11 Things To Know About ASCs — 2014

Here are 11 things to know about ambulatory surgery centers.

1.  There are approximately (5,400) Medicare-certified ASCs nationally. The net increase in ASCs per year is relatively small as almost an equal number of ASCs are opened as are closed in each year. Since 2010, the Medicare ASC growth has been less than 2 percent annually. (MedPAC Report to Congress: Medicare Payment Policy, March 2014) An April 2014 OIG report found Medicare saved almost $7 billion from 2007 to 2011 and beneficiaries saved $2 billion over the same time period. The report estimated Medicare could save an additional $12 billion form 2012 to 2017.  (Medicare and beneficiaries Could Save Billions If CMS Reduces Hospital Outpatient Department Payer Rates for Ambulatory Surgical Center-Approved Procedures to Ambulatory Surgery Center Payment Rates)

2.  The growth in ASCs has been limited due to the fact that many ASC eligible surgeons are already invested in ASCs and hospitals increasingly acquire physician practices.   Physician practice acquisitions directly reduce the number of eligible surgeons. Acquisitions of primary care physicians harm referrals to surgeons. Reported mergers and acquisitions reached their zenith in 2011, where more than 100 acquisitions took place in the healthcare space. (Irving Levin Associates) In 2012, there were just under 60 acquisitions reported.

3.  There are approximately five chains with more than 100 ASCs. These include AmSurg, SCA, USPI and HCA. There are another 20 to 30 chains with investments in 10 or more ASCs. (10 Things to Know About HCA; 10 Things to Know About AmSurg)   

4.  ASCs have been hurt by the extent hospitals can charge a great deal more for the same procedure as ASCs. This difference has led to hospital hiring of physicians and more development of HOPDs. Sixty percent of ASC operators said physician employment at hospitals moderately hurt their centers, but 87 percent said physician employment was an increasing threat. (VMG 2011 ValueDriver ASC Survey) In 2011, Medicare reimbursements for ASCs were 56 percent of HOPD reimbursement, a 2 percent decline from the previous year and 7 percent decline from 2008. Medicare has proposed increasing hospital outpatient prospective payment rates by 2.3 percent in 2014 while recommending no increase in ambulatory surgery center payment rates. (Medicare Payment Advisory Commission, December 2013).

5.  ASC key legal issues include the extent to which physicians can be redeemed for not meeting safe harbors or other tests, the way in which ASCs can profit from ancillary services like anesthesia (Advisory Opinion 12-06 — ASC Transactions with Anesthesia Providers) and the manner in which shares can be sold to physicians. Around 59 percent of ASC companies determine the price for buy out transitions with a formula and 29 percent determine the price with an independent fair market value opinion. (HealthCare Appraisers 2013 ASC Valuation Survey). (12th Annual Spine, Orthopedic & Pain Management-Driven ASC + the Future of Spine Conference)  

6.  The top three specialties for ASCs are orthopedics, gastroenterology and ophthalmology. In a survey of ASC companies, 100 percent rated orthopedics and sports medicine as desirable specialty; 94 rated orthopedic sports medicine as desirable; and 82 percent ranked gastroenterology as desirable. (HealthCare Appraisers 2013 ASC Valuation Survey) Pain management and neurosurgery are also very important to ASCs.

7.   There is an increasingly number of legal disputes involving ASCs. These can relate to the key legal issues noted above or to management agreements and non-competes and similar issues. Nearly half of ASC companies charge ASCs 5 percent of net revenue for management fees. Thirty-one percent charge 6 percent of the ASC's net revenue for the management fee. Most ASC companies with an annual minimum management fee set the fee between $100,000 and $299,000. (HealthCare Appraisers 2014 ASC Valuation Survey).

8. ASCs face challenges regarding same-store growth, as there is more pressure on reimbursement because of new quality reporting penalties, narrow networks and the removal of automatic annual rate increases during contract renewals. Around 24 percent of ASCs experienced stable ASC volume in 2011; 27 percent reported growing volume and 27 percent reported declining volume. (VMG 2011 ValueDriver ASC Survey) Thrity-six respondents said the impact of the economy on elective procedures was their greatest challenge in case volume growth and retention; 32 percent reported competition form other ASCs and surgical facilities as the greatest challenge. Only 23 percent said the increase in hospital-employed physicians was their greatest challenge to case volume growth.

9.  ASCs increasingly look at new models to control their destinies. Like hospitals they increasingly consider hiring physicians, especially those who are currently independent physicians in specialties that have recently experienced reimbursement decreases and to whom employment may be an attractive alternative. ASCs also increasingly look to hospital joint ventures, which show more physician ownership than ever before, and other case volume-ensuring methods, such acquisition of other centers (HealthCare Appraisers 2013 ASC Valuation Survey).

10. Notwithstanding a great deal of talk about multispecialty centers and balancing portfolios of centers, single- and limited-specialty centers still do very well compared to multispecialty centers. The average operating use rate for single-specialty ASCs Is 47 percent and 75 percent of single-specialty ASCs have an accounts receivable rate of 49.6 percent or less. (ASC Association Outcomes Monitoring Project 2nd Quarter (April-June) 2011 Report)

11. To succeed going forward, ASCs often need to truly excel in a specialty to attract business away from competitors, be the dominant surgery provider in their market or run a very low cost center model to pass the savings on to consumers. The number one challenge cited in the VMG 2011 ValueDriver ASC Survey for the next five years was the saturated ASC markets with limited physician pools. Fifty-three percent of ASC operators considered closing underperforming ASCs in 2011.

More Articles on Surgery Centers:
CON States: How to Open a De Novo ASC

ASC Payer Trends: Evolving Market Creates Opportunities for ASCs

6 Tips for Selecting an ASC Billing Company

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