see similar results for 2018 and 2019.
7. Procedure migration continues
Another trend highlighted in last year's review, surgical procedures have continued to make their way out of the inpatient setting and into the outpatient setting, including ASCs. A Dark Daily report, citing data released from the American Hospital Association, notes that hospital outpatient revenue is catching up to inpatient revenue and that the statistics on outpatient revenue "… suggest providers nationwide are working to keep people out of more expensive hospital settings."
This is certainly the case concerning surgeries that can be safely performed in the outpatient setting. We have seen and can continue to expect more complex and higher-acuity cases to make their way into ASCs. These include total joint/orthopedics, cardiac, spine, and gynecology cases.
8. Private equity makes its presence known
Over the past several years, we've seen an increase in investments into the ASC industry by private equity companies (something we know a little about). In a Becker's ASC Review column, Scott Becker and Laura Dyrda note, "Private equity-driven companies are investing in surgery centers, and that comes in two different forms. One, funds like KKR invested in Covenant Surgical Partners with the intent of having growth in the amount of surgery centers in that company, and that's similar to investments by private equity funds in other surgery center companies. The flipside to that is private equity funds that are investing in surgical practice companies, including gastroenterology practices or procedural-driven practices, orthopedic practices, and ophthalmology practices, and in practice management companies looking to build surgery centers."
There is good reason to expect private equity deals to continue. Private equity firms had nearly $1.5 trillion in "dry powder" (i.e., unused capital) at the end of 2019, with CNBC reporting that this figure is the highest on record and more than double what it was five years ago. Firms are eager to invest, and the ASC industry appears ripe for an infusion of capital.
9. Cost remains a significant challenge for patients
This is an issue we highlighted last year and expect to do so for quite some time. Cost is a major factor for patients considering treatment, whether it be routine/elective, emergent, or urgent. A CNBC report shares some interesting data, including that more than half of U.S. adults say healthcare expenses have prevented or delayed their day-to-day activities, while about a quarter say medical bills have impacted longer-term goals. Also, the average American household spent almost $5,000 per person in 2018 in out-of-pocket expenses and insurance premiums — more than double what Americans spent in 1984. Another healthcare financial stressor: the potential for surprise medical bills (more on this next).
10. Surprise medical bills in the spotlight
In mid-December, it was announced that Congress was, as NPR states, "… moving toward a solution to the nation's surprise medical bill problem. Sort of." Addressing the challenge of surprise medical bills — which NPR defines as "… the often-exorbitant medical bills that come when patients don't realize they've been seen by a provider outside their insurance network" — has taken on a higher priority in recent years as word of these bills and their impact on lives have spread.
As an AARP article notes, a Kaiser Family Foundation poll found that two out of every three people worry that they will lack the ability to cover the costs of a surprise medical bill. This makes the issue of surprise medical bills a greater concern than being able to pay for prescription drugs, health insurance premiums or deductibles, or basic living staples (e.g., food, rent/mortgage, gas).
While national legislation is slowly advancing, some states aren't waiting to act. New surprise medical bill laws have recently gone into effect in Texas, Colorado, and Washington.
11. More hospital pricing data to become available
In mid-November, CMS finalized a rule concerning price transparency that affected all U.S. hospitals. Among the new requirements: hospitals must make public a yearly (current) list of its standard charges for provided items and services provided and must make public discounted cash prices, payer-specific negotiated charges, and de-identified minimum and maximum negotiated charges for at least 300 "shoppable" services (i.e., a service that can be scheduled by a consumer in advance) in a consumer-friendly manner. The rule goes into effect in 2021.
As noted in my 2018 review, in a discussion about the availability of the Procedure Price Lookup tool, ASCs may be able to leverage price transparency data to help consumers understand that surgery centers usually represent a lower-cost (and typically higher-quality) option for surgery compared to hospitals.
Looking into the crystal ball…
On February 12, the ASC industry will celebrate its 50th anniversary. It was on Feb. 12, 1970, that the first ASC — Surgicenter in Phoenix, Ariz. — opened for business. It's been a wild half-century, with a lot of highs and occasional lows. Heading into 2020, one could argue that the industry has never been stronger, having been buoyed by a pretty exceptional 2019. In fact, if the ASC industry as a whole needed to come up with a New Year's resolution, one might be: "Work to repeat 2019."
With that said, there is, as always, uncertainty about what the year will bring. Some important questions:
- Will THA be added to the ASC-payable list?
- What other procedures will be removed from the IPO list?
- How much of an impact will private equity, with its substantial dry powder, have on the industry?
- Will the number of ASCs continue to grow, or will we witness slowing or even declining growth due to consolidation, hospital investments in outpatient surgery, growth of office-based surgery, and other pressures?
- Will the federal government push for more disclosure of quality and pricing data?
- How will advanced technology, such as robotics and artificial intelligence, impact outpatient surgery?
- Will we see more shifting from fee-for-service to value-based reimbursement, such as bundled payments?
- What will be the impact of the upcoming presidential election (before and after)? Will we see a flurry of regulatory activity or more conservative approach?
You can count on Surgical Notes to keep a close watch on these and all other developments impacting the ASC industry. Doing so ensures we respond efficiently and effectively to changes that could affect our clients and their delivery of high-quality, cost-effective care. For the latest company and industry news, visit www.surgicalnotes.com and follow Surgical Notes on LinkedIn.
Randy Bishop (rbishop@surgicalnotes.com) is president and chief executive officer for Surgical Notes. Surgical Notes is a nationwide provider of revenue cycle solutions, including, transcription, coding, revenue cycle management (RCM), and document management applications for the ASC and surgical hospital markets.