30 Predictions on the Future of Ambulatory Surgery Centers

Becker's ASC Review queried a number of ambulatory surgery center physicians, administrators and company executives asking them to make predictions pertaining to the immediate, short- and long-term future of ASCs and the ASC industry. These predictions could apply to any aspect of surgery centers and the industry.

 

Here are 30 predictions from 14 leaders, organized by the last name of the source. Editor's note: Do you agree with these predictions? Disagree? Have you own prediction to make? Submit your comments in the "Add New Comment" box below the story or email rob@beckersasc.com.

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John D. Brock, administrator of NorthStar Surgical Center in Lubbock, Texas:

 

1. Procedures will continue to migrate from ASCs from hospitals. "ASCs will more and more be doing cases traditionally done in the hospital. At NorthStar, we are once again doing total joint procedures. To be able to offer the appropriate patient an outpatient procedure (overnight for knees and ankles and same-day for shoulders) that has historically required a multiple-day hospital stay is in the best interest of the patient, the payor and the system. This is also consistent with our mission, and the mission of ASCs, of providing unparalleled medical expertise and cost-effective care."

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Jack Egnatinsky, MD, president of the AAAHC board and retired anesthesiologist:

 

2. ASCs will not benefit from participating in ACOs. "Hospitals, which will dominate ACOs, will not let the two-tiered payment approach for ambulatory surgery exist within their ACOs. They will siphon off all of the profitable cases to the HOPD by being able to direct referrals. ACOs will prove to be a failure — many more of them will cost the providers money than will bring in 'bonus' payments for efficiency and cost savings."

3. Web-based accreditation/certification in healthcare will lead to a lower standard of care. "ASCs that accept web-based training and re-certification, for example in ACLS and PALS, have no assurance that their staff and/or medical staff has demonstrated proficiency in the use of an AED, cardiac compression or airway management. Simple reliance on EMRs and written policies does not validate what actually takes place in the centers and is observed in on-site visits, whether it be ASCs or medical homes."

4. Natural orifice and other 'gimmick' surgical approaches to avoid scarring will gradually disappear. "There are still scars, just not visible ones, which can lead to adhesions and other future problems. They will become unnecessary as new mini- or micro-fibers and tubes, which pass through barely visible incisions, are developed to allow sampling of tissue for pathologic examination, precise 'cutting' and cauterization and vaporization with removal of the tissue vapors in a closed-filtered system. This may seem very radical, but as I think back to 1966 and my first anesthetic for a cataract extraction — general anesthesia with deep extubation so the patient would not cough and extrude vitreous, sand bags on each side of the head, 45 minutes of operating time and 7-10 days in the hospital for recovery. This does not at all seem far fetched to me."

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Sandra J. Jones, MBA, MS, CASC, FHMA, executive vice president and COO of ASD Management and president of Ambulatory Strategies:


5. Same-store growth will be one of the most significant factors for ASCs to maintain success.
"With decreasing or flat reimbursement and increasing operating
expenses, ASCs will need to focus on improving volume. Adding new physicians to the surgery center medical staff and being sure those physicians are not "one and done" when they make the commitment to try the surgery center are critical to the surgery center's
long-term financial health."

6. Quality outcomes will finally be rewarded. "Insurers are using claims data to determine who should be in a network. Some already have developed a super restricted provider network that rewards physicians who have a history of an acceptable treatment
program and excellent patient outcomes. Pain management is one specialty
that insurers are targeting. More insurers will mine their claims data to
select providers, which means surgery centers will need to be aligned with the right
providers as payors continue to advance their analysis of payment for episodes of care."

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Brent W. Lambert, MD, founder and CEO of Ambulatory Surgical Centers of America:

 

7. Reimbursement will continue to decline. "Out-of-network arrangements are going away and CMS is not allowing Medicare increases to cover their true inflationary costs. Surgery centers are falling more behind year after year. ASCs will remain the low-cost, high-quality providers for outpatient surgery. That means their future is basically bright. The only thing that can dim it is more cuts in reimbursements."


8. ASC industry will continue consolidating.
More ASCs are joining larger organizations, such as management companies, hospitals and health systems. Small ASC management companies without an equity stake in their centers will have difficulties growing. They will have less access to bank loans and private equity. "One key contributing factor is their inability to finance a pipeline of projects."


9. Private equity funds are losing interest in ASCs.
The new equity funds are showing declining interest in the ASC space. There are exceptions like H.I.G., which is buying NovaMed and taking it private. "Virtually no new funds are entering the ASC market, and some of the funds that have been there are getting out."


10. Healthcare reform carries a cloud of uncertainty.
"Nobody knows how healthcare reform will work out." Congress, the courts and regulators could significantly change it. "What healthcare reform finally looks like is anybody's guess." The challenges in healthcare reform for ASCs include the Independent Payment Advisory Board, the influx of millions of more low-paying Medicaid patients and the introduction of accountable care organizations. "There is no incentive to start an ACO and plenty of disincentives not to."

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Amy Mowles, president and CEO of Mowles Medical Management:

 

11. Failure to remain flexible, aware of industry changes will lead to problems. "Slowed reimbursement and tighter regulations means ASCs will have to work smarter, not harder. They must be acutely aware of what is going in the ASC industry, with their own specialties and with Medicare and Commercial payor activities. They must have a plan in place to address immediate, short- and long-terms goal and be flexible. They must also be ready for ACOs, as this could affect physician referral patterns."

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Scott
Palmer, president and COO, ambulatory surgery center division of SourceMedical:


12. Cloud computing will continue expansion into ASCs.
"Another way to view cloud computing is the shift of your server hardware and software from on-premises to off-premises. The question is not whether this shift will occur for most healthcare providers but when and how. The business case for cloud computing is driven by lower total cost of ownership, reduced risk, improved performance, anywhere/anytime access, improved interoperability and agility. Independent ASCs and networked facilities will welcome not having to worry about performing backups, equipment failure, periodically replacing hardware and software, installing software updates and other worries associated with maintaining an in-house IT solution."


13. Increasing use of social media will impact utilization and referrals. "
Twenty-three percent of social media users reporting discussing their healthcare experience and seeking advice through their linked contacts. With the continuing rapid expansion of social media utilization into daily life, you can be sure that there will be a meaningful impact on how people share their experiences and recommendations. This bodes well for physicians and ASCs that provide a great patient experience."


14. Clinical automation will see continued increase in ASCs.
"We are continuing to see steady growth in adoption of an electronic health record into ASCs. Growth is driven by proven ROI, pressure from surgeons who no longer expect to be using a paper-based chart and an interest to get ahead of the curve before a government-mandated solution. Most facilities and corporate accounts are still in an evaluation phase but many facilities are now installing with great success."

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Thomas J. Pliura, MD, JD, PC, physician, attorney at law and founder of zChart:


15. Private practice of medicine will continue to flourish. "
Many people in the healthcare industry believe the end of the private practice of medicine is at hand. I predict the private practice of medicine will continue to flourish for essentially all medical providers, especially physicians. Many 'experts' predict the demise of physician groups which are not affiliated with large hospital systems. I predict that is all hogwash. I do not believe hospitals know how to practice medicine. Physicians practice medicine. Hospitals are frantically trying to develop healthcare delivery models that protect their status quo — that is, their revenues. I believe all healthcare providers need to be able to adapt to a rapidly changing environment.

 

"It is my belief that hospitals, by their very nature, are examples of an inefficient delivery system. Traditional large medical providers such as large hospital systems are plagued by multi-levels of inefficient middle management. I think traditional medical providers will need to adapt and change to accommodate the forces that are driving the changes in medicine. The greatest force is the need for economic efficiencies, in my opinion."

 

16. Outpatient settings will drive efficiency in healthcare. "I predict outpatient delivery systems, including ASCs, will be one of the drivers in forcing the healthcare system to become more efficient. Historically the payors (federal, state and commercial) have reimbursed hospitals at a higher rate than outpatient surgery centers. I predict that in the not-to-distant future these payment disparities will begin to evaporate. There is no valid reason why two medical providers should be paid differently for providing the exact same type of service. I do not believe society will continue to approve of these disparate reimbursement methodologies simply based on an argument that the hospital delivery system is more costly, thus society should pay a higher price."

 

17. Insurance companies will continue efforts to align with health systems to obtain price breaks. "I predict insurance companies will continue to attempt to try and align with large health systems to obtain pricing breaks on certain inpatient services such as ICU pricing, neonatal pricing and other high-cost service centers. The U.S. Department of Justice has begun to look at these relationships as being anticompetitive and driving up the cost of healthcare. As an example, the DOJ has filed and antitrust lawsuit against Blue Cross Blue Shield of Michigan, challenging Blue Cross of practices which are alleged to be anticompetitive and cause increases in the cost of healthcare, to the detriment of society. I predict in the not-to-distant future many of the larger insurance companies will be forced to change many of their policies which are in effect today. I believe this will result in ASCs playing an even larger role in the delivery of outpatient medicine.

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Blayne Rush, MHP, MBA, president of Ambulatory Alliances:

 

18. Financial investors will assume a larger role. "While it is well noted that we are seeing increased consolidation up and down the ASC vertical with individual centers, multi-center groups and ASC management companies, I believe in the near term we will see more financial investors playing a larger role in the ASC market. Historically speaking, ASC management companies have lead the way as far as highest purchase price paid for surgery centers, then came the hospitals competing with the ASC management companies around price paid. I believe that now and in the near future, financial buyers (i.e., private equity groups) will outpace all of them as far as price paid.

 

"To understand this, you need to understand a little bit about private equity groups. PEGs obtain money for the most part from intuitional investors, and high net worth families/individuals. Generally speaking, they are typically paid on a two and twenty basis: two percent on the amount under management and 20 percent of the gain in the value of the fund. Funds are typically set up with a 10-year fund life and 6-year investment duration. Think 10 years to invest for six.

"The catch is that the typical agreement is that if they do not deploy the money, they will have to give back the 2 percent management fee. So if they have a $100 million fund and are in year three of the fund, they have taken $6 million in management fees. If they have 6-year investment, they must deploy the money by the end of year four or give back the $2 million per year that they have taken out of the fund for management fees. Knowing that, and that PitchBook found a $418 billion overhang (dry powder/undeployed funds) in 2010, increasing more than $211 billion since 2007, what does that tell you? The vast majority of the funds will not want to return money they have already spent and are on the prowl for investments. All that dry powder has a deadline, and firms are very aware of that which could stimulate some to think getting the deal is more important than getting the best deal, which is good for ASCs.

"The majority of PEGs look for deals bigger than the one ASC deals, but because they are attracted to the ASC space, are facing increasing pressure to invest and there is more money than deals, financial buyers are looking to buy one-off centers and the smaller regional ASC companies to consolidate them. They will do this in a motivated way and in a not so disciplined manner."

19. Local community bank lending will grow. "For single ASC project debt sources, I believe local community bank lending will grow. To many people's disbelief, banks have cash to lend and need to place debt. Regional and national banks are very tight when it comes to placing debt on smaller projects; they perceive there is less risk lending on larger projects. Many banks have taken a bath with the downturn in real estate and the overall economy. With all banks being overly cautious in placing debt for real estate, they are in search of alternatives to lend on.

 

"Some national experts have published that historically as much 80 percent of small community bank's debt portfolios have been held in real estate. Thus, they are in search of safer alternative non-real estate projects and they see physician-centric surgery centers as a strong alternative. Even though you believe you have a strong relationship with a regional bank, search the market local to the project for funding for your next ASC; you just might be surprised."

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Mike Russell, MD, of Azalea Orthopedics in Tyler, Texas, and president of Physician Hospitals of America:


20. ASCs will integrate with hospitals in the short and intermediate-term, but the ASC model will experience resurgence in the long-term.
"ASCs have been an integral part of the evolution of procedures out of the high-cost and inefficient arena of full-service hospitals. Unfortunately the government's policies are driving independent ASCs to sell to hospitals, where they are losing their independent spirit and are becoming more costly to society. These policies will drive short- and intermediate-term decisions, forcing many ASCs to sell and integrate with full-service hospitals. I believe, however, that in the long-term medicine will have to be disrupted, so that more procedures will become outpatient, even office-based, and therefore there will be a resurgence of the ASC model."
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Bob Scheller, CEO and COO of Nikitis Resource Group:

 

21. To preserve the physician-owned model, more ASCs will consider co-management. "We see the co-management model as the way to continue a successful physician-owned venture — one with a hospital partner but following the co-management rules. That is all driven by reimbursement. If we were in the environment of the old age of reimbursement, we probably wouldn't be doing this but third-party payors look at hospitals and give them a much higher payment for the same procedure. They pay for hospitals for parts; they don't pay for parts in the ASC. To preserve physician participation and physician management, that's where you'll continue to get your efficiencies. If the hospital is allowed to 'hospitalize' the project, that seems to be where inefficiencies arise."

 

22. Hospitals and payors are increasingly eyeing surgery center partnerships. "With the advent of accountable care organizations, many hospitals are looking for an efficient surgery center right now. And if I were a payor group, I'd be looking for a couple of surgery centers as well. If I were running a health plan, I would have physicians enrolled and would be looking to work out real estate partnerships and things for the docs and still keep that efficient ASC model, even though I would have to add a substantial number of specialists. It seems like it's all going to be driven by efficiency, and isn't that the reason ASCs were started in the first place?"

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John Seitz, CEO of ManageMyASC.com and chairman and CEO of Ambulatory Surgical Group:

 

23. There will be growing reliance on benchmarking tools and resources for sustainability. "Physicians and owners will begin to rely more on analytical and business intelligence tools to measure and tune the business of their surgical center, to quickly identify problems before they impact the bottom line and to recognize and capitalize on opportunities. While it has always been critical to set targets, measure results and benchmark data, the ability to do this in a quick and efficient manner will change the way owners and managers interact and respond on a real-time basis, and those ASCs that do not take advantage of available resources will fall behind."

24.
"Closed networking" will change the practice of business. "Physicians, operators and patients will take more advantage of "closed networking" (such as LinkedIn and "peer-to-peer" websites) to gather information and to make decisions. On the provider side, we will use these tools to discuss reimbursements and contracts, review/rate equipment and vendors and explore other opportunities and partnerships. For patients, they will use these tools to learn about treatment options, payments and charges, quality measurements and results."

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David Shapiro, MD, CASC, CHC, CHCQM, CHPRM, LHRM, co-chair of the Ambulatory Surgery Center Quality Collaboration, chair of the Ambulatory Surgery Center Association and partner in Ambulatory Surgery Co.:


25. ASCs' role in the healthcare system is set to change
. "Broadly, what I do see changing in the near future is the ASCs' place in the healthcare system. Things are changing around us and I think ASCs, more than ever, need to be aware of what's going on in the healthcare community, particularly their own community. That includes physicians, hospitals and health plans. This does not necessarily mean forming an accountable care organization tomorrow but it's about becoming aware of what kind of changes are occurring, what alliances are being built, the growing role of primary care providers in determining the course of a patient's healthcare. ASCs really need to know what's going on in their local area, as well as nationally."

 

26. Use of electronic medical records will increase. "ASCs need to continue evolving, and that includes the area of electronic medical record usage. We know we have a notoriously low penetration of ASCs using EMRs but we really need to start thinking about getting up to speed on that if not only to improve patient care in our own ASCs but really to allow us to participate in the larger healthcare communities — surgeon groups, hospitals we may form alliances with and even insurers."

 

27. Quality reporting is going to happen. "It looks like we will be starting some quality reporting system in 2012. We're less than six months away from doing something significantly different for ASCs. Physicians have been doing it for a long time, hospitals as well. Clearly it's something that has been a long time coming. It's something we've asked for and is something we've worked very hard to prepare ourselves for. ASCs need to stay tuned to their state and national societies. We have a lot of unanswered questions about the quality reporting system. As CMS rolls out more specifics, ASCs need to have a place to go to and get that information so they can have their own internal reporting systems.

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Vivek Taparia, director of Regent Surgical Health:

 

28. Industry consolidation will continue. "Last year marked the first year in which the net growth of ASCs fell to zero, representing for the industry a transition from a phase of growth to one of maturity as evidenced by recent consolidation in the industry. With Surgery Partners' acquisition of NovaMed and AmSurg's acquisition of National Surgical Care, 2011 has represented a watershed year of consolidation for the ASC industry, marking a trend that will continue in the intermediate future.

 

"In order to continue to achieve economic gains, surgery centers and management companies consolidate to achieve cost synergies. Tangible evidence suggests that such consolidation-linked synergies can be realized. For example, average case volume levels per OR per day have fallen meaningfully over the past few years. Over the long run, it would not be surprising if the ASC industry resembles the current dialysis industry in which a few large players such as Davita and Fresenius control the vast majority of the market. In the short term, however, smaller chains continue to proliferate. According to VMG Health's 2008 Intellimarker, 24 ASC chains managed 988 facilities. In the same study for 2010, VMG reported that 44 chains managed 1,302 ASCs."

 

29. There will be a necessity to embrace robust information systems. "In order to for ASCs to stay competitive, I anticipate the necessity for ASCs to embrace robust IT platforms which thoroughly capture cost and quality data. The Affordable Care Act requires that, starting in Oct. 2012, Medicare reduce hospital DRG reimbursements by a small percentage and reward these funds to providers with high quality and efficiency measures. Earlier this year, HHS presented a plan to Congress to implement a similar value-based purchasing program for ASCs. Draft regulations for accountable care organizations indicate that providers must track 65 different quality metrics in order to participate in the program. While it is still very unclear the traction ACOs will gain amongst providers, it is very clear that robust information systems that track quality, efficiency and cost will be paramount to success in tomorrow's reimbursement environment."

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Jeff Thompson, MS, MBA, MSHA, CEO/administrator of New Mexico Orthopaedic Surgery Center in Albuquerque, N.M.:

 

30. Challenges will continue, but the role of ASCs in healthcare will be solidified. "In recent years, the ASC industry has experienced significant transformation. It's no secret that we are operating in a more highly regulated, legally restrictive and politically sophisticated environment. Overall, the industry has responded well, and from my perspective, is stronger and more relevant than ever. However, the challenges and day-to-day hurdles are greater than ever, as well. We do have momentum and traction as an industry and I think that will continue. I also think that we will see some favorable legislation in the short term. Although, at the end of the day, the challenges we currently face pertaining to legal and regulatory requirements, reimbursement rates and physician employment will no doubt be the challenges of tomorrow. I do believe that our contribution to and position within the national healthcare delivery system will become more defined and solidified within the next two years. Thus, it is vital that we reach out to policymakers and actively participate in the process."

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