The Most Threatening Factors For Currently Operating ASCs

Ambulatory surgery centers are not immune to the competitive nature of the healthcare industry, and every day ASC owners will be faced with many threats to maintaining a successful practice. In this article two ASC industry experts — Luke Lambert, MBA, CFA, CASC, and Joseph Zasa, JD — analyze the most unavoidable threats to ASC success and what surgery centers can do to overcome these threats.
Mr. Lambert is the CEO of Ambulatory Surgical Centers of America, and Mr. Zasa is a managing and founding partner of ASD Management.
Here are their six biggest threats to ASCs.
1. Hospital physician employment. The growth of physician employment by hospitals will inevitably challenge ASCs’ ability to find and recruit unaffiliated physicians. More physicians coming out of medical school are also choosing hospital employment rather than starting private practices or opting to affiliate with an ASC.
“For the first time, more than half of new physicians are employed by hospitals,” Mr. Zasa says. “This is an area of concern for centers unaffiliated with hospitals and health systems.”
He expects this employment trend to slow down surgery center growth, at least until the trend breaks.
“The thought that physicians are going to be told what to do for the rest of their careers is not true,” he says. “We are going through a trend that has probably peaked. At the end of the day, ASCs are a low-cost, high-quality, safe provider for outpatient surgery.”
In the meantime, surgery centers can consider merging with other surgery centers, a trend that has been growing lately. Most ASC operations only use a fraction of the center’s capacity. Joining nearby centers together could reduce fixed costs and allow the ASCs to be more profitable together, Mr. Lambert says.
2. Payer reimbursements. ASCs have been struggling for quite some time to get annual reimbursements increases that used to be so common. Payers realize surgery centers cost less for patients and have less overhead than hospitals; yet, contracting will become increasingly difficult.
“Out-of-network surgery center business is generally under pressure,” Mr. Lambert says. “It will get harder to get paid that way than it has been historically. Policy changes at an insurer level will make it harder or completely impractical to continue out-of-network.”
However, larger patient deductibles and co-pays will provide an incentive for patients to seek their own lower-cost care. ASC should work to get the word out to patients that outpatient surgery centers are cheaper than hospitals, he says.
3. ASC Market saturation. Another threat to a surgery center’s growth is oversaturation of the ASC market. Many centers are underperforming, and in an era of tightening reimbursements, inefficient centers will not survive amongst the competition.
The market still has room for new centers, Mr. Zasa says, and the days of being independent are not over. However, it will continue to be a challenge for facilities to open up or thrive without being affiliated with a health system. Centers must work to stand out from the competition, including both hospital outpatient departments and other ambulatory centers.
4. Hospital domination. One of the biggest threats to ASCs will be hospitals seeking to create integrated networks of care while simultaneously creating market dominance or monopolies, Mr. Lambert says. The move for hospitals to seek partners in care is spurred by the Patient Protection and Affordable Care Act. However, in the name of better managing costs, hospitals are increasingly edging out ASCs and limiting their ability to compete.
These integrated care networks may limit physicians who are recruited to an ASC from bringing all of their patients; a hospital contract may dictate referral sources be taken back to the hospital. Such hospital dominance may also limit which payers will agree to contract with a surgery center, which will bring fewer patients to a center, he says.
“There aren’t significant rewards yet for reducing costs,” Mr. Lambert says. “Hospitals are building networks in preparation for that day, but in the meantime, they are able to exercise market power. Hospitals are actually driving up costs in the name of positioning themselves to save money in the future.”
It is becoming increasingly important to have a hospital relationship, he says. ASC owners could look into forming an alliance or joint venture with a dominant health system for better reimbursements rates and easier physician recruitment.
5. Mismanagement. Though not an external threat, mismanagement can plague surgery centers due to the complexity it takes to run one. Mismanagement of any of the necessary components can be disastrous to a center. ASCs need to have four qualities to be able to survive going forward in a difficult healthcare environment, Mr. Zasa says. The qualities are:
•    Up-to-date risk management programs
•    Sound clinical systems
•    Great business systems, including proper billing and coding
•    Top-notch payer negotiations for the best reimbursements rates
“This is very hard for an ASC to achieve on its own,” he says. “They have to hire talented people maintaining these four sound processes day-to-day. The best way to find out if you have a problem is objectively benchmarking against other centers.”
6. Harsh regulations. Over the past year, the federal government has stepped up its efforts to uncover and punish fraud in all aspects of healthcare. So far, regulations haven’t had a huge impact on ASCs, but this may not always be the case.
Mr. Zasa says he is concerned about particularly aggressive financial practices used by a small minority of surgery centers that are not representative of most of ASC industry. These practices have the potential to bring increased regulations and unnecessary scrutiny to the industry as a whole.
“Are we prepared to fight and show the healthcare industry that these problematic practices are used by outliers and are not a part of the industry as a whole?” he says.
Source: Becker’s ASC Review