In an effort to further explore recent ASC performance, VMG Health conducted a two-part study analyzing same center volume and reimbursement trends. Part I of our article, accessible by clicking here, focused exclusively on same center volume trends, broken out by specialty and region. It was concluded that across the centers analyzed, there is a general trend of flat to slightly declining volume. As such, the takeaway from that analysis was that despite a modest recovery in the broader economy, ASC volume growth remains weak. This article, part II, focuses on net revenue per case trends for the same centers analyzed in part I.
Before the results of the analysis are detailed, the findings must be caveated with a broader understanding of trends in Medicare reimbursement to ASCs. Beginning in 2008 and concluding in 2011, Medicare phased in a new ASC payment methodology with a goal to transition ASC reimbursement from grouper based to APC (hospital) based. In 2008, the first phase of the new payment system began with a 75/25 blend of the 2007 ASC payment rate. In 2009, a 50/50 blend applied; in 2010, a 25/75 blend applied; and in 2011, the new payment system is being fully implemented.
With the final phases of the new payment system being implemented, specialties historically providing the highest volume of Medicare services (i.e., ophthalmology and gastroenterology) are expected to experience a decline in net revenue per case. Conversely, specialties historically providing lower levels of volume to Medicare patients (i.e., orthopedics and obstetrics/gynecology) are expected to experience an increase in net revenue per case.
Within this study, 118 ASCs located throughout the United States were analyzed to compare 2009 to 2010 case volume and net revenue per case growth. Data was gathered using VMG Health’s published Multi-Specialty ASC Intellimarker. Intellimarker is a compilation of information that provides detailed financial benchmarking information and analysis on ASCs around the United States.
Same center growth trends: aggregate and by specialty
As illustrated in the chart below, overall net revenue per case (NRPC) for the 118 ASCs analyzed increased from an aggregate $1,663 per case in 2009 to $1,702 per case in 2010. This represents a minimal increase of $39 per case, or 2.3 percent growth.
Nine of the 12 specialties shown above displayed an increase in net revenue per case from 2009 to 2010. Neurology had the largest growth in dollars and percent with a $763 increase per case, or 14.6 percent growth. Obstetrics/gynecology experienced the second largest growth in net revenue per case, exhibiting an increase of $138. Orthopedics and general surgery were closely behind, increasing $96 (3.4 percent) and $94 (4.7 percent) per case, respectively. Podiatry increased $68 (3.1 percent) and urology increased $63 (3.4 percent) per case. A significant driver for the overall increase in net revenue per case can be largely attributed to the growth in orthopedic and pain management reimbursement given the prevalence of the procedures in the ASC setting.
Of the 12 specialties shown above, only 3 specialties had lower net revenue per case in 2010 versus 2009. Oral surgery experienced the largest decline at $144 per case, representing a 12.9 percent change. Gastroenterology decreased 0.9 percent, or $8 per case. Ophthalmology reimbursement remained relatively flat.
Same center growth trends: by region
The surgery centers used for this analysis were further analyzed by categorizing each center into the appropriate region of the United States as shown below:
Accounting for approximately 9.0 percent of the total 2010 cases examined in this analysis, the West region experienced the largest increase in net revenue per case, increasing by $214 per case, as shown below. The most notable aspect of the West region was the large increase in net revenue per case for orthopedics (by specialty not shown) increasing $441 per case. The West experienced a decline in net revenue per case for only three specialties: gastroenterology (-$17), plastic surgery (-$29) and podiatry (-$51).
Representing 24 percent of the 2010 case volume, the Midwest region also showed an increase in overall net revenue per case of 2.8 percent or $55 per case. The most notable increase in net revenue per case by specialty is a 12.5 percent ($258) increase in general surgery. The Midwest region experienced growth in all specialties with the exception of pain management (decrease of 5.5 percent).
Following closely to the Midwest region, the Southeast region (representing 19 percent of the 2010 case volume) experienced a $30 increase in overall net revenue per case, or a 2.3 percent increase. The Southeast region experienced large reimbursement growth in oral surgery (26.1 percent), urology (8.0 percent), obstetrics/gynecology (7.7 percent) and plastic surgery (7.5 percent). The Midwest region experienced a decline in only otolaryngology (-1.2 percent).
The Northeast region experienced the lowest increase in net revenue per case with only a moderate 0.7 percent increase, or $12 per case. The Northeast had large growth in both general surgery (12.4 percent) and gastroenterology (10.9 percent), but also had large declines in oral surgery (-22.2 percent).
The only region to experience a decline in overall net revenue per case was the Southwest region, comprising 36.4 percent of the 2010 case volume tested. The Southwest region had a decline in all specialties with the exception of orthopedics (11.9 percent increase), obstetrics/gynecology (2.0 percent increase) and otolaryngology (0.5 percent increase). The most notable declines in net revenue per case were neurology, decreasing 31.5 percent, and oral surgery, decreasing 15.0 percent.
As illustrated in this analysis, we are observing trends of a moderate increase in net revenue per case for almost all specialties throughout most of the country. The specialties that did exhibit declines in reimbursement were likely the result of the phase-in of the new ASC payment methodology. Although the ASCs in this study do not represent all ASCs across the nation, the sample size certainly represents a population large enough to draw meaningful conclusions. It should be further noted that the ASCs in this study have come to our firm to provide transaction and valuation services. As such, these centers have active management that have consistently pursued physician recruitment and share movement within their ASC. This is a vital endeavor in positioning their respective ASC to be in the best possible position given the myriad headwinds facing the industry.
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