ASC margins can't take it anymore

For many ASCs, margins can't tighten anymore. But cost pressures persist and insurance companies haven't adjusted to reflect rising supply and labor costs.

Andrew Lovewell, CEO of Columbia (Mo.) Orthopaedic Group, joined the Becker's Ambulatory Surgery Centers podcast to talk about how major headwinds are changing the way surgery centers plan for the future. Below is an excerpt from the conversation.

Note: The interview is slightly edited for clarity.

Question: What are the major headwinds you are seeing?

Andrew Lovewll: When you talk about challenges ASCs are facing, it's different in any market. We worry about whether we are going to be able to staff our operating rooms reasonably because of the anesthesia shortages all over the country. What about scrub techs? What about nurses? All of the pressures of trying to provide appropriate levels of staffing for the organization is a massive issue.

On top of that, you've got the compression of the margin where you look at what we used to be paid for procedures, and then all of a sudden supply costs go through the roof and prices still haven't come down. You'e got your [Blues, United, Cigna, Aetna health plans] that haven't adjusted reimbursement to make up for the new normal post COVID, and what we have for cost pressures.

It comes down to the federal government and what's going to happen when it comes to loosening restrictions with the inpatient only list, or increasing Medicare reimbursement from the standpoint of Baby Boomers now needing care. There are pretty massive things right now that we're trying to surmount, and it doesn't seem like there is any movement in the industry to adequately address them yet.

Q: What are you seeing in the supply chain space and how are supply costs affecting your center?

AL: One of the things you have to keep in mind is when you look at the ASC space, the margin compression is not something that's thrown out there as fluff. It's a real issue. The pressure we deal with from the vendor or supply chain manufacturer, when we have a price increase of 15 percent on our packs and nothing has changed with the item, [I wonder] what is that for? What happened when all of a sudden the prices today are totally different tomorrow? It just doesn't make sense.

I can't be in the position where I'm buying the exact same packs with the exact same stuff, and these packs are already post-production, but now all of a sudden they cost more money. It seems like post-COVID, there's been a lot of people taking advantage of the system complexity we live in to say, yep, we're going to go ahead and mark this up.

The federal government needs to put in some limitations to what these markups can be, because you've got your big distributors and it doesn't seem like there is any accountability from Washington. They're definitely more willing to say they will cut your Medicare reimbursement but they're not willing to address the other side of the coin.

Q: Does this make it difficult for ASCs to stay flexible and adaptable?

AL: I think it does. You're not going to save your way to prosperity anymore. You have to pay out salary, wages and benefits, and supplies. From the flexibility standpoint, there is going to come a point in time where some ASCs are going to say it's not worth it. They are not going to do cases at the ASC anymore because the margins are not there the way they used to be, which is sad because then we're costing the American public more to transition care back inpatient.

There's got to be some accountability to say the ASCs are trying to do the right thing and shift cases. Doctors, especially in private groups that own their own ASCs or own them with a management company, are trying their best to be good stewards of the healthcare dollar. But there's been no shift to really incentivize that from the standpoint of any increased remuneration or cost shifting for cases.

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