30 years later, ambulatory surgery is braced for market, payment changes

New ASC payment system, quality reporting to affect direction

(Editor's note: This issue marks the 30th anniversary of Same-Day Surgery. In this issue we look at the growth of hospital-based outpatient surgery, freestanding centers, and office-based surgery practices, and we discuss how the field has changed. We discuss upcoming challenges, including a new payment system and quality reporting requirements for freestanding centers. We look at how you can draw the line, in terms of which patients are appropriate for outpatient surgery. We look at where OR technology is headed by examining digital ORs. As your editor since 1991, I — along with my editorial advisory board — look forward to helping your program survive these changes and thrive in the decades ahead. — Joy Daughtery Dickinson)

Even after 30 years, the outpatient surgery field still is constantly adjusting to changes in procedures, policies, and payments. Consider these recent actions:

  • Surgical procedures are moving not only from traditional hospital-based setting into ambulatory surgery centers (ASCs), but also to physician offices.
  • A payer has decreased payments for some procedures in the hospital and increased reimbursement for the same procedures in physician offices and ASCs — and a judge has affirmed that policy is OK.
  • A Medicare reimbursement system has been proposed for ASCs that would pay 62% of the hospital outpatient department (HOPD) rate.

These actions and others have caused outpatient surgery managers to scratch their heads as they wonder from day to day, where are we heading? Even Wall Street is worried. Bank of America issued a downgrade to the ASC sector, and several ASC companied watched their stock prices subsequently dramatically drop.

If you manage an ASC, should you be worried too? Should hospital-based managers of outpatient surgery be celebrating?

Overall, the physician and surgery center markets are growing. When comparing growth in the number of facilities from 2000 to 2006, surgery centers have seen a growth of 65%, and the number of medical group practices that perform at least minor surgery have seen a 28% growth, according to Verispan, a Yardley, PA-based company that provides health care data and services. On the other hand, hospitals with outpatient surgery departments have grown by a 5.89% decline in their numbers during the same time period, according to Verispan. (See chart.)

Physicians continue to have ownership in virtually all (90%) ASCs, according to a newly released report, Ambulatory Surgery Centers — A Positive Trend in Health Care," published by an ASC coalition that includes the American Association of Ambulatory Surgery Centers (AAASC) and the Federated Ambulatory Surgery Association. (To obtain a free copy, go to aaasc.org.)

However, hospitals also are cashing in on the outpatient surgery craze with their own outpatient surgery departments, freestanding centers, and, in some cases, joint ventures with physicians. "From the data we've looked at, we've certainly seen the movement of care from an inpatient basis to an ambulatory basis has been very rapid and driven by technology changes in anesthesia, surgical procedures — especially scopes, so there is a major shift in where care is delivered," says Ellen Pryga, director of policy for the American Hospital Association in Washington, DC. "As that shift occurred, most was in the hospital-based outpatient departments." Then, with the advent of growth in other ambulatory settings, a lot of the procedures shifted to ASCs and physician offices. "The reality is, care is shifting to the ambulatory setting," she says.

Will hospitals go out of business if all of their surgeons open ASCs? "It depends on how far it goes," Pryga says. If surgeons take most of their cases out of the hospital, then the hospitals are left caring for patients that are primarily uninsured or Medicaid patients, she warns. "If that is indeed the case, then you're not bringing in enough revenue to support that care, let alone other care or services that aren't attractive to niche players," she says. Could they go out of business? Yes, Pryga says, and some are having difficulty already. "You have to have enough from the well-paying work to pay for the not-well-paying work."

The future of the hospital market depends on the payment and regulatory environment for ASCs and physician offices, Pryga predicts. Currently, ASCs and hospitals don't have to meet the same costly regulatory requirements, she maintains. "There's a much higher cost attached to that: the safety code requirements for structures, the frequency of maintenance, recalibration, inspection of equipment, certification of personnel, etc. The list is endless," Pryga says.

The report from the ASC coalition points out that ASCs and hospitals face the same Medicare requirements in several areas, including surgical services and compliance with state licensure law.

Pryga points to additional requirements for hospital outpatient quality reporting that ASCs are not currently required to meet, although outpatient data reporting requirements are being developed.

Will hospitals be jumping on to the ASC bandwagon with greater numbers of joint ventures? "Your crystal ball is as good as mine," says Pryga, who adds that the trends will be driven by payment policy. "It's always been that way for every service, and will be that way for this one, too, so it's important particularly for government programs that payment polices are appropriate she says."

Caryl A. Serbin, RN, BSN, LHRM, president of Surgery Consultants of America in Fort Myers, FL, predicts that hospitals will be more interested in joint ventures. "I'm seeing hospital administrators who didn't embrace the prospect now saying this may be an opportunity to do a joint venture ASC," Serbin adds.

This interest stems from physician pressure and from hospital administrators wanting to grow their market share, she says. "We're starting to see a shift where hospitals will built next to a competitor to bring in new patients, new physicians," Serbin says. Also, she expects these joint ventures will be larger multispecialty facilities, due to the upcoming changes to the ASC payment list that will dramatically reduce payments for some specialties.

In terms of the ASC market, will the boom continue, or is the industry beginning to level off?

"There are some markets leveling out, but from a national perspective, the ASC market continues to grow," says Craig Jeffries, executive director of the AAASC.

The growth is not unrestrained however, he emphasizes. ASCs continue to face barriers, including state certificate of need (CON) laws and what Jeffries calls "legislative political pressure," mostly from state hospital associations.

However, even states with CON laws have seen significant growth, Serbin says. "The future is bright for ambulatory surgery center development," Serbin says. "We have seen continued growth as long as I can remember."

With this growth, the question arises: Are there too many surgery centers?

"There are some suburban markets where there is now more competition between surgery centers," Jeffries says. "The incidence of that is much less than other states where there's an underserved population. In other words, there are not enough surgery centers."

The more successful ASCs are the ones in which several physician practices come together to create a multispecialty, higher-volume center, Serbin says. "I think one of things the payment system changes, as that's proposed today, is that it's going to make physicians think twice about jumping out and doing a center, especially single specialty physician-owned centers," she says.

Also expect to see more hospital joint-ventured surgery centers, Serbin predicts. "Physicians are looking for someone to help them lessen the risk. They want a partner," she says.

Where do we go from here?

Surgery centers are facing significant changes, mostly in payment, that will profoundly affect future growth in the industry, says Eric Zimmerman, JD, MBA, partner with McDermott Will in Washington, DC.

"Many of the changes will be beneficial, others less so, but the overall impact on any given surgery center depends considerably on its specialty and case mix," Zimmerman says. "I think that we'll see a shift in the specialties typically practiced in the ASC environment, and many new opportunities arising as a result."

The recent stock drop is a "reflection of the impending change and uncertainty as to how that change will impact the market," he says. While some ASC payments will decline, others will increase, Zimmerman says. "Overall, the outlook is still good, although some individual centers may struggle if they resist change," he says.

Even with the recent stock fluctuation for same-day surgery companies, the mood of the field is one of cautious optimism, Serbin says. "I think there is a sense that it will rebound," she says.


For more information on the growth of outpatient surgery, contact:

  • Caryl A. Serbin, RN, BSN, LHRM, President, Surgery Consultants of America, 8540 College Parkway, Riverwalk Building, Fourth Floor, Fort Myers, FL 33919. Phone: (888) 453-1144. Fax: (239) 482-0888. E-mail: cas@surgecon.com.