The shift of more complex orthopedic, spine and cardiology procedures to the ASC has accelerated over the past few months. That transition will likely continue in the coming years with CMS’ proposal to remove 266 orthopedic procedures, including 67 spine procedures, from the inpatient only list in 2021.
“The migration of higher acuity cases to the ASC will only continue to trend in a favorable direction as it serves not only the interest of the patient, but the payers and providers as well,” said Tony Taparo, chief growth officer of Surgery Partners. “Each year, CMS continues to approve more procedures to be done in an ASC therefore allowing the physician to make the determination based on what’s clinically best for their patients.”
The agency added total knee replacements to the ASC payable list beginning in 2020 and aims to add total hip replacements next year. The agency may also eliminate the inpatient only list and revise criteria for the ASC payable list in the future, which would potentially make 270 surgery or surgery-like codes payable in the ASC setting.
“These changes are in perfect alignment with our growth initiatives in higher acuity procedures, such as cardiac, orthopedic and spine,” Mr. Taparo said. “Despite COVID, we’ve experienced tremendous growth in our orthopedic and total joint service line. In June 2020, orthopedic cases increased 18 percent and total joint replacements saw a 2.6-times growth compared to the same month the prior year. Overall, the 2020 trend continues to be favorable with a 70 percent increase in total joint cases year-to-date.”
Surgery Partners currently has more than 180 locations nationwide, working with partners to customize strategy for each facility. The company has realized 10 percent annual same-facility growth over the past five years and now has around 1,500 partnered and 4,000 affiliated physicians. The company also works with health systems and has 12 joint venture facilities with partners such as Baptist Memorial Health Care in Memphis, Tenn., Nashville, Tenn.-based Vanderbilt Health System and UCLA Health System in Southern California.
The musculoskeletal service line makes up 44 percent of the procedures Surgery Partners facilities performs, and in June the company reported an 18 percent increase in orthopedic cases year-over-year, despite disruption from the pandemic during the second quarter. CMS’ and commercial payers’ changing policies, as well as new robotic technology, is expected to propel Surgery Partners’ musculoskeletal service line into the future.
Commercial payers that aren’t already reimbursing for total joint replacements and spinal fusions in the outpatient setting will likely follow Medicare’s lead, especially during the pandemic as patients are eager to stay out of hospitals for surgery whenever possible. Payers are also making the payment structure more desirable for members to have surgeries in the ASC. The shift was already underway when the pandemic began. In 2015, case volume trends show hospital outpatient departments covered 60 percent of the outpatient market share while ASCs had 40 percent; Mr. Taparo said today those percentages have flipped.
“In the next three to five years, we will continue to see a significant outmigration of cardiac, orthopedic and spine procedures to the ASC setting,” he said.
Most centers with total joint replacements have been performing them on commercial patients for several years, and payers like Humana have partnered with orthopedic practices and surgery centers to develop bundled payments for total joints and spinal fusions. ASCs are also more likely to pursue bundled payment options as total joint replacements shift from the inpatient to outpatient setting.
The changes CMS is making are positive steps for the ASC industry because the federal government is recognizing these procedures can be done safely within ASCs, and potentially result in better outcomes for the patient at a lower cost. The shift will be especially potent for total joint replacements; Sg2 estimates 51 percent of total joints will be performed outpatient by 2026, with many being in the ASC. The 2020 VMG Health Healthcare M&A Report also predicts growth for outpatient total joint volume, hitting 77 percent through 2026.
The effect of the pandemic
Will the trend toward total joint replacements in ASCs continue post-pandemic? Mr. Taparo thinks so.
In March and April, hospitals and ASCs across the U.S. experienced a severe disruption in case volume and revenue as states temporarily halted elective procedures to focus resources on treating patients with COVID-19 and to minimize the spread of the virus. Since then, most hospitals and surgery centers have resumed more normal operations. Many have hit 90 percent or more of their typical elective surgical volumes. Mr. Taparo said Surgery Partners’ revenue from physicians recruited in 2020 through June is up around 37 percent year over year.
“The strength of our business model and the execution of our leadership team and front-line associates has enabled Surgery Partners to persevere during the pandemic,” said Surgery Partners executive chairman of the board Wayne DeVeydt during the company’s second quarter earnings call in August. “We are cautiously optimistic we can maintain our current trajectory for the second half of 2020, and we remain confident in our long-term growth. Our confidence in our model and our value proposition was underscored by the 2021 Medicare hospital outpatient prospective payment system and ambulatory surgical center payment system proposal from CMS.”
During the second quarter earnings call, Surgery Partners CEO Eric Evans indicated the company could overcome potential COVID-19-related disruptions in the future. “The temporary suspension of elective procedures depressed overall volume [earlier in the year] but we remain cautiously optimistic as we look into the second half of the year based on our most recent results and the outstanding efforts of all our team members.” Even through the pandemic, Surgery Partners reported same-store case volume as a percentage of prior year totals was up 19 percent to 93 percent from April to June.
“Based on the strict protocols we have implemented and because our facilities generally do not treat [COVID-19] patients, we continue to believe we are uniquely positioned to be a safe haven for elective surgeries, and we are committed to serving the healthcare needs of our communities as this crisis unfolds,” Mr. Evans said.
One technology that helps surgeons bring more complex procedures into the surgery center is robotics. There has been an uptick in ASCs purchasing robots for orthopedic procedures in the past year, and Surgery Partners is working with its centers to acquire the technology.
“We feel it is important to provide our physicians with the latest technologies available. Many new physicians
are being trained in residency and fellowship programs on these robots and expect them to be available post schooling,” Mr. Taparo said. “Therefore, we are in the process of implementing a facility specific robotic strategy in markets where there is a physician demand and the financial analysis justifies the capital investment.”
While purchasing the robot is an extra capital expense, Mr. Taparo said manufacturers realize the reimbursement differential between ASCs and hospitals is significant and they will need to develop a separate strategy for the surgery center market. Surgery Partners has been working with the manufacturers to develop a cost structure that makes sense for the ASC business.
Over a 90-day period in 2020, Surgery Partners added four robots to its ASCs and plans to continue evaluating other opportunities. The company is also considering additional investments for its centers based on size and capabilities to accommodate for new procedures and expected increased demand over the next several years.
“Many facilities have started to invest in robotics and will continue to evaluate the needed capital investment in cardiac and spine procedures,” Mr. Taparo said.
Outlook for ASCs
Mr. Taparo said Surgery Partners’ outlook on the ASC industry is positive, and he sees Medicare continuing to support the transition of cases to ASCs in the next several years.
“These changes will continue to increase the success of ASCs coupled with payer pressure on hospitals and providers to deliver a lower cost, higher quality care alternative,” he said. “Patients continue to become more sophisticated in researching and making decisions related to their healthcare needs. Many are already requesting a more convenient, low-cost solution and asking their physicians to consider an ASC for their surgical procedures.”
This article is sponsored by Surgery Partners.
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