Nearly 7,000 ASCs now deliver surgery at lower cost, with high patient satisfaction and almost no infections. By William Prentice’s account, the industry is still fighting uphill.
The obstacle isn’t the case for ASCs, Mr. Prentice, CEO of the Ambulatory Surgery Center Association, said during a panel at Becker’s 32nd Annual ASC conference in Chicago. It’s how Medicare was built.
“Our health system is kind of based upon who got there first,” he said. Hospitals got there first, took the high ground on healthcare spending and have held it since. ASCs have spent more than 50 years trying to make the climb.
A payment system that penalizes growth
ASCs have won some ground. For years, CMS updated ASC rates with a different inflation factor than it used for hospitals, so centers slipped further behind each year. ASCA persuaded the agency to apply the hospital inflation factor instead, which has kept the gap from widening.
The bigger problem, Mr. Prentice said, is structural. Medicare pays each care setting from its own silo — hospital outpatient departments, ASCs, physicians — and tries to keep each silo budget neutral. When more procedures move into ASCs, CMS holds the ASC silo’s spending in check by lowering what it pays per case. The setting that grows gets paid less for growing.
That dynamic is why ASCA was bracing for CMS’ 2027 outpatient payment rule, expected days after the panel. Mr. Prentice said that if the rule were finalized as proposed, ASCs would see cuts to 85 of their 100 most common procedures.
In his view, the incentives run backward. “What our policymakers in Washington should want is more of that migration,” he said. “They should want more volume moving from the more expensive HOPD setting to the ASC setting. Yet they do not have policies in place to promote that.”
Despite the slow growth in outpatient supportive policies, ASC growth and investments are only projected to get higher, especially as CMS begins to phase out the inpatient-only list.
Mr. Prentice expects the impact of eliminating inpatient-only lists to be measured at first. The bigger benefit is procedural: ASCs no longer have to go to CMS “hat in hand,” with clinicians and data, to win coverage for procedures such as total knee, shoulder and hip replacements. As clinicians grow more comfortable with those cases and anesthesia and pain control improve, more procedures can move to ASCs without a regulatory fight.
Asked why large health systems are making multibillion-dollar bets on ASC companies despite lower ASC rates, Mr. Prentice pointed to the model’s efficiency and the fact that patients prefer it. He said systems may also be positioning for an eventual reckoning in which payers actively steer care to lower-cost settings, and owning a national ASC network ahead of that shift makes sense.
ASCA’s proposed fix is narrow: merge the hospital outpatient and ASC silos into a single outpatient silo, so a procedure shifting from one setting to the other no longer triggers rate cuts. Mr. Prentice said CMS could make the change on its own, though ASCA presses Congress as well.
Mr. Prentice said he is seeing growing interest on Capitol Hill in limiting Medicare Advantage prior authorization, though the midterm elections could reshape the agenda.
Whichever way the election breaks, Mr. Prentice’s argument to the next Congress and CMS is the same: payment policy should reward care that moves to lower-cost settings, not penalize it.
A pitch to hospitals
Mr. Prentice framed the change as one hospitals could support. If volume shifted to the lowest-cost appropriate setting, he argued, patients and payers would spend less, and the savings could flow back to hospitals for the complex, expensive care only they can provide. That would ease the cost-shift mindset in which hospitals seek higher rates across the board to subsidize their most costly services.
“We pay them better for the things that only they can do,” he said.
Getting there means overcoming a lopsided fight in Washington. Hospitals and health systems field far more associations and lobbyists than ASCs, Mr. Prentice said, and they are often the largest employer in a lawmaker’s district.
Physicians face a different handicap: the community is split across specialties competing for the same slice of the Medicare physician payment pie, which makes a unified front hard to build.
Where ASCs side with hospitals
Regarding site-neutral payments, Mr. Prentice said ASCs and hospitals share concerns. Paying the same rate for a procedure regardless of setting can look like an easy way to save billions. But lowering every Medicare procedure to the ASC rate would hit hospital outpatient departments, which are paid roughly double what ASCs receive.
A cut of that size, he said, “would be daunting and would create enormous problems for them, not only financially, but also in terms of their willingness to take cases.” Some of those patients, particularly those with significant comorbidities, don’t belong in an ASC. The likely outcome would be pressure on centers to take cases they aren’t equipped for, or an access problem for those patients.
At the Becker’s 32nd Annual Meeting: The Business and Operations of ASCs, taking place October 29-31 in Chicago, ASC leaders, surgeons and healthcare executives will explore strategies to drive growth, enhance operational performance, navigate reimbursement challenges and prepare for the future of ambulatory surgery. Apply for complimentary registration now.
