Ambulatory Care Quarterly: Outpatient managers face uncertain reimbursement

With the full impact of ambulatory payment classifications (APCs) still unknown for hospital outpatient surgery departments, ambulatory surgery centers (ASCs) are bracing themselves for an uncertain future.

"We don’t know what they’ll do to us," says Lawrence Pinkner, MD, immediate past president of the San Diego-based American Association of Ambulatory Surgery Centers and president of the SurgiCenter of Baltimore. "Maybe they’ll link us to hospitals — not 100%, but maybe 95%." Or there could be a totally different fee schedule for ASCs, he says. "What we don’t expect is a total increase in reimbursement. It’s threatening. Nobody knows what will happen." If Medicare cuts rates, other insurers will follow suit, Pinkner predicts. "That could be death for lots of surgery centers."

Some surgery centers are closing because they found out they can’t get reimbursed for pass-through items or disposable items. "We’re working hard on third payers and say, If you pay us for disposables, we could do these procedures and save you a lot of money,’" he says. "Some are changing, but if it doesn’t apply, it limits what can move to outpatient venue." If you make $100 to $200 for a procedure, you can’t do them, Pinkner maintains.

Eric Zimmerman, JD, MBA, an attorney at McDermott, Will, & Emery in Washington, DC, is more optimistic in his outlook. He predicts that reimbursement for freestanding centers will change in the next three to five years, but it probably will be for the better.

"There no doubt will be some winners and losers; i.e., reimbursement will increase for some procedures and drop for others," Zimmerman says. "However, overall, changes on the horizon in Medicare reimbursement will improve stability and predictability in ASC service reimbursement and also an expansion in the number of services that will be covered in the ASC setting."

Pinkner describes reimbursement as the "single biggest burden on managers." However, with the help of tracking software, managers are becoming knowledgeable about their profits, he says. Software can even track the cost by physician, Pinkner says. Good managers will analyze their costs and know when to tell physicians they can’t provide the procedure, he says.

Expect increased managed care contracting with outpatient surgery centers, predicts Jennifer Marks, MPH, acute care product manager at SMG Marketing in Chicago. "Low overhead and this consumer demand for outpatient services appeal to managed care organizations, and surgery centers themselves can offer multiple types of services to patients," Marks says. "It’s a combination of it being less costly for managed care and consumers being happier with outpatient service rather than be admitted."

One thing won’t change in the years ahead, Zimmerman predicts, and that is the dominance of Medicare. "As the Medicare population swells, so too will the role that Medicare plays in the ASCs, from reimbursement to influence on arrangements," he says.

While some surgery centers are converting to inpatient status, some hospitals are abandoning that niche and converting to all outpatient care. In 1999, 12 hospitals in the country were outpatient facilities, according to the Chicago-based American Hospital Association. That number grew to 22 in 2000, according to the association. A look at one facility that took this step provides some of the reasons.

Mercy Community Hospital in Havertown, PA, was a 64-bed medical/surgical hospital with a five operating room surgery center and pain center. "Recently, the market has been turbulent, particularly in that reimbursement was not keeping pace with costs," says Martin McElroy, hospital administrator. "Also, malpractice has escalated in this area, [and] with the nursing shortage, salaries were going up," The hospital couldn’t survive with 64 inpatient beds when they were surrounded by large established institutions, including one from their own health system within seven miles. Thus, the inpatient hospital services and the emergency department have ceased operation. An imaging center and an outpatient radiology area have been added. Sixty percent of the full-time employees are being placed elsewhere, and 25% will remain on campus, McElroy says. The remaining 20% have been terminated. Now the hospital is adjusting to being an outpatient facility.

"We hope to provide some things that the community is looking for now: state-of-the-art services in a manner that is customer-friendly," he says. "We want to reduce waiting times and focus the specific needs of outpatients."

One of the biggest challenges has been changing the culture to focus more on patients and physicians, he says. "From inpatient to outpatient, the challenge is: What is the level of care you’re able to give? Is it customer-friendly to the point at which people feel there’s value added to that?"

Expect more hospitals to follow Mercy’s lead, McElroy predicts. "As you look to the future, the things that keep coming up . . . are the ability to serve the patient and physician in a new health care model that has easier access, more timely services being provided, and also the ability to get the turnaround time that patients are demanding. Those types of things, if we can address them, will help us become successful."

[For more information, contact:

  • Martin McElroy, Hospital Administrator, Mercy Community Hospital Center, 2000 Old West Chester Pike, Havertown, PA 19083. Telephone: (610) 853-7001. Fax: (610) 449-0415.]