Q: How is the current recession impacting ASCs?
Mike Lipomi: Overall, there has been a minimal affect on most ASCs. We have what I would call a false economy in healthcare. What I mean by that is patients are already receiving a discount for services, assuming they have healthcare coverage, so the demand curve is less likely to be affected even in tough economic times. It is different for other sectors. For example, car companies may discount a vehicle to make it more attractive to buyers when money is tight and as the demand curve lowers. That’s not an issue in healthcare where you are paying only a fraction of the cost of what a procedure is worth to you. For example, a patient might only pay a $500 deductible to go in and get hernia or gallbladder surgery that’s worth $5,000 to them. Thus, the general economic condition of the country does not impact ASCs as much as it does other industries. However, the economy has had a much larger impact on certain specialties, like cosmetic surgery. Elective procedures are where we’re seeing the biggest impact. If you’ve got a hot gallbladder, you are going to have that surgery no matter what it costs, but you may hold off on getting an elective procedure, like a rhinoplasty.
Q: What are your views on the current ASC market?
ML: I think the current market for ASCs is strong. I think physicians are realizing in these economic conditions the importance of having control over an investment and a seat at the governance table. Physicians will learn the value of practicing in an efficient center. They can’t afford to sit in the doctors’ lounge and wait. These conditions will make them look for a more efficient place to practice and that will benefit ASCs.
Q: How will the recently passed economic stimulus package affect ASCs?
ML: Well, I don’t think any ASCs will be getting checks, and I don’t think that the TARP or current stimulus package go far enough to ease the credit crisis. However, if the government continues to pour funds into a stimulus package, that should free up the credit market. It will allow ASCs to borrow money, which will allow ASCs to expand or purchase equipment and grow the industry. The stimulus package is the first step in freeing up credit markets and that will allow new centers to be built and existing centers to grow.
Q: What are the biggest challenges currently facing ASCs, and what new challenges might they anticipate in the coming year?
ML: One of the biggest challenges will be the growing unemployment rate. More of the population will lose their health insurance and their Cobra benefits. The impact of this is twofold. The first may be an influx of patients over the next 3-12 months. If someone has been putting off a procedure and knows his or her benefits will run out soon, you can bet that person will get the procedure soon. Secondly, the growing rate of uninsured individuals could eventually make it difficult for ASCs and hospitals to maintain their case loads. If a significant portion of the population does not have insurance and is forced to self-pay for procedures, ASCs and hospitals could see a decrease in the number of procedures performed.
Q: What are the best opportunities for ASCs right now?
ML: I think that the biggest opportunity to gain market share for ASCs right now is to improve efficiencies and quality of service. When you have a credit crisis and an economic slump, the most efficient operators are the ones that continue to thrive. ASC competitors, such as tertiary hospitals, are often inefficient and have a lot of waste. As a result, competitors have started to freeze salaries, lay off staff and close certain services. ASCs can take advantage of that. With reduced competition, ASCs can attract better employees and add more procedures, and that will make ASCs more desirable to patients as a result.
Mr. Lipomi (ssurgery@aol.com) is president of RMC MedStone Capital, a company focused on acquiring ASCs and small hospitals, focused on surgery, in partnership with physicians. Learn more about RMC MedStone Capital.
