10 Watershed Trends for ASCs Over Past 25 Years

ASC industry leaders identify and discuss 10 watershed trends for ASCs over the past 25 years.

1. Long, slow period of growth. ASCs have grown by leaps and bounds since the first one opened in the 1970s, says Brent W. Lambert, MD, co-founder of Ambulatory Surgical Centers of America. "This new arrangement made a lot of sense for physicians in terms of efficiency." He recalls when he was still working in the hospital, "I was doing 500 cataracts a year in one room, once a week," he says. When he moved to an ASC, "I was doing three times as many." In the early days, "the problem was getting paid," Dr. Lambert says. While ASCs were efficient and convenient, opening an ASC was risky because payors would not recognize them. That changed when Medicare began to reimburse ASCs in 1982. One advantage of ASCs, he says, was improved patient satisfaction, even though they had virtually no advertising. "ASCs weren't being marketed," he says. "Patients learned about them by word of mouth."

2. Growth fueled by technological innovations. Clinical and technological advances buoyed ASCs by reducing the need for hospitalization and improving patient safety and clinical outcomes, observes Andrew Hayek, president and CEO of Surgical Care Affiliates. "Technological breakthroughs have allowed us to do so many more cases in the OR," says David Shapiro, MD, a partner in the Ambulatory Surgery Company, chair of the Ambulatory Surgery Foundation and chair-elect of the ASC Association. He lists laparoscopic surgery in the 1990s and minimally invasive spine surgery more recently. With faster recoveries, "so many more cases could go to the ASC," he says. Improvements in anesthesia to control pain were also "a huge factor" in the growth of ASCs, Dr. Lambert says, adding, "More cases could be done on an outpatient basis because people could be sent home so soon."

3. Incubators of medical breakthroughs. Physicians' new sense of freedom in their own ASCs led to a raft of medical breakthroughs, Dr. Lambert says. Clinicians moving from the highly bureaucratized hospital to the ASC were able to try new things, even though they lacked many of the research grants available at large academic institutions. In ophthalmology alone, Dr. Lambert says, ASC-based physicians developed phaco-emulsification and new kinds of intraocular lenses for cataract patients.

4. Rise in political clout. As each new surgery center opened its doors, the industry found itself with more political clout, Dr. Shapiro says. Now, with some 5,300 Medicare-certified ASCs nationally, "we are definitely establishing ourselves as a legitimate entity in the healthcare landscape," he says. Physician-owned hospitals, with much fewer facilities, were an easy target. The healthcare reform law "essentially regulated them out of existence," Dr. Shapiro says. "The physician-owned hospitals did not have strong foothold in the healthcare landscape as we have." With most cataract operations and most colonoscopies are done in the ASC, "if you abolished ASCs, hospitals couldn't possibly take on the volume," he says.

5. Decline in out-of-network. "Payors are highly focused on reducing out-of-network volume and employers are reducing the out-of-network offerings in their benefit plans due to the economy," Mr. Hayek says. Some states are supporting this trend. Chris Christie, the new GOP governor of New Jersey, for example, has made limiting out-of-network benefits a priority, he says. "ASCs that used to make a ton of money on out-of-network don't know how to deal with the environment," Dr. Lambert says.

6. New payment system. The four-year phase-in of the Ambulatory Payment Classification system for ASCs, which started three years ago, represents "a sea of change" for the industry, Dr. Shapiro says. The old "grouper" payment system had not kept up with changes in technology and types of procedures performed on an outpatient basis, such as in orthopedics, Mr. Hayek says. The changeover has resulted in higher reimbursements for orthopedics and lower reimbursements for pain management, GI, and urology, he says.

7. Growth grinding to a halt. "We are in the midst of a dramatic shift in the ASC market," Mr. Hayek says. Medicare-certified ASCs showed a 9.2 percent compound annual growth rate from 1998-2005 and then a 4.9 percent rate from 2005-2008, according to the Medicare Payment Advisory Commission. Mr. Hayek says 2010 will be the first year when net growth falls to zero. Dr. Lambert calls this new stage the "bottom of the barrel" phenomenon. "Every week I hear of another ASC going out of business," he says. "It is caused by the recession, a glut of ASCs and payment policies." Lambert estimates that while 50 percent of ASCs make a profit, 25 percent break even and 25 percent lose money. Physicians have been willing to "feed" poor-performing ASCs, but they are less able to do so as their income falls, he says.

8. Decline in volume. Mr. Hayek predicts total ASC volume will actually fall this year. "This is a very new reality for the ASC industry," he says. Dr. Shapiro says the industry is a victim of its own success. "A huge percentage of eligible surgeons are already involved in ASCs," he says.

9. Heightened regulations. Medicare has stepped up its scrutiny of ASCs, driven by an expanded federal Conditions for Coverage policy and a more active surveying process, with improved funding from the federal stimulus bill two years ago, Mr. Hayek says. The process now has a much greater focus on infection control and HHS is developing a separate set of regulations also focusing on infection control, he says.

10. Hospitals' higher profile. Hospitals have been redirecting the flow of surgery patients by buying up specialty practices, primary care practices and acquiring ASCs, Mr. Hayek says. When a hospital buys out the physician-owners and converts the ASC to a department of the hospital, it realizes a 75 percent increase in Medicare rates overnight. "This is a direct function of the growing disparity in payments between ASCs and hospital outpatient surgery departments," he notes.

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