Healthcare reform is driving drastic change in the industry as a whole and the ambulatory surgery center industry. As healthcare legislation causes fluctuation in reimbursement rates, physicians shift towards hospital employment and the pressure to provide quality, cost-effective care increases, the ASC industry faces a number of challenges in this shifting landscape. Here are 50 facts about the ASC industry.
1. There are currently more than 6,000 ambulatory surgery centers in the United States. There has been a dramatic slowdown in the net addition of ASCs during the last two years.
2. As of 2011, approximately 22.3 percent of freestanding ASCs were owned or managed by an ASC management and development company, according to VMG Health's Intellimaker Survey 2011.2
In 2011, the five companies that owned and managed the highest number of ASCs were AmSurg, United Surgical Partners International, Surgical Care Affiliates, HCA and Nueterra. AmSurg acquired 17 centers in 2012 and currently operates a total of 243 centers. 2
3. ASCs tend to be for-profit facilities and located in an urban setting, according to MedPAC data. 3
• From 2010 to 2011, 97 percent of ASCs were for-profit, while only 3 percent were non-profit.
• From 2004 to 2011, 91 percent of ASCs were located in an urban area, while only 9 percent were in a rural area.
4. In 2011, there were 5,344 Medicare-certified ASCs, while there were only 4,033 Medicare-certified ASCs in 2004. 3 Here is how the growth went:
Medicare-certified ASC growth:
• 4,033 centers
• 367 new centers
• 6.7 percent new growth in center numbers from the previous year
• 4, 328 centers
• 328 new centers
• 5.5 percent new growth in center numbers from the previous year
• 5,045 centers
• 281 new centers
• 4.3 percent new growth in center numbers from the previous year
• 5,252 centers
• 189 new centers
• 1.8 percent new growth in center numbers from the previous year
• 5,344 centers
• 153 new centers
• 1.8 percent new growth in center numbers from the previous year
5. During the past year, 54 percent of ASC management companies have observed an increase in acquisition activity. Only 17 percent of management companies have reported a decrease in acquisition activity and 29 percent have reported no change from the previous year, according to HealthCare Appraisers 2013 ASC Valuation Survey.4
6. The typical sales price for a majority interest in an ASC is in the six to seven times EBITDA minus debt range. The price is much lower where the center has significant risks to its income sustainability. When a hospital buys a center to convert to a HOPD, this generally cannot be accounted for in the price, i.e. the increase in reimbursement.
7. A typical non-compete in an operating agreement may be two years and 10 to 20 miles. In a sales transaction, it is substantially longer.
8. Surgical Care Affiliates, an ambulatory surgery center management and development company, has recently acquired Health Inventures. Health Inventures is a national surgical and physician services company that operates more than 20 ASCs in partnership with 10 health system partners across the country. SCA now provides surgical solutions to more than 40 health system partners.
9. The Ambulatory Surgery Center Association is the national membership association and advocacy group for ASCs. Nap Gary, the chief operating officer of Westchester, Ill.-based Regent Surgical Health, is the current president of ASCA.
10. Ambulatory surgery centers are usually single-specialty or multispecialty facilities and are generally smaller than hospitals. The average number of operating rooms in ASCs across the nation is 3.98 and the average number of procedure rooms is 2.01. The average square footage of an ASC is 14,793. 2
11. The 10 most frequently performed Medicare surgical services in ASCs include: 3
• Cataract surgery with IOL insert, 1 stage: 17 percent
• Upper GI endoscopy, biopsy: 8 percent
• Colonoscopy and biopsy: 5.7 percent
• Lesion removal colonoscopy, snare techniques: 4.4 percent
• Injection foramen epidural lumbar, sacra: 4.1 percent
• After cataract laser surgery: 3.9 percent
• Injection spine: lumbar, sacral (caudal): 3.6 percent
• Diagnostic colonoscopy: 3.6 percent
• Injection paravertebral: lumbar, sacral: 2.2 percent
• Injection foramen epidural add on: 2.1 percent
12. Many of the core specialty physicians for ASCs remain reasonably independent and can thus invest in ASCs and ACOs.
13. Ambulatory surgery centers with one specialty have an average lifespan of 11 years, while ASCs with more than five specialties have an average lifespan of 11.7 years.4
Here are four statistics on the average number of years ASCs are open by number of specialties:
• ASCs with two specialties: 10.9 years
• ASCs with three specialties: 10.1 years
• ASCs with four specialties: 10.4 years
• ASCs with five specialties: 9.9 years
14. ASC reimbursement from commercial payers varies widely from area to area. Commercial payers are the largest group within ASC payer mix at an average of 59 percent of gross charges.2 Medicare is second, with 24 percent.
15. Medicare payments to ASCs have increased $1 billion dollars between 2004 and 2011. In 2004, Medicare paid ASCs $2.5 billion and in 2011 ASCs received $3.5 billion in Medicare payments, according to MedPAC data. 3
16. Medicare patients represent a significant portion of the healthcare industry's overall patient population, but in ASCs 86 percent of patients did not have Medicaid, according to MedPAC data. Medicaid patients represent only 14 percent of ASC's total patient population. In hospital outpatient departments, on the other hand, 76.9 percent of patients did not have Medicaid and 23.1 percent of patients did, according to MedPAC data. 3
17. The House Energy and Commerce Health Subcommittee has passed a bipartisan proposal that would repeal Medicare's sustainable growth rate, which Medicare used to determine physician reimbursement. The proposed bill would have SGR no longer starting next year and grant physicians a 0.5 percent increase in Medicare reimbursement until 2018. Beginning in 2019, physician pay will be based on quality reporting and outcomes.
18. Sequestration is impacting ambulatory surgery centers through the 2 percent reduction in Medicare payments.
CMS has recently proposed to increase Medicare reimbursements to ambulatory surgery centers by 0.9 percent beginning next year. CMS has estimated that this bump in reimbursement will increase overall Medicare payments to ASCs by $133 million. In 2014, Medicare payments are expected to be $3.98 billion.
19. Medicare spending and reimbursement is a hot button issue for all of healthcare. President Barak Obama's 2014 fiscal year budget plan intends to cut Medicare's budget by an estimated $370 billion through reduced payments to pharmaceutical companies and higher premiums for wealthier seniors covered by Medicare Parts B and D.
20. Healthcare reform has brought myriad changes to the industry, representing a world of opportunity and challenge for ambulatory surgery centers. For 51 percent of ASC leaders, reimbursement is the biggest challenge they face, according to a 2011 Provista Report of ASC Survey Findings. 5
Top six challenges for ASC leaders:
1. 51 percent: reimbursement
2. 20 percent: EMR implementation
3. 11 percent: physician alignment
4. 11 percent: healthcare reform
5. 4 percent: consolidation
6. 2 percent: another source
21. Most ASCs should heavily compress their schedules.
22. When a hospital invests in a center, there is no certainty that this will improve reimbursement rates. Hospital partners are becoming a larger consideration in the ASC industry. A large number, 83 percent, of ASC management companies have reported selling a controlling interest in a surgery center to a hospital, health system or other third party.4
23. The Government Accountability Office has found that CMS is behind on a number of the 34 federally facilitated insurance exchanges it is expected to organize and open for business by Oct. 1. The GAO reported similar findings within states that plan to host their own small business exchanges. Though interim deadlines have been missed, the GAO does not believe this means the CMS exchanges won’t be ready to go live by the Oct. 1 deadline.
24. A majority ownership held by physicians is found to be a desirable ASC ownership arrangement by 76 percent of ASC management companies.4
Here are five statistics on what ASC companies find desirable in an ownership arrangement.
• 63 percent: minority management company
• 57 percent: minority hospital
• 47 percent: minority physician
• 25 percent: majority hospital
• 13 percent: majority management company
25. Most management companies expect equity in ASC deals. Some will have solely consulting and management roles. A typical management agreement tends to hover between four to seven percent of collections/net revenues.
26. Here are four important issues for ASC leadership to be aware of:
• The Ambulatory Surgical Center Quality Reporting Program, scheduled to begin July 1, has been delayed.
• The shortage of propofol has been resolved, though it may move slowly through the supply chain.
• CMS has proposed to offer permanent reimbursement for VisionCare’s implantable miniature telescope.
• The HIPAA Omnibus Final Rule was released in January and the deadline for full compliance is Sept. 23, 2013.
27. Supply chain management has increasingly become an area of potential savings for ambulatory surgery center leaders, but only 16 percent have reported being "very engaged" in managing supply costs, according to a 2011 supply chain survey from Provista. 5
How ASCs manage supply chain:
• 53 percent maintain paper records
• 48 percent use some kind of inventory management software
• 23 percent track their supply chain on a spreadsheet
• 18 percent use a distributor-provided system
• 5 percent use some other method
28. Though the Ambulatory Surgical Center Quality Reporting Program was delayed, ASCs do have access to version 3.0 of the specifications manual on QualityNet, the only CMS-approved website for healthcare quality data exchange.
29. Hospital integration is a large trend in today's healthcare market and most physicians foresee this trend having an impact on them. Ambulatory surgery center leaders will have to consider the impact this trend will have on the physicians performing cases in their centers, according to the Deloitte's Physician Perspectives Survey. 6
Here is what different types of physicians think about hospital integration:
• 73 percent of surgical specialists feel they are likely or very likely to integrate
• 71 percent of primary care physicians feel they are likely or very likely to integrate
• 71 percent of other physicians feel they are likely or very likely to integrate
• 61 percent of non-surgical specialists feel they are likely or very likely to integrate
30. There is a mix of surgeons involved in physician-owned distributorships. This remains a fairly risky area.
31. Electronic health records, for some ASCs a challenge and others an advantage, are a prominent issue. In recent study published in the Annals of Internal Medicine, researchers found that the use of electronic health records can reduce costs by 3 percent in the ambulatory care setting. The study notes that there is a potential for more cost savings as EHR use becomes optimized. Read: 5 Things Surgery Centers Need to Know About Meaningful Use and the 50% Rule.
32. There are several healthcare organizations, amongst them the American Medical Association, against the implementation of ICD-10, CMS has made it clear that the Oct.1, 2014, implementation date for ICD-10 is here to stay. An eHealth Initiative and American Health Information Management Association survey has found that 59 percent of providers anticipate a decline in revenue and 26 percent of providers have no ICD-10 goals other than claims processing. On the positive side, 51 percent of providers think quality improvement will be a potential benefit and 40 percent think outcome measurement will be a potential benefit.
33. Price transparency is in ever-growing demand in healthcare. Facilities, notably Surgery Center for Oklahoma, have begun posting their prices for patients to see. A Healthcare Finance News report has found that the market for price transparency will grow 55 percent by 2016 and be worth $3.09 billion.
34. As of yet, the ASC industry has not been seeing creative, helpful arrangements between ASCs and ACOs. Thus far, 67 percent of physicians involved with an accountable care organization have reported that they did not experience any personal financial benefit from their participation, according to Jackson Healthcare's 2013 Physician Outlook & Practice Trends survey.7 Though physicians have not been seeing personal benefit from ACO involvement, physician participation has tripled between 2012 and 2013. In 2012, 8 percent of the nation's physicians reported they were in an ACO or planning to join one. This year, 24 percent are in an ACO or plan to join one within a year, according to Medscape's 2013 Physician Compensation Report. 8
35. While physicians test the waters of ACO participation, ASC leaders must consider the impact these organizations could have on their centers. Federal ACO waivers, released in 2011, will impact even ambulatory surgery centers that do not join an accountable care organization. The waivers, involving antitrust, fraud and abuse laws, suggest that ASCs will be able to share some pricing information that was previously confidential and have a level of protection against ACOs' market power.
36. Sixty-nine percent of healthcare providers expect that healthcare legislation and mandates will drive patients to the outpatient setting, according to a Healthcare Finance News report. Reimbursements were named by 48 percent of providers as the most significant influence on health systems.
37. The Oregon Ambulatory Surgery Center Association has reported that surgery centers in the state have had a nearly $611.6 million impact on Oregon's economy. The state has 85 ASCs that employ near to 1,760 workers. The ASCs have been found to have a lower infection rate than hospitals and a 93 percent patient satisfaction rate.
38. Denied claims are causing an increasing financial pressure on ASCs. Here are the 15 states with the highest denial rates for surgery centers, according to RemitDATA. 9
1. New York – 37 percent
2. Georgia – 27 percent
3. Kentucky – 22 percent
4. Kansas – 21 percent
5. Indiana – 19 percent
6. South Carolina – 17 percent
7. Minnesota – 16 percent
8. Pennsylvania – 15 percent
9. Washington – 12 percent
10. Illinois – 11 percent
11. Maryland – 10 percent
12. New Mexico – 10 percent
13. Virginia – 9 percent
14. Delaware – 8 percent
15. Alabama – 8 percent
39. A Wolters Kluwer Health 2013 Physician Outlook Survey has found that 34 percent of physicians are "very" or "somewhat" likely to leave their practices in the near future. Of those planning to leave, 29 percent said they would make the decision because they were struggling make their practices profitable.
40. The growing concern of a physician shortage is a pressing matter for ambulatory surgery center leaders. Practicing physicians will be attracted to areas with a low cost of living and low density of other physicians.
Here are 12 of the best and worst states for practicing physicians. 10
• Southwest and South Central regions
Best state: Texas, where cost of living and physician density and few malpractice claims per capita
Worst state: Nevada, with high unemployment rates
• West and Northwest regions
Best state: Idaho, where there is an affordable cost of living and low physician density
Worst state: Hawaii,
• Southeast region
Best state: Tennessee, with good physician compensation and no state income tax
Worst state: Florida, with extensive Medicare fraud and litigious environment
• Mid-Atlantic region:
Best state: Virginia, where there is a reasonable cost of living, low physician density and a low tax burden
Worst state: Maryland, where there is a high cost of living and physician saturation
• Great Lakes and North Central regions
Best state: Indiana, where there are strong healthcare and pharmaceutical industries
Worst state: Illinois, where there is physician saturation, a high tax burden and expensive malpractice fees
• Northeast region
Best state: New Hampshire, with ample nursing and PA support, affordable cost of living and low tax burden
Worst state: Connecticut, where there is a high cost of living, high physician density and low average physician compensation
41. As of fall 2012, more than 50 percent of healthcare providers were still in the first phases of ICD-10 implementation, according to a Journal of the American Health Information Management Association study.11 If providers do not prepare in time for the implementation deadline, it is possible that healthcare reimbursement will suffer. 12
42. In May, the House of Representatives voted to repeal the Patient Protection and Affordable Car Act for the 37th time, but to no avail due to the Democrat's control of the Senate. Read: 3 Years of PPACA: The 5 Biggest Changes since the Law's Passage.
43. In June, Ron Wyden (D-Ore.) and Mike Crapo (R-Idaho) introduced the Ambulatory Surgical Center Quality and Access Act of 2013 to the United States Senate and similar legislation has been introduced in the House of Representatives. The proposed bill would no longer allow CMS to use different measures of inflation for ASCs and hospital outpatient departments when setting rates. The legislation would also require CMS to add a representative of the ASC community to the Advisory Panel on Hospital Outpatient Payment.
44. Out of all centers, we estimate an overall small percentage is engaged in methods to profit from anesthesia. The American Society of Anesthesiologists remains vigilant in trying to prohibit these efforts.
45. There are certificate of need regulations in these states: Alabama, Alaska, Connecticut, Delaware, Georgia, Hawaii, Illinois, Iowa, Kentucky, Maine, Maryland, Massachusetts, Michigan, Mississippi, Montana, Nevada, New Hampshire, New York, North Carolina, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, Washington, West Virginia and Washington, D.C. 13
46. The CON program is currently an issue of contention in a number of states. North Carolina has recently suspended its CON program and Georgia physicians are rallying for the same action in their state. In June, the Ambulatory Surgery Center Association of Illinois sent a letter to the United States Department of Justice asking for the review of the Illinois Health Facilities and Services Review Board's recent proposal that would create CON changes restricting ASCs seeking to add specialties. Alabama Governor Robert Bentley recently signed revisions to the state's CON law, simplifying ownership changes and expanding provisions to limited liability companies.
47. The Joint Commission has recently revised its ambulatory care accreditation standards. Revisions were made in the areas of leadership, human resources, medication management, national patient safety goals and provision of care and services. Joint Commission accreditation surveys, once ending in one of five options, have only have two possible outcomes: certified or not certified.
48. Ambulatory surgery centers spend an average of $1.42 million on employee salary and wages.
Here is how the cost of employee salary and wages varies across the country. 2
• Midwest: $1.53 million
• West: $1.43 million
• Southeast: $1.36 million
• Southwest: $1.4 million
• Northeast: $1.15 million
49. Of twenty major ASC management and development companies, 53 percent intend to purchase one to five ASCs within the next year.14
Here are four statistics on management acquisition plans for the next year.
• 17 percent have no acquisition plans
• 12 percent intend to purchase six to 10 ASCs
• 12 percent intend to purchase 11 to 15 ASCs
• 6 percent intend to purchase 16 or more ASCs
50. As of 2007, the last year comprehensive data was collected: 2
• The five states with the highest number of Medicare-certified ASCs were California (668), Florida (358), Texas (346), Georgia (253), Washington (221) and Pennsylvania (221).
• The five states with the lowest number of Medicare-certified ASCs were Vermont (1), Washington, D.C. (4), Rhode Island (7), Alaska (9) and Hawaii (12).
1 Ambulatory Surgery Center Association of Illinois: What is an ASC? Available at http://www.ascillinois.org/aws/ASCAI/pt/sd/news_article/37227/_PARENT/layout_details/false
2 VMG Health's 2011 Intellimaker ASC Benchmarking Study. Available at http://www.vmghealth.com/
3 Medicare Payment Advisory Commission data. Available at http://www.medpac.gov/document_search.cfm
4 HealthCare Appraisers data. Available at http://www.healthcareappraisers.com/
5 2011 Provista Report of ASC Survey Findings. Available at https://www.provistaco.com/Pages/default.aspx
6 Deloitte's Physician Perspectives Survey. Available at http://www.deloitte.com/assets/Dcom-UnitedStates/Local%20Assets/Documents/us_chs_2013SurveyofUSPhysicians_031813.pdf
7 Jackson Healthcare's 2013 Physician Outlook & Practice Trends. Available at http://www.jacksonhealthcare.com/media/191888/2013physiciantrends-void_ebk0513.pdf
8 Medscape's Physician Compensation Report: 2013. Available at http://www.medscape.com/features/slideshow/compensation/2013/public
9 RemitDATA. Available here http://remitdata.com/
10 Medscape's Best and Worst Places to Practice: 2013. Available at http://www.medscape.com/features/slideshow/best-places-to-practice-2013
11 AHIMA: ICD:10/PCS Status Check. Available at http://library.ahima.org/xpedio/groups/public/documents/ahima/bok1_050199.hcsp?dDocName=bok1_050199
12 MediGain: ICD-10 Readiness Could Impact Reimbursement Rates. Available at http://www.medigain.com/blog/bid/314462/ICD-10-readiness-could-impact-reimbursement-rates
13 National Conference of State Legislatures. Certificate of Need: State Health Laws and Programs. Available at http://www.ncsl.org/issues-research/health/con-certificate-of-need-state-laws.aspx