EXECUTIVE SUMMARY

Surgery center growth is on track to rise 16% through 2026, according to the 2018 Ambulatory Surgery Center Market Report by the Health Industry Distributors Association.

  • Movement from inpatient surgeries to ambulatory surgery centers continues at a steady clip.
  • Medicare removed knee replacement surgery from the inpatient-only list in 2018, which contributes to the ASC growth trend.
  • Growth opportunities include orthopedic, spine, and prostate cancer procedures.

Surgery centers can expect steady growth in 2019 and beyond, according to the authors of a recent ambulatory surgery center (ASC) market report who predict 16% growth in outpatient procedure volumes through 2026.1

This growth largely is due to an expanding population of older patients who need surgery now or will soon, but it is supplemented by surgical procedures shifting from inpatient to outpatient settings, according to the 2018 Ambulatory Surgery Center Market Report by the Health Industry Distributors Association (HIDA).

“There’s no question that there’s a continual, gradual movement away from inpatient surgery and toward ambulatory surgery centers. It looks like the government is trying to change reimbursement, so there is more of an incentive to go to ASCs,” says Jeff Peters, MBA, the CEO of Surgical Directions, a specialty healthcare consulting firm based in Chicago. “There typically is 2% growth per year, and we think that will continue,” he predicts. Peters also believes there will be an end to regular growth in the proportion of ASCs owned by surgeons. Instead, most ASCs eventually will be affiliated with health systems. Original ASC owners are maturing, Peters notes, and their younger physician counterparts are less likely to want to buy out their ASCs.

“The market for opening new investor-owned ASCs is not rich,” he explains. “This is because young physicians don’t have as much interest in taking financial risk, and more and more young surgeons are being employed by hospitals and health systems.”

No matter who owns ASCs, such facilities will continue to gain market share as major payers encourage this trend to save costs. For instance, recent changes by CMS have helped ASCs capture more market share. One such change involved CMS removing six procedures from its list of 1,700 inpatient-only procedures in 2018 and proposed two more removals for 2019. The procedures that may be performed on either an inpatient or outpatient basis now include knee replacements and gastric restrictive procedures. CMS evaluates surgical procedures annually to see which should remain on the inpatient-only (IPO) list for Medicare/Medicaid reimbursement. The major factor in CMS’ decisions is safety, says Justin Waters, manager, research and analytics, for HIDA.

“With improvements in medical technologies and surgical techniques, an increasing number of procedures are being removed from the IPO list,” Waters says. “This shift generates increased volumes for ASCs.”

For example, a HIDA survey of ASC providers revealed that 35% of respondents reported an increase in surgical volumes in 2017, while 57% anticipated an increase in 2018. “Increased surgical volumes correlate directly with higher ASC revenues,” Waters adds.

HIDA’s report predicts the ASC market will increase to $40 billion in 2020 from an estimated $36 billion in 2018. Primarily, ASC market share growth is influenced by changes in reimbursement and advancements in pain management and technology, Peters says. “Surgeons and patients have a better experience in ASCs as opposed to doing the same procedure in a hospital setting,” he adds.

Lower outpatient surgery costs have contributed to ASC revenue growth. “This shift toward outpatient is expected to increase ASC volumes, thus generating higher profits,” Waters says. “Surgeries performed in an outpatient setting avoid the hospital room charges and related costs associated with inpatient procedures.”

Research revealed that hospital outpatient departments (HOPD) set procedural prices lower than the same procedure in an inpatient setting, but higher than prices at an ASC, Waters notes.

“By focusing solely on outpatient procedures and by specializing, ASCs are able to cut operational costs and thus offer reduced pricing,” he says. “It is estimated that by 2026, patients will save ... on out-of-pocket spending as ASCs capture an increasing percentage of HOPD surgical volumes.”

Another growth driver is the nation’s aging population. “By 2020, the population of Americans ages 65-plus is projected to grow to 56.4 million, and it is expected to reach 98.2 million by 2060,” Waters says. “In a study by the National Library of Medicine (http://bit.ly/2LmlAw4), the average American was reported to spend $316,000 on medical expenses over a lifetime. However, nearly half of spending occurred during senior years, 50-plus years.”

With more people in need of healthcare and who can spend money on it, more procedures will shift to outpatient settings, causing increased volumes at ASCs, Waters predicts. Surgery centers that want to increase their own volumes and revenues in 2019 could focus on joints and spine procedures, Peters suggests.

“If you want to have a very profitable service, I would focus on prostate surgery. If you’re the first one in the market, you will capture the market,” Peters adds. “The centers doing ambulatory prostate surgery now are doing 10 a week and generating margins of 50%.”

REFERENCE

  1. Health Industry Distributors Association. 2018 Ambulatory Surgery Center Market Report. Available at: https://bit.ly/2Lk8j6U. Accessed Dec. 14, 2018.

Inpatient-Only Procedures Revisions

In 2018, CMS removed six procedures from its inpatient-only list, a change researchers say contributed to growth in the ASC market. These changes are described as:

  • CPT code 27447. Arthroplasty, knee, condyle, and plateau; medial and lateral compartments with or without patella resurfacing (total knee arthroplasty);
  • CPT code 43282. Laparoscopy, surgical, repair of paraesophageal hernia, includes fundoplasty, when performed; with implantation of mesh;
  • CPT code 43772. Laparoscopy, surgical, gastric restrictive procedure; removal of adjustable gastric restrictive device component only;
  • CPT code 43773. Laparoscopy, surgical, gastric restrictive procedure; removal and replacement of adjustable gastric restrictive device component only;
  • CPT code 43774. Laparoscopy, surgical, gastric restrictive procedure; removal of adjustable gastric restrictive device and subcutaneous port components;
  • CPT code 55866. Laparoscopy, surgical prostatectomy, retropubic radical, including nerve sparing; includes robotic assistance, when performed. (Learn much more about the 2018 changes at: http://bit.ly/2SJSb16.)

For 2019, CMS has proposed removing two procedures from its inpatient-only list:

  • CPT code 31241. Nasal/sinus endoscopy, surgical; with litigation of sphenopalatine artery;
  • CPT code 01402. Anesthesia for open or surgical arthroscopic procedures of knee joint; total knee arthroplasty. (Learn more at: http://bit.ly/2RYGvrx.)