Operating in ambulatory surgery centers rather than hospitals offers benefits to patients, surgeons and payers. It even benefits hospitals. For example, if hospitals can move less-complicated procedures to an ASC, it opens up operating room time for more complex and expensive procedures. This article will look at some ways the ASC scene has evolved in recent years and some of the considerations that are warranted if you’re envisioning an ASC in your future.
Emphasis on Efficiency
“The push to do your work in a surgery center is really just a matter of efficiency,” says Jay S. Duker, MD, chairman of the New England Eye Center/Tufts Medical Center in Boston. “In general, outpatient ASCs, whether they are hospital-owned, owned by a group of doctors or owned by a for-profit company, work more efficiently than hospital ORs. Therefore, we can do more surgery in a shorter period of time and have more control over our schedules.”
This was demonstrated in a 2009 study that found that outpatient surgery performed in an ASC was superior to procedures performed at a hospital-based facility.1 The study included 486 cases and performance was measured in five categories: safety; patient-centeredness; timeliness; efficiency; and equitability. In the study, the ASC had no unexpected safety events, compared to nine at the hospital-based facility. Patient satisfaction was similar between the facilities. However, differences in timeliness approached 30 percent. In fact, 77 percent of ASC cases finished within the scheduled time, compared with 38 percent of cases at the hospital-based facility. Additionally, total charges at the ASC were 12 to 23 percent less than those at the hospital-based facility.
Why are ASCs more efficient than hospitals? “Surgery is a team sport,” says Stephen C. Sheppard, managing principal of Medical Consulting Group in Springfield, Mo. “When you have a circulating nurse, a surgical technician and a surgeon who are all doing large volumes of cataract surgery, like any team, they get very good at anticipating what the next moves are going to be and who is going to be where when. The process becomes much more efficient, which saves the doctors time and the patients time. It becomes a more relaxed, less stressful environment for not only the staff and the surgeon, but also for the patients.”
Whether performed in a hospital or in an ASC, there are typically three fees that are charged for each procedure: the surgeon’s fee, the facility fee and the anesthesiologist’s fee. Medicare is currently paying surgery centers, on average, about 56 percent of what it is paying hospital outpatient departments for the same surgical procedures. “Surgery centers performing cataract surgery right now across the country are getting paid a facility fee of about $975 for Medicare patients,” Mr. Sheppard says. “Hospitals are getting a facility fee of $1,760 for the same procedure. This will become more important as society continues to age and feels the increasing cost of health care. We are currently adding 10,000 people a day to the Medicare rolls, and that’s going to continue to happen for the next 15 years as the baby boomers age. We are going to have to become more cost-effective, and ASCs are the low-cost providers of surgical services.”
Dr. Duker explains that the government has started to wonder what it is getting for its additional money and whether it should be paying hospitals more for the same procedure that an ASC can do as well, if not better. “It is believed that, in the future at some point, the differential payment between hospitals and surgery centers will go away, in which case many of the hospitals won’t be able to compete,” he says. “They may just drop things like doing retina surgery altogether. If this happens, retina specialists who don’t have access to a surgery center could be in trouble. This is an argument for those who don’t have access to a surgery center to start to think about it. If they wait, they may not have their choice of centers. They could end up at an ASC 50 miles away and without adequate OR time. It is something to think about, because it is something disruptive that may be coming.”
Should You Consider Ownership?
Some ophthalmologists are choosing not just to affiliate with an ASC, but to become an owner. “It is not unusual for ophthalmologists to be the owners of their ASC,” says Mark E. Kropiewnicki, an attorney with Health Care Law Associates in Plymouth Meeting, Pa. “Solo-practicing ophthalmologists rarely own their own ASC, but are typically on the lookout to buy in to either a single-specialty or a multispecialty ASC. Surgeons have to take their cases somewhere, and they would like to affiliate or buy in to an ASC that is in a convenient location and where they can hopefully get a reasonably good and consistent schedule. If you are in a group of four or five doctors, and all of you have a need to use an ASC, the group could build its own ASC that would be just for the practice. Additionally, sometimes, two groups of doctors who could not build an ASC alone will go together to form a jointly owned ASC. Some ASCs are owned by 10, 20 or more doctors, and that’s where a solo doctor would look to buy.”
Mr. Sheppard notes that owning a portion of an ASC affords the surgeon some economic benefits as well as the quality-of-life benefits. “Without any additional labor hours on their part, they can create a new revenue stream for their professional practice. This is one of the reasons that this has become so popular over the past 20 to 25 years,” he adds.
If a surgeon currently owns part of an ASC, selling his share to a hospital can also make sense. “If surgeons are looking to sell their ASC, the best-case scenario would be to sell all of the ASC to a hospital,” Mr. Kropiewnicki says. “If a hospital owns an ASC, it can become a hospital outpatient department and qualify for the higher Medicare facility fees. So, the hospital can buy an ASC and convert it into an HOPD, and the reimbursement for Medicare patients is almost double. If the hospital does not buy all of an ASC, the ASC will not qualify as an HOPD. However, if the hospital has any clout whatsoever with the non-Medicare payers, then the hospital may also be able to negotiate better reimbursement rates for the jointly owned ASC for the non-Medicare patients.”
He explains that if an ASC is netting $500,000, and a doctor is selling his or her ownership to another doctor, the sale price is typically a two to four multiple of the net income. “A multiple of three is $1.5 million, so that’s not an insubstantial amount, but it’s not as much money as a surgeon could get by selling it to someone else. Public or private equity firms are typically looking to buy ASCs from doctors, but keep the doctors involved because they need doctors to continue to operate in it. Public companies may buy it for a five to seven multiple because this will help boost their own profits, because the stock market is selling at more like a 10 to 15 multiple. Hospitals probably can’t or won’t quite do that. They can probably pay more than a two to three multiple for the purchase of that ASC, but they probably won’t go as high as seven, especially nonprofit hospitals,” Mr. Kropiewnicki says.
However, owning and operating an ASC is not as simple as it appears at first glance. According to Mr. Sheppard, most ASCs are licensed by the state in which they are located and are certified as enrolled in the federal Medicare program and state Medicaid programs as a separate legal entity. “Of course, you are providing surgical care to individuals, so the ASC as a business entity has professional liability insurance coverage,” Mr. Sheppard says. “It is a highly regulated industry, so there’s a very detailed policy and procedures manual. You must comply with OSHA and state anti-kickback statutes.”
In addition, there are some financial risks to consider. As with any business, there is no guarantee that it will make money. “It must be designed well, structured well and operated efficiently for it to be successful,” Mr. Sheppard says. “ASCs are required under the [Center for Medicare & Medicaid Services] Conditions for Coverage to be overseen by a governing body. The governing body typically includes a number of the physicians who are either owners or active participants in the ASC. The Conditions for Coverage lay out in great detail the responsibilities of the governing body for oversight and for management of the facility. The governing body is responsible for a quality assurance program, for an infection control program, for credentialing the surgeons and for peer review. It’s a miniature hospital, and it is regulated, justifiably, like a miniature hospital.”
Before investing in an ASC, Dr. Duker recommends performing an assessment of the return on your investment. Try to determine the likelihood that the surgery center is going to continue to make money in the term long enough for the surgeon to make his money back. “These are business decisions that have to be made on an individual basis,” he says. “Fifty percent of all surgery centers in the United States in recent years have failed. Maybe you are going to make money, and maybe you’re not going to make money. Maybe it’s a good investment, and maybe it’s not. That’s something that has to be evaluated on a case-by-case basis. However, whether you own part of a surgery center or whether you have access to a surgery center, physician happiness with surgery centers is high.
“If you are asked to buy in to an existing surgery center that is profitable already, the buy-in price is apt to be high because you are buying into an already profitable business. In general, being a partner in a well-run surgery center is a good thing. In general, having some control and say over the direction that the surgery center goes is a good thing, even above any profitability. If your principles as a physician are that you want to have the best facility for your patients, if you don’t own that surgery center, you don’t make the decisions about things like what equipment is being bought in the surgery center. As a retina specialist, if there are certain things that you feel you need to do your surgery, you want to try to be an owner so that you can have a say in that.”
The future of ASCs looks bright. There are currently more licensed, certified ASCs than there are licensed, certified hospitals, and with less-invasive procedures becoming the norm, their use will continue to increase. “Back in the 80s, this movement started with ophthalmology,” says Mr. Sheppard. “In the early 90s, gastroenterology became very feasible and very reasonable to do in an ambulatory surgical environment. As the technology has continued to improve and as more and more surgery is done endoscopically, it makes more and more sense to move those surgeries into a less-intense, lower-cost environment.”
Recently, even some retina procedures have moved to ASCs. Dr. Duker notes that there have traditionally been two arguments for not performing retina surgery in an ASC: Retina patients are sicker and the cases are longer, and there is the potential for emergencies.
“That’s generally not as true anymore with smaller-incision vitrectomy, fewer buckles and fewer re-operations,” he says. “In general, retina surgery is more amenable to an outpatient setting than it used to be. As far as emergencies, people will argue that they need access to a hospital OR. However, recent numbers suggest that the true number of retinal emergencies is very low. Retinal detachments, even macula-threatening retinal detachments, are not considered true emergencies anymore. Even metallic intraocular foreign bodies, which we used to do in the middle of the night because we thought they were emergencies, are not emergencies. There is evidence now out of the Middle Eastern wars that foreign bodies can be left in for weeks with excellent results.”
The move to ASCs really benefits all parties involved. Mr. Sheppard notes that, by partnering with the ASC, hospitals can keep a part of the revenue stream. “Then, they have a symbiotic relationship between the doctors and the hospital at that point. It benefits the patients and society as a whole,” he adds.
1. Grisel J, Arjmand E. Comparing quality at an ambulatory surgery center and a hospital-based facility: Preliminary findings. Otolaryngol Head Neck Surg 2009;141:701-709.