The Business Corner is a bimonthly column by Shakeel Ahmed, MD, CEO of St. Louis-based Atlas Surgical Group. This is the first installment.
Having been involved in the ASC industry for a quarter of a century, I have seen the transformation of this business through all its stages. I can safely say that ASCs are entering a tighter margin environment now than ever in recent memory. I have seen labor costs climb to new and unsustainable heights, with many ASCs, including those owned by my group, reporting double-digit annual wage inflation for registered nurses and staff. Add to that anesthesia shortages and subsidy pressures, and you have what’s called the perfect storm.
What is not keeping pace with these downward pressures is payer dynamics. The CMS apparently did not get the memo on our woes. Their final rule for 2026 sets an overall payment update for ASCs of 2.6%. All of this comes as the industry is reporting that supply, implant, hardware and labor inflation in surgical services are grossly outpacing that reimbursement growth. I have seen firsthand that in sub-specialties with high implant usage, the margin of error is harrowingly narrow.
Not all news is depressing, despite these headlines. A 2023 report by the Medicare Payment Advisory Commission found that Medicare spending per fee-for-service beneficiary on ASC services grew about 7.8% per year from 2018 to 2022 and jumped 15.4% in 2023. This growth clearly shows that there is a strong migration of surgeries into outpatient settings. This report also hints to business-minded surgeons where they can invest in ASCs. I have seen that centers that automate workflows, optimize efficiency and — most importantly — select and move higher-acuity cases to protect margins, even as they face reimbursement pressures, perform quite well.
Another important point is one of my favorite topics: physician-led ASC ownership. The industry was founded on physician ownership. This model continues to be a compelling option, especially for centers focused on efficiency and cost containment. While national percentages vary, many new surgery centers remain physician-friendly, reinforcing the advantages we all recognize in surgeon-driven ownership and governance. This translates into quicker decisions, operational agility and ultimately better profit margins.
On a similar note, private equity involvement continues to grow in outpatient surgery and physician practices. For example, a 2022 study in the JAMA Health Forum found that among 578 physician practices acquired by PE from 2016 to 2020, the average allowed amount per claim increased by 11% and the average charge per claim increased by 20% compared with controls. These data clearly suggest that PE models drive volume and price changes. My thought on this topic is that this is a Faustian bargain. You are accepting access to capital and scale, but in turn, you are giving up autonomy and operational flexibility. Many surgeons will sadly vouch for this reality.
Here are my final thoughts. As we head into 2026 and beyond, the ASCs that will succeed will be the ones that combine surgical leadership, operational flexibility and cost containment into high-quality patient care. They will have to do so while managing reimbursement stagnation and the alarmingly rising cost of inflation. Don’t expand. Expand smartly. I feel that very few centers are prepared to balance these opposing principles. Those that can will come out ahead.
