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5 More Predictions on the Future of ASCs in Five Years: Most Common Ownership Model

Features Insight From Jeff Sapp of Innovative Surgical Solutions; Dr. Robert Peets of Samaritan North Surgery Center; Jeff Peo of ASCOA; Dr. Mike Russell of Texas Spine & Joint Hospital; and Jeffrey Shanton of Journal Square Surgical Center


ASC leaders recently shared their thoughts about what will be the most common ASC ownership structure in five years — physician-owned ASC, joint-venture ASC or HOPD — in the column "Future of ASCs in Five Years: Predictions on the Most Common Ownership Model." Here are several more predictions.


Jeff Sapp, Partner, Innovative Surgical Solutions, and PhD Candidate at Capella University in Minneapolis With a Dissertation on "Factors Influencing the Decision Makers of Hospitals to Adopt Strategic Alliances with Physicians": An alternative view to the suggestions of industry leaders regarding the ASC position in the next five years is the ability to focus on establishing a single price that all payors can access. This global pricing strategy, referred to as the Prometheus Model, includes the global fee for the ASC, physician, anesthesia, pathology, PT and diagnostic testing required for providing episodic care to a patient. The model promotes and engages affiliated primary care and specialists to focus on three issues: price, quality, and limiting hospitalization. As a result, the model produces two positive behaviors. First, collaboration of physicians, ASCs and other providers is supported along the continuum of care. Second, this collaboration engages active efforts to reduce avoidable complications of care and the increased cost associated with complications.


Michael Porter, a leading authority on company strategy and the competitiveness of nations, asserts that the more experience physicians and teams have in treating patients in a focused factory, the more likely better outcomes and lower cost will be achieved. Not a new concept, the focus factory was first introduced in the manufacturing industry by Wickham Skinner, championed by Regina Herzlinger in healthcare and proven successful by the ASC industry since the early 1980's.


Bundling episodes of services is not a new concept. CMS established three demonstration programs in 1991, 1996 and 2001; however, despite promising outcomes for both cost and quality from these studies, intense hospital opposition to these changes prevented the incorporation of episodic bundling. CMS has once again resurrected this concept and began a new three-year study in 2008.


Medicare's need to reduce hospital costs was the initial driver that promoted the development of ASCs. Everyday, ASCs provide the government, insurers and patients a safe, affordable alternative to hospital-based surgery. Unfortunately, the current political climate attempts to undermine our accomplishments when results of a research study published in April only concluded that physician ownership of ASCs are tied to higher surgical volumes without regard to better outcomes associated with the increased volume. Even more alarming is the infection control study of a one-time cross-sectional study of a survey instrument administered in a pilot program by CMS and televised in the national media. From these studies, and the complete rewrite for the Conditions for Coverage for Medicare to increase from nine pages to 166 pages, it does not take a rocket scientist to conclude that the future will hold less innovation and more regulation.


If allowed, government will destroy the diffusion of innovation in healthcare. ASCs will be a casualty of national healthcare if we cannot reinvent ourselves or if we relent to an institutional mindset. The dialogue should change from how we fit to how we pursue our own physician-driven strategy.


It is not the strongest of the species that survive, or the most intelligent, but the one that is most responsive to change (Charles Darwin).


Dr. Robert Peets, DO, Ophthalmologist and Board Member, Samaritan North Surgery Center (Dayton, Ohio) — Our surgery center is part-owned by physicians — only 20 percent — and then 80 percent is owned by a hospital. One of the things that the physician-investors have spoken about is increasing their share. It would give the physicians more say in what's done with the hospital and especially with contracting. Having the hospital as a partner is certainly a good thing for our facility because it has tied our facility reimbursement rates to the hospital, which has been wonderful.


Our surgery center is administered by HealthInventures. Before that we had Johnson & Johnson and before that it management by the hospital and the physicians themselves and we didn't make any money. It wasn't until Johnson & Johnson and now HealthInventures took over that the facility became profitable and remains profitable. I would absolutely say that having these managing organizations is going to be vital to freestanding ASCs. I think that all three ASCs in Dayton are at least partially owned by hospitals. I think the physician-investors and the hospitals have sent the benefit of having an investment in these outpatient surgery centers. As far as having a standalone, physician-owned surgery center, I think that will go the way of the past unless they can successfully continue these multi-specialty facilities. For single-specialty ASCs, I just don't see how they can survive.


Jeff Peo, Vice President, Acquisitions & Development, Ambulatory Surgical Centers of America: I think that we will see a large move from the 100 percent physician-owned model towards corporate partners and hospital joint ventures.

The mounting burdens coming from compliance and regulatory issues, as well as the pressure to operate even more efficiently, due to reimbursement trends, will drive the physician-owners to bring in partners they didn't want or need previously. They will bring them in to focus on those issues, and others that will be critical to the success of the center, like payer contracting, human resources issues and vendor management.

I think there will also be a reduction in the number of corporate partners, as those organizations that have limited operational expertise will find themselves unable to operate profitably in the changing environment.


Mike Russell, MD, Orthopedic Spine Surgeon and Physician-Owner, Texas Spine & Joint Hospital in Tyler: The unfortunate thing I've read was a little bit of pessimism in the ASC model, especially as an expanding market. I think there's quite a bit of concern about the healthcare bill and the future of healthcare in America.


I think that one of the biggest concerns that I have is that there are so few independent physicians coming out of residencies any more. The model seems to have shifted in the last 5-10 years. Ten-plus years ago, when I got out of my residency, it was almost unheard of for a specialist to go to work for a hospital. It wouldn't even be considered by most top-tiered physicians coming out of a specialty training. And now it seems to be more the norm.


I echo some of the comments I've read — there are going to be fewer startup ASCs in the future. We've seen a maturing of the market. I think that you might see some of the established ASCs looking for some protection by making alliances or forming partnerships with their local hospitals and/or corporate ASC companies. I think that you're going to see fewer new ones come up, may see more maturing of the other ones. As a personal opinion, I hate to see that — I think the independent-minded ASC and/or physician-hospital model has been such a driving force in innovation and decreasing complications and increasing efficiencies and actually lowering healthcare costs overall that it is really sad to see the direction that things seem to be going.


Jeffrey Shanton, Director of Business Management, Journal Square Surgical Center in Jersey City, N.J.: I think it depends on what part of the country (state) and the timing. Regulatory restrictions and insurance carrier 'push back' have a lot to do with it. In areas where this is becoming endemic, you will certainly see centers purchased by corporations, as the doctor-owners seek to protect their investment, but do not want the hassle of combat with the carriers and politicians. Those states would also seem ripe for hospital joint ventures. In states saturated with ASCs, it is and will be increasingly difficult to introduce viable 100 percent physician-owned centers, due to a diminution of the pool of available investor doctors. In- and out-of-network play a part as well. Some states are not 'user friendly' when it comes to out-of-network, which makes management company ownership or joint venture more attractive, especially if the doctors are in-network. The specter of the new federal healthcare plans muddy the waters for everyone, but (to me) would seem to favor the hospital-doctor joint-venture model.


Send your predictions to rob@beckersasc.com.

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