EXECUTIVE SUMMARY

Shift of surgical care to ASCs moved steadily over the decades and now encompasses orthopedic, neurological, and other high-acuity cases that once were unimaginable for this setting.

  • ASCs still struggle with reimbursement of some devices.
  • Overall reimbursement continues to be low, requiring ASCs to remain efficient.
  • ASCs need to know what their costs are per case so they can better negotiate rates from payers.

When the first ASCs opened decades ago, few might have predicted this would turn into a trend in orthopedic, neurological, and other high-acuity surgery cases.

“The shift of surgical care outside of an inpatient setting has been moving at varying rates since the first surgery centers were first opened,” says Jeff Dottl, principal at Physician Surgery Centers in Tarzana, CA. “The first ASCs were a fissure in the dam, and now the dam is about to break with more codes shifting to outpatient between spine and other high-acuity orthopedic cases. Almost nobody does ophthalmology in a hospital anymore; pain management is entirely outpatient, and general surgery is more outpatient.” With hernias, mastectomies, colonoscopies, and other gastrointestinal surgeries all shifting away from inpatient hospital settings to the more efficient and cost-effective ASC settings, the trend is exploding.

“We got news last year of Medicare moving total knee off the inpatient-only list,” Dottl says. “That made the headlines, and it got a lot of hospitals to think about a trend that wasn’t on the radar for them until now.”

Challenges remain. For example, procedures involving devices are a struggle because of the low reimbursement surgery centers receive, Dottl notes. “We’re at the bottom of the barrel when it comes to reimbursement. When there’s a device-intensive case that the surgeon wants done in an outpatient setting, it can be challenging because reimbursement stinks,” Dottl says.

Procedure codes feature three payment levels, depending on their setting. Hospital inpatient surgery receives the highest level of payment. Hospital outpatient surgery is second. ASCs receive the least amount of reimbursement.

“They are wildly different reimbursement rates, even with the same patient, same surgeon, same procedure,” Dottl explains. “For procedures that involve neural stimulators or hardware implants and other devices, the device cost will be a driver on whether or not you can even do the case, financially, at the center.”

This is a question ASC administrators, owners, and physicians must ask of each costly procedure: Can we perform this procedure safely and with high quality at the ASC reimbursement level? Dottl offers suggestions for how to assess whether new procedures will make financial sense for a surgery center:

How flexible are the ASC’s surgeons in selecting devices? Surgery centers might be able to afford some new surgeries, provided there is some flexibility in ordering devices. The issue is whether their surgeons will accept a change in device product or vendor.

“If there’s a certain device manufacturer that doesn’t want to play ball and sets their price too high so the surgery center can’t make a reasonable profit on the case, you might want to seek an alternative,” Dottl advises. “The biggest roadblock is the willingness of medical staff to find an alternative device.”

From a surgery center administrator’s perspective, the key is to not make changes that surprise physicians. “You don’t like surprises, and neither do surgeons — so don’t surprise them,” Dottl offers.

Instead, review the economics of a potential change. Show physicians what the current cost is and how this makes the surgery economically unfeasible. Then, show how the surgery can work financially if the device cost were lower, such as using a competing device manufacturer’s product, Dottl suggests.

“Put doctors in charge. Give them all the facts,” he says. “I have yet to find a surgeon who is not appreciative of being told the costs, but you have to do it in a way that is not accusatory.”

Dottl says one way to approach this conversation is to say: Dr. X, your cases cost this much with your preferred device. Here’s what we would like to use, and here’s the cost. “If information is relayed in this spirit, it’s always taken well,” Dottl adds.

What is the relationship like between an ASC and its contract managers and payers? With fixed reimbursement, such as with Medicare, ASCs have to watch their costs closely because there is no possibility of changing the contract, Dottl says.

With commercial payers, there might be some flexibility. “They each have different ways of formulating their reimbursement model,” he says. There might be an opportunity to negotiate a higher reimbursement rate for surgeries that involve high-cost devices.

Can the ASC obtain concessions from its vendors? Vendor sales associates can help increase costs if ASCs are not collecting data and negotiating aggressively. For instance, if a vendor sales representative quotes an unreasonable price for a product, the ASC administrator can show data on how much of the reimbursement that product will absorb and how the ASC will lose money at that price, Dottl suggests.

“We might have a $2,500 reimbursement for a case, and the device the doctor wants is $2,700,” he says. “At this rate, we’ll lose money before the patient rolls back to the operating room.”

This is why ASCs should know what their reimbursement looks like for each case. Armed with cost data, they can push back on vendor prices and improve their negotiating power, Dottl says. “Sometimes, the sales rep won’t bend, and it won’t work out.”

In those cases, the ASC will have to turn down that procedure or switch to a much less expensive alternative.

“I’ve seen more than my share of these fly-by-night companies that pop up with some greatest thing for minimally invasive surgery,” Dottl explains. “They’re here today and gone tomorrow because they have a cost-prohibitive device. It sounds nice until you talk about outcomes, costs, and the science and evidence behind it.”