1. ASCs are holding up, overall, fairly well compared to the rest of the economy. Many of the industry experts agreed that most ASCs are doing fairly well as compared to other businesses in this economy.
Daniel Daube, MD, FACS, a physician at the Surgical Center for Excellence and Gulf Coast Facial Plastics and ENT Center in Panama City, Fla., says, “We’re definitely holding up and doing better than most in this economy.”
2. ASCs are seeing decreases in overall procedures. Decreases in procedures are seen at surgery centers. Commonly, reductions are 5-7 percent as opposed to dramatic reductions.
A recent study conducted by the AAAHC Institute for Quality Improvement found that 60 percent of 1,000 participating surgery centers reported a decreased demand for services in the past 12 months.
The study found that both basic service and elective surgeries were affected. The five specialties that experienced the greatest decline were cosmetic and general plastic surgery (reported by 73 percent of facilities that offered this specialty), general surgery (72 percent), oral maxillofacial surgery (72 percent), facial, plastic and reconstructive surgery (71 percent) and plastic surgery (71 percent).
In addition, many ASCs are finding it difficult to add new physicians or to increase case volume in light of the economy. William Southwick, president and CEO of HealthMark Partners, says, “Without additional physician members to drive case volume, growth is likely to be anywhere between flat to down 5 percent. Higher deductibles and job loss inevitably will hamper growth from existing partners.”
However, some centers are managing to maintain and increase their case volume. Luke Lambert, CEO of the Ambulatory Surgery Centers of America, says that his company’s ASCs have been seeing 7 percent growth this year as compared to last year.
Marge Schillaci, administrator of the Surgery Center at Joliet (Ill.), says, “I purposely budgeted flat for 2009, expecting our volume to be impacted by the economy. In reality, we are experiencing a 15 percent increase in cases to date, especially GI. We are on track to perform nearly 340 GI cases this month. My guess is that we will continue to see an increase in our overall cases due to the fact that people are using their health insurance while they have it. We may see a decline in cases the second half of the year as people lose their jobs.”
3. ASCs are seeing flat to slightly reduced reimbursement with less opportunities for big reimbursement. In the current market, surgery centers are seeing less big out-of-network payments from payors and less high paying commercial payors.
John Poisson, executive vice president and strategic partnerships officer for Physicians Endoscopy, says, “For GI, Medicare declined 6-7 percent on Jan. 1 for the most part; however, through strategic negotiations, the balance of the third-party payor community continues to provide negotiated increases which at this point offset the governmental declines.”
Mr. Lambert says, “Out of network is seeing some curtailment in some markets. With contracted commercial payors, we continue to negotiate increased reimbursement.”
4. Spine continues to move to ASCs with an increasingly positive impact on surgery centers overall. Spine procedures have been shown to be profitable for ASCs, and many centers have taken the opportunity to add spine to their centers when possible.
James Lynch, MD, director of spine services for Regent Surgical Health and chairman of SpineNevada and president of the Surgical Center of Reno (Nev.), says that recent advancements in technology, techniques and procedures have allowed surgeries, especially spine surgeries, to be performed in the outpatient setting that were once only available in the inpatient setting.
“The technological advances, coupled with the changes to reimbursement guidelines and levels, are propelling spine programs into ASCs, where they can have a central role in a center’s operations,” he says. “Currently, only about 5 percent of all spine surgeries are done outpatient. The improved technology, higher quality of care and improved patient outcomes — in tandem with the reimbursements — suggest spine programs could grow by 400 percent over the next five years [according to data published in the Future of Orthopedics report by the Healthcare Advisory Board.]”
In addition, Dr. Lynch says, “Patients, along with their families, appreciate having procedures done in a patient-focused environment.”
Nancy Burden, director of BayCare Ambulatory Surgery Centers in Tampa Bay, Fla., says that her ASC is one that recently added spine — a specialty they had not done before.
Sue Sumpter, administrator of the Loveland (Colo.) Surgery Center, says that spine surgery can be a major income generator for an ASC. “More and more payors are realizing the financial benefit of allowing spine cases to be performed in an ASC setting,” she says.
In addition to benefiting financially, spine procedures in the ASC setting can be beneficial to the patient, which can drive case volume. “In 2006, we completed an outcome study that looked at every spine case we completed from June 2003-Sept. 2006,” Ms. Sumpter says. “This study reviewed 357 patients. Overall patient satisfaction was 98 percent. Postoperative pain control was superior compared to a hospital for a number of factors: from the initial pre-op preparation and education of the patient to the use of preemptive analgesia and regional analgesic techniques. We offer nearly one-on-one nursing care and post-op pain control is improved. Patient outcomes were excellent, with few complications.”
If permitted by state law, having a convalescent care center or rehabilitation center attached to the center or nearby can make spine procedures a further asset to ASCs. Ms. Sumpter, whose ASC has a convalescent center, says, “Patients who have elected to have surgery at our center have recovered quicker, spent less on surgical cost and experienced a greater level of satisfaction than those who elected to have surgery at a hospital. In addition, outside insurance audits have indicated a 60 percent cost savings in performing these surgical procedures at the ASC compared with local hospitals.”
5. GI and orthopedic volumes remain generally fine to slightly down without huge negative impacts from the economy. Orthopedics is slightly down more than endoscopy. For both of these specialties, there seem to be significant geographic variations as to results, as some regions of the country are holding up better than others. This trend is generally aligned with the economics of the area.
Ms. Burden says, “We are finding a drop off in GI — sometimes at the point of the preadmission business call about co-pay and deductibles and some from the loss of procedures at the physician office. Some people are just not coming in for their ‘routine’ colonoscopies. Some, not all, of our GI docs are telling us that business in general is down for them.”
Mr. Poisson has seen a different trend at his company’s GI centers. “According to an assessment from accounting on Q1 2008 versus Q1 2009, the results were quite pleasant in that overall volumes are up 3 percent across our partnerships. The one area of weakness is the Midwest where a flat to negative 3 percent is in play across a variety of facilities.”
Sandy Berreth, administrator of the Brainerd Lakes Surgery Center in Baxter, Minn., says, “My center has not noticed discernable change in elective orthopedics. I have been told that the community hospital [in our area] has noticed a decline in GI cases. One might have assumed that because many of those cases are Medicare patients — as are most ophthalmology cases — that the Medicare aged population is continuing to seek healthcare. However, I believe that the decrease in GI in this area is regional.”
6. There has been a slow down in the growth of bariatrics procedures and a dampening in the pricing of bariatrics. Bariatrics is one specialty that has seen the number of procedures being performed slow in ASCs.
Tom Michaud, chairman and CEO of Foundation Surgery Affiliates, notes that while his company is not seeing a slowdown at this time, there is potential for a decline in bariatric procedures.
“As many of these are cash procedures, we expect, if unemployment continues to rise, that we will see a softening in this area,” he says. “For those that continue to have employer-sponsored healthcare insurance, we are seeing more plans cover bariatric procedures on a ‘medical necessity’ basis. Again, if the economy continues to deteriorate, we expect more potential bariatric patients to ‘delay’ their procedure due to deductible/co-pay issues.”
7. Ophthalmology seems to be doing fine. Many of the industry experts we asked agreed that their ophthalmology practices were stable in the current ASC market.
8. Pain management reimbursement and the total number of procedures seem to be holding up well. Pain management is currently holding steady, but a few experts see higher expenses and some movement back to the office setting as particular barriers for this specialty.
Julian Vaisman, MD, physician-owner of New England Pain Care in Peabody, Mass., says, “Facility fees are holding on, although Medicare cuts are expected next year. Although the reimbursement didn’t change much, our expenses are on the rise: health insurance for employees and supplies.”
Ms. Burden, however, finds that more pain procedures are moving to the office setting. She says, “We find more and more pain procedures moving to the physician office primarily because of two things: 1) there is higher physician reimbursement in the office and 2) patient co-pay is much less in the office setting.”
9. Cosmetic surgery appears down significantly. Certain types of cosmetic and plastic surgery procedures are down in this economy.
Dr. Daube says that this is a highly regional trend, and big cities are being hit hardest. “Big ticket procedures, like face lifts, are down in big cities,” he says. “However, ‘big city’ procedures performed in small towns are stable because more people are willing to travel a few hours in order to spend less. What costs $15,000-$20,000 in the city may only cost $10,000 in a small town.”
In addition, many cosmetic surgery patients are opting for nonsurgical procedures to “buy time” until they can afford to have the more expensive procedure, according to Dr. Daube. “Overall, the number of procedures is not down,” he says, “but we are seeing movement from the big ticket surgical procedures to cheaper in-office procedures like injectables.”
One interesting trend Dr. Daube has seen is the increase of high-end professionals scheduling appointments for consultations. “Since more and more professionals are now job hunting, they have the time to come in, and they want to look better for their job interviews,” he says.
10. Great management together with the benchmarking of supply costs and the managing of staffing costs has become more important than ever. As it becomes increasingly important for surgery centers to watch their costs, having strong management who will implement and find new cost-saving measures is a necessity.
Mr. Poisson agrees that this strategy is important to helping ASCs thrive in the current market. He says, “Our own case studies show that on average our partnered centers enjoy 14 percent higher collections per procedure in comparison to peer facilities in local markets while benefiting from an approximately 25 percent reduction in medical supply costs. Together, this adds up to substantially healthier bottom lines without any negative impacts, in any way, on quality, safety or clinical excellence.”
Dr. Daube notes that this trend is similar to how patients and physicians are handling their personal finances. “When things get lean, you start looking at every little detail,” he says.
11. Negotiations with payors are becoming more challenging overall. This is highly dependent upon market and access issues. In some markets, payors are under more pressure to limit reimbursement; however, there continues to be opportunity to work with payors and enhance ASC contract rates if the ASC demonstrates a cost savings alternative. For example, if the ASC is offering a new line of business, especially spine and high-cost orthopedics, there is often an opportunity for substantial negotiation.
I. Naya Kehayes, managing principal and CEO of Eveia Health and Consulting Management, says, “Overall, in general, payors are not curtailing negotiations; payors continue to negotiate with ASCs, but it is certainly dependent upon market and access issues. There are some markets where payors have more pressure to limit increases. However, there continues to be opportunity to work with payors and enhance ASC contract rates if the ASC demonstrates a cost savings alternative. In fact, if the ASC is offering a new line of business, especially spine and high cost orthopedics, this is an opportunity for negotiation as well as other cases that can be moved from the hospital setting.”
Mr. Poisson says, “Skilled payor contract negotiators and access to market data are really the only keys to success in today’s market. These negotiations are one part facts/data, two parts the skilled art of negotiations.”
One tactic some ASCs are taking when negotiating with payors is working out agreements for specific procedures rather than obtaining a flat rate increase. Rajiv Chopra, principal and chief financial officer for The C/N Group, says, “Gone are the days when an ASC can negotiate significant ‘across the board’ increases without resistance from the payors. However, we are finding that payors are very receptive to exploring reimbursement increases for specific procedures. The key is to educate the payors on procedure costs and also sell the ASC as a lower-cost alternative compared to hospital and other market competitors. We have had some recent success in this regard within the GYN specialty.”
Some ASCs are taking steps to avoid or gain assistance in these complicated negotiations. Linda Peterson, CEO of Executive Solutions for Healthcare, notes that some physicians are looking to negotiate joint ventures with hospitals in their areas.
“Recently, the reason [to pursue a joint venture] is that the physicians want the hospital’s more generous payor contracts,” she says. “This has resulted in a different mindset regarding the percentage of ownership between hospital and physicians, as the payors typically won’t look at using the hospital’s more favored contracts unless the hospital has ‘controlling interest,’ which is typically related to 51 percent or more ownership. The challenge is that these physicians have been counseled in the past to push for more ownership in order to have more control. What we end up with, through these difficult negotiations, is an operating agreement that gives the physicians more control while preserving the superpowers the hospital needs to stay within Safe Harbors as well as the percentage needed to prove to the payors that they deserve the higher rates.”
Ms. Peterson notes that during a recent negotiation, for one CPT code she saw a $588 facility fee proposed from a major payor with the non-affiliated contract versus a $2,700 fee from another major payor due to the hospital affiliation.
Some ASCs have seen an increase in insurance costs but no change in their reimbursement rates. Dr. Daube says, “Blue Cross in our area just increased insurance costs 15-20 percent, but we’ve seen no increase in our reimbursement.”
12. Shifts in payor mix impact net revenue per case. As patients are faced with layoffs and potentially new jobs with new employers, there are substantial shifts in the payor mix which impact net revenue per case. In addition, there are increases in flexible spending accounts and high deductible benefits that require a larger portion of the overall payment to be from the patient. Hence, patient collections and upfront collections are becoming more critical.
Mr. Chopra notes that his company has seen an increase in distressed situations with patients as more of the responsibility for payment falls to them. “There is absolutely no question that this is a major concern for all healthcare providers given the current economic situation. Patients are considering other bills at this time, such as the mortgage or cell phone bill. Healthcare bills are often the last to get paid.”
He notes that there is no solid solution at this time. “There is no silver bullet to address this challenge. We’ve tried to increase upfront collection and put such policies into place,” he says.
Mr. Poisson notes that across the country, patients are facing higher financial liabilities even when in-network. “It is not uncommon for payors to impose a $250 co-pay for a colonoscopy,” he says. “This is approximately 50 percent of the expected collections per procedure in many markets. It is an alarming trend but a fact of life — as more and more medium to large size companies self-insure (and often will use a national carrier such as United or Cigna to provide administrative services — this is referred to as the ‘ASO’ model commonly), the employers are electing to increase patient liabilities for their employees through higher co-pays or deductibles.”
He notes that many physicians and ASCs who use an out-of-network model aren’t aware that most national insurers have more than 50 percent ASO models as part of their book of business. “Thus, ASCs that go out-of-network or physicians who use out-of-network ancillary providers such as pathology are not really hurting the insurers,” he says. “Instead, they hurt the employers in the local community. For instance, pathology out-of-network reimbursement for GI is often two to three times higher than the in-network costs. This additional cost is imposed not on Cigna or United but on the local employers who self insure. This is something many people in the ASC market simply are not aware of at this point.”
Ms. Kehayes also notes this trend. She says, “As patients are faced with layoffs and potentially new jobs with new employers, there could be meaningful shifts in third party payor mix for ASCs which can impact net revenue. In addition, there are increases in flexible spending accounts and benefit plans that require a larger financial commitment from the patient. Therefore, co-pays and co-insurances due in from the patient are enhanced. Hence, patient collections and upfront collections are becoming more critical.”
13. ASCs are reducing full-time employees and increasing outsourcing where possible. ASCs are re-examining opportunities to reduce full-time employees and increasingly outsourcing certain functions such as revenue cycle management, and billing and collection services, particularly where the center can realize savings and/or improve collections.
Bill Gilbert, vice president of marketing for Advantedge Healthcare Solutions, notes that economic pressures and slowing ASC growth is leading more ASCs to focus on efficiency. “At the same time, some are realizing that billing and collections results are not what they expect and are getting harder to achieve (issues such as recruiting and retaining skilled billing staff, staying current with changes in coding and billing procedures, and ever-more demanding payors),” he says. “As a direct result, we are seeing more and more centers consider using a professional billing service. The benefits include increased collections, reduced overheads, reductions in fixed costs and more management time to focus on patient care and promotion.”
Mr. Lambert of ASCOA says, “We do look on an ongoing basis to find opportunities to improve the productivity of our staff. This typically occurs by eliminating down time in the surgical schedule. We like to have full busy days and minimize partially utilized days. When the surgery is done we send staff home necessitating our staff work flexible hours.”
Caryl Serbin, president of Serbin Surgery Center Billing, says, “Analyze your billing practices (such as acceptance of denials and errors with no pursuit). Also, consider outsourcing coding, billing and A/R management to experts.” She also notes that in this economy, ASCs could benefit by using a management service to evaluate various aspects of a center, including business practices, efficiency, managed care negotiation and coding and billing services.
14. There is increased interest in refurbished equipment. We are seeing an increased interest in the willingness to buy re-fabricated and refurbished equipment as opposed to new equipment.
Russ Ede, vice president of non-acute contracting for Amerinet, notes that many ASCs are considering refurbished equipment in order to save money. However, he says it is important to note that refurbished equipment is not the same as used equipment, as refurbished equipment is reconditioned into like-new condition.
“Many ASCs find this to be good option because they are paying less, but [a reputable seller] is guaranteeing their investment,” he says.
Some companies have always considered buying refurbished or used equipment as an option at their centers. Mr. Chopra says, “It has always been part of the equation for us as we always have to be mindful of capital outlays. Patient safety is our primary consideration, so we are selective in how and when we utilize refurbished equipment solutions.”
However, many centers are still unsure about or uninterested in buying used or refurbished equipment at this time.
Are you seeing these same trends in your ASC? Share your thoughts with us by e-mailing Scott Becker at sbecker@mcguirewoods.com.
