MASCA NEWSLETTER

Winter 2018

Follow The Money: Inpatient surgery moving out of hospitals into ambulatory centers

Why not? by Lea Anna Burnside, RN, BSN

2017 Ambulatory Surgery Center Market Report

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Follow the money: Inpatient surgery moving out of hospitals into ambulatory centers

Inpatient procedures, such as hip replacements and other surgeries, are in the midst of a migration. They’re moving out of big hospitals, in fact, and into the

ambulatory facilities -- freestanding clinics included.  A big part of the reason? Cost.

It’s a serious market shift from where things were five or six years ago, when most medical decisions and procedures took place in the main hub of a large system. Greg Hagood, senior managing director at SOLIC Capital and head of its healthcare practice, said the shift began about two years ago -- and it’s been picking up steam ever since.

“While there’s still a trend toward large-scale corporatization of physicians, more and more they’re joining groups that are being backed by private equity,” said Hagood. “And you’ve seen the insurance companies embrace the surgery center as a much lower-cost environment.”

Procedures like the hip replacement are typically less expensive at a surgery or standalone ambulatory center -- between $22-25,000 as opposed to around $40,000 in the hospital itself. Payers like these surgery centers for two reasons: The higher patient satisfaction, given less bureaucracy than at a typical hospital. Plus, they see it it as a way to fight back against the autonomy of the big health systems. Physicians have bought in for the same reasons.

In July, the Centers for Medicare and Medicaid Services decreed that knee replacements can be performed in such facilities. The agency also said it would allow certain types of hip procedures

to be performed by surgery centers. Think: Medicare is starting to incentivize this shift as well.

Surgeries and implants tend to be money makers, but hospitals are rolling with the tide and moving those procedures to the inpatient setting -- and taking less money for them as a result. “There’s a lot of money fleeing the hospital sector,” said Hagood. “On the flip side, look at what happened in the fall. Bain Capital invested in Surgery Partners. Then you saw KKR buy a relatively small surgery center operator. If you just look at a microcosm of where the private equity is flowing, it’s absolutely in that direction. We expect to see that trend continue, that flow of patients out of the hospital and into the ambulatory environment.”

A lot of these ambulatory centers are located in rural locations, and have begun to supplant the community hospital as a

primary destination for rural patients. It’s no secret that rural hospitals are struggling -- four have closed since the beginning of the year, two of them in Ohio -- so residents in those areas are increasingly turning to ambulatory centers and telemedicine to fulfill their healthcare needs.

“When a health system says, ‘We’re going to close our hospital,’ typically there is a commitment to provide levels of ambulatory care in the community,” said Hagood. “It’s not necessarily done in the same facility that was a hospital. They’re not going to maintain that old facility. But they will offer up some version of care. Some of those hospitals have closed, and the repurposing is still up in the air.”

For a lot of these closed facilities, there’s no immediate alternate use; some can be turned into skilled nursing facilities, but that’s all they’re able to do because of the way Managed Care has changed their reimbursement. 

“Behavioral care is another option where we’ve seen some interest,” said Hagood. “I think there will be greater interest in using an inpatient facility for behavioral care, but that requires investment in infrastructure.”

That shift will continue, said Hagood, and combined with telemedicine services, will start to shape a new paradigm of rural health.

“A lot of these community hospitals are doing a really good job, but the trend is going toward community care with a regional medical center,” he said. “What you don’t need is a 50-bed inpatient hospital.”

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Winter 2018| Newsletter 04

ASCs are more personal, more efficient, and more convenient for the patients we treat. Let’s face it, we know what we do and we are good

at it. We are smaller than the hospitals, but a lot of ASCs can provide the same exact service to a patient in half the time and for a fraction of the cost that a hospital can. Don’t get me wrong, hospitals are our friends and are certainly needed in every community. As the public becomes more aware of the benefits and services an ASC offers, our volumes will continue to increase.

Let’s talk about efficiency. What is it and why are we so good at it? We understand that time is money and that patient satisfaction is what keeps us in business. We are volume driven and know what it takes to make patients happy. Patients love that we are able to process them quickly and efficiently without compromising their care. In order to be efficient, we have to teach our staff why it is important. When they are efficient, the staff has increased speed, increased quality, and decreased costs. All of these things factor into the center’s success and if the staff is not committed to these aspects, efficiency will not be maximized.

From a management perspective, it is all about the numbers. The more patients you have, the more staff you will need to maintain maximum efficiency. On the flip side, patient volumes need to be consistent so that you are not overstaffed on some days and understaffed on others. Also, cross training of employees is absolutely necessary. The more areas an employee is able to work in that is within their scope of practice, the more valuable they are to the company.One of the most important lessons that I have learned over the years is that my ideas do not always work just because it makes sense in my mind. Ask your staff for ideas on how to improve efficiency because they are the ones that are on the front line. This also lets your employees know that they are valued and empowers them to come forward when they have new ideas for improvement. Change can be hard for some, but when staff is empowered, the implementation of new work flows becomes a much smoother process.

There are other ways to drive your center to maximize efficiency. As we all know, not everyone is a candidate for an ASC procedure due to their extensive medical conditions. Proper screening of patients is crucial to avoid last minute cancellations. Patient education is also important to ensure that Pre-op instructions are followed to avoid cancellation on the day of service.

With the squeeze in reimbursement, it is important to control expenses so that your ASC can flourish. Cost containment requires in depth planning and a list of ongoing or expected capital expenses should be kept up to date. Explaining financial goals to employees helps them to be able to see the big picture more clearly. After all, your employees and their commitment to the standards set for them directly affect the financial success.

An ASC can be as successful as the leadership’s understanding of efficiency. It is important for us to continue providing exceptional patient care because we are the current and future of healthcare in our communities. For those that are not yet convinced that an ASC is the way to go and still want to know why they should choose one of our centers, I would like to challenge them by asking the question, “Why Not?”

The 2017 Ambulatory Surgery Center Market Report evaluates the emerging market and its impact on existing sites of care.

Revenues for ambulatory surgery center (ASC) services were $26 billion in 2016. Of the 6,150 facilities nationwide, 57% are independent/physician owned, 22% are corporate/ for-profit, and 21% are hospital-owned/nonprofit. Corporate ASC companies are gaining traction in the market. From 2010 to 2015, the number of facilities owned by the top five companies increased 43%.

Ambulatory surgery centers have much lower procedure costs compared to their largest competitors, hospital outpatient departments. For patients receiving outpatient surgical care, this could translate into savings of up to $5 billion annually. Some estimates place annual savings for Medicare and commercial payers at $18.7 billion and $12.4 billion respectively. In 2017, ASCs that fail to report on quality metrics could face Medicare reimbursement cuts of up to 2% of their overall Medicare revenues. The number of measures included in the reporting is expected to increase from 10 to 11 in 2018. However, for a number of measures, the incident rate (number of occurrences for each measure) has remained unchanged since the program was implemented. Rates of occurrence have been consistently low, at less than1 per 1000 cases.

Key Topics Covered:

• 1. 57% of ASCs Are Physician-Owned

• Commercial Insurance Makes up More than Half of ASC Payer Mix

• Revenue Grows in Publicly-Owned ASCs

• Publicly-Traded ASC Profits Increase 2014-2016

• ASCs Increase Spending on Salaries, Supplies

• ASCs Offer Nurses Better Hours, Salaries

• ASCs Projected to Treat 60% of Outpatient Surgeries by 2020

• ASCs To Treat More Surgeries of All Types by 2020

• Fewer Procedures Restricted to Inpatient Only

• Procedure Volume Critical to ASC Profitability

• One Quarter of ASC Cases Are Gastroenterology-Related

• Orthopedics, ENT, Urology Most Profitable Specialties in ASCs

• Cataract Surgery is the Most Commonly Performed Medicare Procedure in ASCs

• Quality Reporting Program Could Cut ASC Medicare Reimbursement Up to 2%

• ASC Quality Incident Rate Less Than 1 in 1000 for Key Measures

• Certificate-Of-Need Regulations Slow ASC Growth

• ASC Management Companies, Hospitals/Health Systems Largest ASC Acquirers in 2016

• Patients, Payers Cut Costs Through Use of ASCs

Newsletter | Winter 201803

2017 Ambulatory Surgery Center Market Report Centers Expected to Treat 60% of Outpatient Surgical Cases by 2020 - Research and Markets

Why not?

In the past, when a person needed surgery, the only

option was to have the procedure done in a hospital

setting. In the 1970s, that began to change as two

physicians from Arizona had the idea to create a

more convenient alternative for their patients. Over

the next decade, the nation saw Ambulatory Surgery

Centers (ASC) grow rapidly, much due to Medicare

approval for payments for ASC procedures.

Lea Anna Burnside, RN, BSN

Director of ASC Operations

GI Associates and Endoscopy Center

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MASCA Day at theCapitol

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BUSINESS PARTNERS

Save the Date

MASCA Spring Membership Meeting

“MedTalks on Human Resources in a Surgery Center”

Table 100 in Flowood

April 19, 2018

9:00am – 3:00pm

200 North Congress Street , Suite 500Jackson, Mississippi 39201

Phone: 1-800-936-4426Website: www.masca-ms.org