From: Becker Scott <>
Subject: Last Day to Register Early for Orthopedics Webinar; 10 Concepts for Physician-Owned Hospitals; Update on Pain Management Procedure Indicators


November 20, 2007
In This Issue
Physician-Owned Hospitals: 10 Concepts to Consider
Last Day to Register Early for Dec. 5 Webinar, "Key Thoughts on the Orthopedics Industry"
Pain Management in ASCs -- Here to Stay in 2008 and Beyond
Two Openings: Assistant Director of Business Office Operations, Experienced Operations Professional
News and Notes
Companies to Watch
Jan.-Feb. Issue ad
Physician-Owned Hospitals: 10 Concepts to Consider

1. There are now nearly 200 hospitals in the country with physician-ownership of one kind or another.

2. This compares with 5,500 to 6,000 ASCs.

3. About 35 to 50 of these physician-owned hospitals have a not-for-profit hospital as a partner as well.

4. Approximately 60 to 65 of these physician-owned hospital are focused fairly wholly on orthopedics or cardiovascular specialties.

5. Most physician-owned hospitals, like most general hospitals, need a strong presence in orthopedics or neurosurgery (spine) or cardiovascular to thrive.

6. Two of the biggest threats to physician-owned hospitals include increased employment of specialists by hospitals, and legislation that would prohibit physician-ownership of hospitals.

7. Any legislation is uncertain. If there is legislation, there is likely to be more favored status for existing or developing hospitals than for new hospitals. Any legislation that stalls the development and innovation of these hospitals is likely to result in long-term bad outcomes for the country's healthcare delivery system.

8. The legislative discussions don't tend to give any more protection to physician-owned general hospitals versus physician-owned specialty hospitals.

9. One great threat to specialty hospitals exists due to the sheer lack of their numbers. There aren't yet so many that they are a "protected" class in Washington DC.

10. The greatest growth of physician-owned hospitals is coming out of two places: first, ASC owners who see an opportunity to expand and better serve their patients; and second not-for-profit systems that view partnering with physicians as a terrific growth opportunity.

An eleventh concept one ought consider when reviewing the concerns that these hospitals harm community hospitals is as follows: U.S. community hospitals had their highest revenues ever in 2006 and their highest profit margins in at least the last five years. Modern Health Care reported the largest profit margin since a decade ago, showing total revenues at $587 billion and a record overall profit of $35 billion..

If you'd like to support physician development and growth of physician-owned hospitals, please e-mail Molly Sandvig or call her at (605) 321-3483. She serves as the executive director of the Physician Hospitals of America.

Newest Webinar ad w. Emily
Last Day to Register Early for Dec. 5 Webinar, "Key Thoughts on the Orthopedics Industry"

Over the next several years, there is likely to be no more important specialty for ASCs than orthopedics. ASCs are truly becoming a business of haves and have-nots. This Webinar will provide guidance on the single most significant specialty for ASCs. The presentation will cover expected changes in orthopedics for the next five years, plus how ASCs, hospitals and medical device companies should work with orthopedics surgeons.

At a Glance: "Key Thoughts on The Orthopedics Industry"

What you will learn: There are two key issues that will be the focus of the Webinar:

  1. A forecast for the next 10 years in orthopedics; and

  2. how ASCs, hospitals and medical device companies should work with orthopedic surgeons.

Who should attend: C-level hospital leadership, vice presidents and other leaders who who work in a orthopedic-physician-relations capacity, orthopedic physician leaders, ASC administrators, ASC owners, and ASC and medical device companies.

When: Wednesday, Dec. 5 at 2 p.m. CST (running time: 60 to 90 minutes)

About the speakers: John Cherf, MD, MBA, MPH, is an orthopedic surgeon at the Chicago Institute of Orthopedics, a clinical advisor for Sg2 and a thought-leader in orthopedics. Dr. Cherf founded the Midwest Orthopedic Institute, an orthopedic physicians group with full integration of diagnostic imaging, rehabilitation, ambulatory surgery and occupational medicine under one roof. He presently practices in Chicago and is once of the founding members of the Chicago Institute of Orthopedics. With more than 15 years' experience and fellowship training in sports medicine, he has served as team physician for several collegiate and professional sports teams in addition to U.S. Soccer. Dr. Cherf has published in numerous peer review journals, speaks internationally, and serves on several advisory boards for healthcare-related businesses.

Scott Becker, JD, CPA, is a partner in and co-chair of the health depatment at the national law firm of McGuireWoods in Chicago. For more information, visit his McGuireWoods profile or

Cost: $199 if registering today (save $50!).

How to register: There are five easy ways.

  1. Fill out and submit the online registration form.

  2. E-mail Jessica Cole.

  3. Call us toll-free at (800) 417-2035.

  4. Download the printable registration, fill out and fax to (866) 678-5755.

  5. Download the printable registration, fill out and mail to 315 Vernon Ave., Glencoe, IL 60022.
SMP ad
Pain Management ASCs -- Here to Stay in 2008 and Beyond

When CMS displayed the final version of the new ASC payment system rule and the accompanying fee schedule on Nov. 1 (to be published in the Federal Register Nov. 27), many of the payment indicators for pain management procedures changed. This has an impact on a part of the authors' analysis in "Pain Management ASCs -- Here to Stay in 2008 and Beyond," on p. 20 of the Nov./Dec. issue of the Becker's ASC Review. An updated version of the article, by Amy G. Mowles and William E. Lindeman, AIA, NCARB, appears below; a PDF can be downloaded on our Web site here.

While you might be hearing a lot of doom and gloom about pain management's future in ASCs after CMS's transition to HOPD-based facility fees, an assessment beyond a rudimentary sampling of the most common procedure codes reveals a significantly different picture. In fact, as the traditional "grouper-based" facility fees for individual procedures are being eradicated, there are new sources of payment previously unavailable in freestanding (non-HOPD) facilities.

Depending on the specific procedure volume and payor mix, pain management ASCs may see few adverse effects -- and could, in fact, come through the transition just fine. To assess the impact of the new payment system, one needs to understand and evaluate the overall complexity for 2008 and beyond, from reductions in payment for some procedures, to increases for others, to payments entirely new to ASCs.

Identifying payment indicators
The road map to this understanding starts with grasping the payment indicators stipulated by CMS to guide the four-year transition (to be complete by beginning of 2011) to an HOPD-based system for all ASC services. Payment indicators specify method and timing for application of the revised payments; and there are 16 ways that is proposed to happen. Luckily, single-specialty pain management ASCs need only work with a few of them. They include the following:

  • The old groupers, or procedures already classified as receiving facility fees in 2007, will make the multi-year prorated transition from the 2007 basis to 65 percent of the HOPD rate.

  • New procedure codes not previously considered appropriate to office-based facilities (they were exclusive to hospital-based facilities) will be paid immediately (starting Jan. 1, 2008) at 65 percent of the HOPD rate.

  • Device-intensive procedures (such as neurostimulators and drug-infusion pumps) will be paid according to the multi-year prorated transition to the HOPD basis which includes addressing the costs of the devices themselves.

  • Codes that were considered "office-based" and did not previously qualify for a facility fee, but instead paid a higher professional fee if performed in the office setting. The difference between the enhanced fee and that paid to the surgeon if using someone else's facility is/was commonly referred to as the site-of-service differential and represented the minimum fee an ASC should be paid for use of the facility by the surgeon to avoid the appearance of subsidizing use of the ASC. These procedures are each being assigned a transitional value (different from the site-of-service differential) that is applied immediately (starting Jan. 1, 2008) as the facility fee.

Understanding the reimbursement
If you look only at the prorated transition of the familiar groupers from the 2007 basis to the proposed 65 percent of HOPD rates, the outlook is indeed not good, with most facility fees reduced between 24 percent and 35 percent. But as seen above, that is only part of the picture. While the basic values for those codes are going down, ASCs can now be paid additional fees for some of the more expensive drugs when used along with qualifying procedures. Add to that the significant number of codes qualifying for new or higher payments and the situation brightens considerably.

For example, a large joint injection [20610] under the 2007 system only offered an ASC the office-based site-of-service differential amount as anticipated compensation: a whopping $21.22, which is particularly offensive considering nothing additional can be charged for the drug administered. Under the HOPD system, the ASC will be paid a basic facility fee higher than the 2007 site of service differential plus separate payment for some of the more expensive drugs, such as Synvisc for a knee injection. Baclofen Clonidine J0735 also show a scheduled additional payment that could be used to fill an implanted infusion pump during the initial implantation.

No two codes previously practice-based are treated the same, however. The increase over 2007 site-of-service differential values for non-radiological pain management procedures ranges between 23 percent and 128 percent, but all those payments for the most common pain management codes are increasing.

One of the important distinctions with the newly defined facility fees, higher and in lieu of site of the older service differential values for office-based procedures, is they will be paid directly to ASCs. While it was understood the practice-based differentials (as an absolute minimum) should be paid to ASCs, it was a political and/or cash flow problem for the ASC to collect payment from the operating surgeon because the amounts were paid to the physician as global professional fees. For ASCs used by non-owner surgeons, the new system eliminates the potentially unpopular process of extracting payment from part of a surgeon's professional fees and clearly defines the facility fee due directly from the CMS carrier.

Uncovering other new advantages
Some other procedures, such as neurolytics, will fair better under the HOPD-based system because it accounts for the costs of expensive needles, probes and grounding pads -- something the old system clearly did not. Stimulators and pumps (which have long involved extended negotiating and compromise to get paid for) are now included in the Ambulatory Payment Classification, offset by a "device percentage."

The overall effect of these changes (transition to a HOPD-rate basis) is highly dependent on the specific procedures performed. To give you a better idea, annualized procedure data for four unrelated pain management groups across the country were run through feasibility projections for 2007 through 2011. The insights or projections (no escalation of fees for inflation adjustments where assumed or applied, except as noted) that were yielded were interesting:

  • CMS payments for ASC pain management procedures in 2008 will be up from 2007, with a weighted average increase slightly over 2.5 percent. They will then decrease annually as the transition to a purely HOPD basis progresses. Consequentially, investors who have delayed developing new ASCs while waiting to see CMS's final methodology have missed the strongest year for Medicare reimbursement in the recent past and foreseeable future.

  • The net effect at the conclusion of the transition to the HOPD basis will be a weighted average reduction in payment a little under 6 percent -- a far cry from the 35 percent or greater losses touted by inadequately informed resources.

  • If HOPD rates are projected to increase a modest 3.5 percent to 4 percent annually for each year of the transition (except 2009 where blocked by CMS), the net effect will be an increase in weighted average payment of approximately 5.3 percent over 2007's. Though such a small sample of pain management groups is hardly extensive or statistically precise, it should serve as a wake up call for those fearing the worst case scenarios postulated elsewhere. The greatest point to be made however, is how insignificant those modest reductions can be in a well conceived and efficiently run pain management ASC.

Productive through 2011 and beyond
In the end, any pain management ASC with adequate patient volume to keep staff productive and equipment busy will be profitable (given a normal procedure mix). As long as that is the case, compensating for a 5.3 percent loss, even if from all payors, should be covered by roughly an annual procedure volume increase of less than 2.5 percent (for most groups' capabilities and expectations). Considering the likelihood that CMS is not the only payor, and is probably the lowest payor, the volume increase to cover the projected reduction should be even less.

A busy pain management ASC has long been an excellent investment for owner-surgeons, and the transition to the proposed HOPD basis will do little or nothing to change that. To get the most from their investment, pain management groups should size their facilities to be efficient from the onset but capable of supporting longer-term projected-volume increases -- beyond a break-even level, each percent of volume growth can increase profit many fold. Single-specialty pain management ASCs tend to have an advantage pursuing efficiency increases compared to multi-specialty ASCs, simply because they avoid the down-time of adapting procedure room equipment and arrangement between cases, and have staff attuned to the relative high volume possible for the specialty.

A final push toward ASCs, and away from practice-based pain management procedures, may come from the regulatory side -- and in fact already is in some states, such as Pennsylvania, where the health department has recently written opinion that the acuity of pain management patients and the procedures performed are only acceptable in licensed and certified ASCs. The transition to the more inclusive HOPD procedure list will only increase the acuity of patients treated and the risks associated with the more provocative procedures allowed. Then there are expectations of significant cuts in office-based procedure fees -- but that is anyone's guess at this point, and another discussion entirely.

June conf ad w Emily
Two Openings: Assistant Director of Business Office Operations and Experienced Operations Professional

Assistant director of business office operations. There is an immediate opening for an assistant director of business office operations for an ambulatory surgery development and management company. Applicant must be able to compile financial analysis and key performance indicators; train and monitor new business office managers on all facets of business office operations, including scheduling, coding, billing, collections, accounts payable and physician relations related to business office functions; provide ongoing training, and supervision and performance assessment to existing business offices; and possess strong computer and interpersonal skills. Candidate must also be able to travel. ASC experience strongly desired. We are looking for a dynamic individual who can multitask and thrive in a fast paced environment.

Fax resume and references to (225) 753-7513 or e-mail

Experienced operations professional. Meridian Surgical Partners, a national ASC development and management company headquartered in Nashville, Tenn., seeks an experienced operations professional. Qualified applicants must have at least five years of industry experience. Responsibilities to include clinical operations, financial/budget oversight, physician recruitment and partner/board relations for multiple facilities. Position will require travel and offers an excellent benefit package and salary commensurate with experience.

Qualified applicants, please email resume and cover letter to Meridian's HR director.

News and Notes

Johnson & Johnson shakes up structure; surgery division strong. In the wake of declining sales over safety concerns and anticipating patent expirations on key drugs, Johnson & Johnson has "reshuffled top executives, split its medical device division in tow and created a new group to look at strategy," reports the Wall Street Journal. The two new medical devices units will be surgery and comprehensive care; despite hits, medical devices has been by far a positive for J&J, writes the Journal:

"Sales last quarter rose 6 percent to $5.25 billion. Growth would have been more robust in that division had it not been for the company's woes selling its Cypher drug-eluting stent," sales of which dropped 44 percent in the United States last quarter.

The new structure will be implemented beginning in January and "Wall Street will be watching whether it helps J&J revive growth," says the Journal.

Nueterra Healthcare expands community hospital division. Nueterra Healthcare, one of the largest de novo developers of surgical hospitals and ASCs in the industry, is entering the community hospital market with two projects planned for 2008 and 2009 in Texas and California. In addition, the company has hired two senior healthcare executives to help lead the community hospital development and operations teams.

Michael S. McCoy joins Nueterra Healthcare as senior vice president operations, community hospital division; he is responsible for the operations of Nueterra's community hospital division. Thomas L. Nester, FACHE, joins the company as vice president development, community hospital division; he will oversee the development process in the community hospital division.

ASC Review circulation increasing to 25,000. The circulation for the Jan./Feb. issue of the Becker's ASC Review will be increased to 25,000. This will include each surgery center in the country plus approximately 19,000 surgeons and proceduralists. Recipients will include orthopedic surgeons, gastroenterologists, and ear, nose and throat physicans. Should you have questions about advertising in the Becker's ASC Review please e-mail Jessica Cole or call her at (312) 505-9387; e-mail Emily Noyes or call her at (773) 454-7445; or e-mail Ryan Kiernan or call him at (202) 337-1893.

The issue will highlight 40 companies to watch in the ASC industry, profiting through bariatrics and the orthopedic spine medical device market letter.

ASC Communications adds new vice president and account manager. We are delighted to add Emily Noyes to our team. She will be acting as a vice president and account manager. If you advertise or exhibit with ASC Communications, you will likely hear from her shortly. Her goal and ASC Communications' goal is to help advertisers and people better access their target market. Aside from providing the vehicle for doing so, we are happy to help develop special programs, targeted mailings, distinct Webinars and other concepts to help people target and reach their market in a smart and cost-effective way. You can e-mail her at

Call for nominations: bariatric surgery product roundup. In addition to the annual list of 40 companies to watch in the ASC sector, our Jan./Feb. issue of the Becker's ASC Review will feature a story about adding bariatric surgery to ASCs profitably and intelligently. A roundup of interesting products, equipment or services for bariatric surgery will be included; if you have a nomination, please e-mail Stephanie Wasek today!

Sponsorships available for next Webinar. We have two sponsorships available for the next installment in our "Extraordinary Leaders in Healthcare" Webinar series. "Key Thoughts on the Future of the Orthopedics Industry" will be held Dec. 5. Please e-mail Jessica or call her at (312) 505-, or e-mail Ryan or call him at (212) 337- for more information.

Ask Scott Becker. If you have an ASC-related legal or business question, e-mail Scott, and we'll publish the answer in a future E-Weekly. Please indicate when asking whether you prefer to remain anonymous.

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Companies to Watch

We are delighted to highlight the following companies in this week's E-Weekly.

SourceMedical Solutions. SourceMedical is the leading provider of outpatient information solutions and services, collectively serving ASCs, rehabilitation clinics and diagnostic imaging centers. Its unique end-to-end systems improve operational efficiency and cash flow while empowering healthcare facilities to deliver a higher standard of patient care. SourceMedical's solutions strengthen and enhance overall clinical, financial and administrative processes. More than 2000 ASCs and surgical hospitals nationwide use the company's Vision, AdvantX and SurgiSource solutions. SourceMedical continues to invest in research and development to maintain its leadership position with innovative products and services that satisfy the specific requirements of this unique market.

Transworld Systems. John Morgan is a national account manager with Transworld Systems, focusing on helping the ASC industry and their physician partner practices recover money on past due patient accounts and insurance claims for a flat fee of around $10 per account rather than charging a percentage. Some of John's clients include Surgical Care Affiliates, Nueterra Healthcare Single Specialty Division and Practice Partners in Healthcare. The Transworld Systems profit recovery system is designed to reduce costly internal processes regarding past-due accounts and improving cash flow by getting accounts paid quicker. The company's 24/7, Web-based system is user-friendly and allows for a simple reporting mechanism for both ASC corporate partners and independent facilities. E-mail John or call him today at (800) 873-8005 to begin spending less and recovering more. You can also visit him online.

Regent Surgical Health. As buyers, developers and managers of outpatient surgery centers and physician-owned hospitals around the country, Regent Surgical Health is an experienced developer and specialist in turnaround situations. Partnering with Regent can result in almost immediate improvements in financial health. In addition to acquiring underperforming ASCs and physician-owned hospitals, the company also thrives on turning single-specialty ASCs into multi-specialty, larger entities. Regent believes that doctors need to own the majority interest in their facilities and to control their own destinies. As a result, Regent typically owns about 20 percent of the ASCs and 10 percent of the physician-owned hospitals in which it partners. Its principals invest their own capital and expertise in each facility, sharing risks side-by-side with surgeon partners. Regent employs a limited liability company business model, which places the control of the business in the hands of the physician members. You can learn more by visiting Regent Surgical Health online.

JCB Laboratories. JCB Laboratories is a compounding pharmacy that serves the ASC market place. Unlike most compounding pharmacies, JCB Labs focuses exclusively on preparing sterile products. By limiting the focus to sterile products, the company is able to provide exceptional safety, consistency and pricing. JCB Labs compounds preservative-free products for epidural use, pain management products, and sterile ophthalmics. In addition, JCB Labs provides products that are unavailable due to short supply issues and discontinuation. Contact CEO Brian Williamson, PharmD, at (877) 405-8066 or visit the company's Web site for more information.

*           *           *

If you have any questions on any of the items listed in this letter, please contact me at (312) 750-6016 or by email at

Very truly yours,
Scott Becker

Scott Becker, JD, CPA
(312) 750-6016

Becker's ASC Review
is a publication of
ASC Communications, Inc.
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