The state of the ASC Industry: Key challenges, opportunities & 5 observations from Andrew Hayek

The U.S. spends 18 percent of gross domestic product on healthcare — much higher than other industrialized nations. And healthcare spending continues to increase. However, the U.S. has a below average health status, more chronic disease and shorter lifespan than other industrialized nations.

"We spend twice as much per person on healthcare," said Andrew Hayek, CEO of Surgical Care Affiliates and OptumHealth as well as chairman of One World Surgery during a keynote address at the 15th Annual Becker's Spine, Orthopedic & Pain Management-Driven ASC Conference + The Future of Spine in Chicago. "People fly from all over the world to be here. But for the day-to-day healthcare, we are a very expensive system."

Earlier this year, billionaire Warren Buffet named healthcare costs as the No. 1 issue slowing down business growth in the U.S. at the Berkshire Hathaway annual meeting, and former Defense Secretary Robert Gates placed healthcare on his short list of national security issues because healthcare spending raises the deficit and requires the U.S. to borrow from other countries. Healthcare costs are also the No. 1 source of bankruptcy in the country, touching people across all demographics.

"Surgical costs are one of the largest drivers and biggest levers in healthcare costs," said Mr. Hayek. "We spent a lot of time with health plans, taking claims data and analyzing it in a way we hadn't previously. We wanted to look at surgery in totality; surgical costs are about 30 percent of every premium dollar spent on healthcare. You can look at what is done outpatient today and examine what can be done in an ASC."

The Dartmouth Atlas examines healthcare trends based on Medicare data, and the analysts recently concluded utilization rates are among the greatest sources of inefficiency. However, Mr. Hayek believes a greater issue is site of service. The differential in cost between the hospital-based facilities and ASCs also contributes to a huge healthcare spending increase because surgeries aren't performed in the most optimal setting.

For example, in Louisville, Ky., orthopedic surgery is three-to-four times more expensive in hospitals than ASCs; the difference in Columbus, Ohio, is five-to-six times more expensive in hospitals. In San Francisco, orthopedic surgeries are three times more expensive in hospitals and in New York City orthopedic surgery in hospitals is four to five times more expensive than ASCs.

"These kinds of payment differentials add up to tens of billions of dollars for health plans and consumers," said Mr. Hayek. ASCs may also provide better quality than competing hospitals with lower infection and complication rates as well as higher patient satisfaction. "We have a great quality story to tell. If you are a relatively well patient, the surgery center setting is a safer place to have your procedure."

However, ASCs continue to face challenges in the evolving healthcare marketplace as there are fewer independent surgeons and primary care physicians secondary to reimbursement pressure on professional fees and increasing technology costs

Despite the challenges, there are independent physician groups around the country that continue to thrive. "The thriving groups are large branded groups consolidating in key specialties and branding in their communities," said Mr. Hayek. "Then the patients self-refer and the specialists have more leverage in their market."

Small groups can either align with health systems, enter into strategic partnerships with health plans or align with primary care or multispecialty groups on value-based payments or risk contracts. "The most successful models are full capitation where the health plan hands off part of their risk," said Mr. Hayek.

The partnerships and alignment extend to payers as well. Physicians and ASCs can negotiate bundled payments or other risk-based arrangements with insurance companies. Earlier this year, UnitedHealth Group's Optum acquired SCA, demonstrating the payer's commitment to ASCs.

"This is the first time a large payer said we believe in this so much that we want to buy the company," said Mr. Hayek. "We were fiercely independent; we loved our independence. But we needed to be able to provide more tools to help independent physicians. Optum had a lot of these tools."

Optum's independent physician group includes more than 21,000 aligned physicians serving 3.5 million consumers. SCA added more than 200 facilities and 8,000 physicians under the OptumCare umbrella.

Mr. Hayek concluded his presentation with five observations on healthcare today:

1. There is an enormous need to improve healthcare cost and efficiency in the U.S.

2. Supporting independent physicians is critical to reducing cost.

3. You can improve the Triple Aim by aligning independent physicians with surgery centers.

4. Alignment strategies with health plans, medical groups and progressive health systems can be effective.

5. There is increasing recognition from payers and self-insured employers that ASCs are important to them.

"We do see signs that the pendulum will swing back toward independence and in fact many health plans across the country are embracing this model that has worked," said Mr. Hayek.

More articles on surgery centers:

124+ ASCs performing total joint replacements

5 considerations when converting vascular access centers into Medicare-certified ASCs

4 recent ASC acquisitions

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