Future of the Freestanding Surgery Center: Q&A With Barry Tanner of Physicians Endoscopy

Barry Tanner is president and CEO of Physicians Endoscopy in Doylestown, Pa.


Q: What do you see as the future of the freestanding ambulatory surgery center?

 

Barry Tanner: I think it’s brighter than it's ever been. I know that may seem to go against conventional wisdom and the immediate business interests my own company. However, I believe that physician-owned, freestanding ASCs will continue to play an important role in the healthcare delivery system. That outlook may change over time, but the fact is that as physician reimbursements continue to decline, physician ownership in ASCs has become a significant portion of overall medical practice income. It's called survival. It's going to be extremely hard for independent physician ownership of ASCs to disappear.

 

Consolidation of the market will continue because there are very clear benefits to affiliating with a larger, multi-site ASC management company. We have depth of management, business expertise and access to both human and financial capital, which you do not necessarily see in a wholly physician-owned ASC. However, there are lots of physician-owned freestanding ASCs left. Less than 50 percent of surgery centers, maybe just 25 percent, have a corporate partner. After all these years, are the other 75 percent of ASCs simply going to fail?

 

Q: Don't large organizations' economies of scale make them superior to the independent surgery center?

 

BT: There are most definitely economies of scale, but there are other reasons why the industry is consolidating. There is less opportunity to develop de novo ASCs and fewer available physicians to recruit as owners. Management companies that want to grow –– and desire to do so quickly –– have to acquire existing ASCs. The best way to achieve this is to promote market consolidation.

 

Sure, a larger ASC management organization can provide independent centers with access to capital and potentially better business guidance, but there are clinical factors for success that are not completely in the management company's control. These include efficient utilization of a facility's procedure rooms or ORs, staffing of those rooms and the practice patterns of physicians. One GI physician may take 45 minutes to perform a colonoscopy while another may take 30 minutes. That difference is significant, because the reimbursement for the procedure is fixed and does not accommodate the consumption of resources. There are several other factors where the differences between independent ASCs and multi-site ASC management companies are less lopsided, such as access to best pricing through group purchasing organizations.

 

Q: Will self-standing ASCs be able to take advantage of accountable care organizations?

 

BT: ASCs would make great sense for ACOs because they are clearly the low-cost, high-quality option. But it's still not clear to me that ACOs will have any broad-based success. Many ACOs may crop up in the short term, but I'm not sure they will survive the test of time. If the pilot programs that were the precursors of ACOs are any indication, this phenomenon may well prove to be a miserable and expensive failure.

 

But whatever happens with ACOs, I am confident we will see a trend toward some form of bundled payments. Providers will face a mandate for better coordination of care and the result will be more collaborative partnerships between them. Physicians and hospitals will continue to partner on ASCs and possibly even third-party payors will join in. The details are not yet clear. Everybody wants to know: Where will I fit into a bundled payment scenario, what will my role be and how can I best position myself to influence the outcome?

 

Learn more about Physicians Endoscopy.

 

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