The following article is written by Jeffrey Simmons, chief development officer for Regent Surgical Health.
Reductions in private reimbursements at ASCs and "flat" earnings in revenue are a main cause for new surgeon and hospital alignments
It is no secret that ambulatory surgery centers nationwide are experiencing either flat revenue or, in some cases, reductions in earnings because of insurance company decisions to demand less revenue per case for independent surgery centers. This phenomenon has resulted in a drastic increase in new partnerships between surgeon-owned ASCs and hospitals. Restructuring ownership so the hospital has certain controlling rights can lead to much higher reimbursements. In fact, ASCs that are 100 percent owned by hospitals, or HOPDs, are being paid more than ever for key surgical specialties.
Many insurance companies are offering no increases in payments to ASCs when their contracts are up for renewal and in many cases are actually offering lower payments than existed previously. In addition, those ASCs that depended on a percentage of their cases being Out of Network to remain profitable are realizing that those payments are being drastically reduced, as insurance companies are often times writing policies that contain no out of network benefits or very low caps on payments for those that have those plans. ASCs that rely primarily on out-of-network payments for profitability run the risk of bankruptcy unless they change their strategy.
ASCs that are in these situations should consider a partnership with their local hospital — yes, the same hospitals that they left years ago to open their own ASCs for operational control, clinical control and the ability to realize profits to supplement their professional income. At Regent we work to retain these three conditions in newly formed surgeon/hospital partnerships.
There are three reasons why these partnerships now make sense in markets where physician owned ASC have maximized their revenue:
- Hospital CEOs almost universally now realize that surgeons should remain in control of operations regardless of whether the hospital purchases a majority or minority interest in the center. In the past, when hospitals offered surgeons a partnership they did so oftentimes with the caveat that the hospital be in charge of management. Today, hospital administration realizes that running an ASC requires an entirely different skill set than managing a hospital.
- Hospitals are paid significantly more per case on private cases than independent ASCs. Usually this is less than an HOPD rate, but more than what an ASC can negotiate with payers themselves.
- Regardless of whether you believe the new health care legislation is good or not for our industry, it has created a greater sense of urgency for surgeons and hospitals to align. ASCs are simple partnerships that can be developed or acquired in a community.
Regent Surgical Health now has 11 hospital/surgeon partnerships in its portfolio of facilities. That represents nearly half of our company’s business. More importantly, most of our new developments and acquisitions are surgeon, hospital and Regent entities. We believe this trend will continue as a key strategy against oftentimes predatory insurance company practices to reduce payments for surgical cases at ASCs.
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