By Stephen W. Earnhart, MS
Earnhart & Associates
Austin, TX

Healthcare, in particular outpatient surgery, is aflutter right now. I have been working with hospitals and surgery centers for 30 years and this is the busiest we have ever been. I suspect that much of it is driven by foreseeable action on the Affordable Care Act, although any changes to that are still in the works as of this writing. However, it seems likely that something is going to change, hopefully for the better.

Much of our new business right now is focused on developing hospital outpatient departments (HOPDs) for hospitals, which allow them to run a lower-cost facility for outpatient surgical cases. Developing and managing freestanding surgery centers is second. Expansion of existing facilities is third. The time is right for all three. If you are not considering one of these options, you could be in trouble. Doing nothing is dangerous.

Hospitals understand the need to off-site their growing outpatient surgery into its own facility to allow for lower operating costs. This gives the hospitals the opportunity to bundle procedures such as total joint replacement, advanced shoulder procedures, and spine surgery that is going to the freestanding ASCs with escalating speed as payors see the opportunity to cut their costs.

The need for segregation of inpatient and outpatient cost structure is here to prevent further erosion to cost efficiency and the high customer satisfaction found in ASCs. Employing a staff that is dedicated to fast-tracking patients and cost control is paramount to hospitals’ success in this growing market. Another benefit of outsourcing this class of patients is the elimination of costly in-hospital expansions of new surgical suites.

The number of freestanding ASCs is rising as well, mostly because hospitals are joint-venturing with the doctors where they can (where they cannot is mostly in the Certificate of Need states). Of note, 100% of all the new ASCs and HOPDs we are working on right now have expanded patient recovery areas and expanded instrument processing sterilizers and space for total joint replacement.

Several hospital initiatives have to do with their employed surgeons, something that in the past hasn’t been necessary because of the binding effect of employment with the surgeons. However, with the lure of the lucrative growing total joint market, even employed surgeons want to share in the facility fee with the hospital. With more surgeons becoming employees of hospitals, this is very telling of where the market is going.

Existing ASCs that are not willing to carry out a physical expansion of their surgery centers are essentially saying, “I am OK with losing my orthopedic and spine cases to someone else.” Many ASCs are not taking orthopedic cases anyway, so it is not necessarily a high risk for them not to expand. However, for those that are performing a few arthroscopies and count on that revenue, do not get comfortable in keeping them in your budget as more orthopedic groups move from existing ASCs into facilities that will allow their surgeons to perform higher-end joint replacement and basic ortho cases in one facility with which the group has entered into an equity position. The same goes for spine procedures: Don’t underestimate the tight bond between spine and ortho groups.

One must constantly expand or run the risk of being left behind. Surgery centers and hospitals’ basic business model has remained the same for the past couple of decades. Not now. Settling for what you have in the past is going to kill many hospitals and surgery centers who cannot see the future and respond accordingly. Complacency is the worst place you can be tomorrow. The worst thing you can do is not make a decision today.

Earnhart & Associates is a consulting firm specializing in all aspects of outpatient surgery development and management. Earnhart & Associates can be reached at 5114 Balcones Woods Drive, Suite 307-203, Austin, TX 78759. Phone: (512) 297-7575. Fax: (512) 233-2979. Email: Web: