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August 4, 2014


ASCs are subject to many of the same challenges as anesthesiologists, starting with declining revenues and the risks of performing increasingly complex procedures that were formerly inpatient-only on an outpatient basis. Anesthesiologists need to be sensitive to how these issues affect their ASCs as well as to ASC-specific concerns such as the competition with hospitals for referring physicians.

Ambulatory or outpatient anesthesia accounts for approximately 60 percent of surgeries in the U.S. today.  The majority of anesthesia practices provide services at one or more of the 5,300 Medicare-certified ambulatory surgical centers (ASCs).  The challenges faced by ASCs—whether hospital-owned or independent—affect us all.  In order to be your ASCs’ valued partners, anesthesiologists and nurse anesthetists need to understand how healthcare’s challenges in general and ASC’s challenges in particular affect your facilities.


Like all other providers, ASCs are confronting declining payments.  Health insurers are squeezing their margins and ASCs are threatened by exclusion from provider networks, especially those dominated by hospitals with whose outpatient departments the ASCs might be competing.  Hospitals are rushing to create integrated networks while simultaneously growing horizontally through mergers.  Integrated networks not only lock up physicians who might otherwise refer to the ASCs; they may also limit the number of payers who will enter into contracts with the ASCs.

Collections from patients require more effort than they did when deductibles and co-payments were lower. 

Medicare payment levels are a particular thorn in the side of ASCs.  All outpatient procedures, whether performed in hospital outpatient departments or in ASCs, are paid using the Ambulatory Payment Classification (APC) system, which groups procedures and services on the basis of clinical and resource use similarity.  All services in a given APC have the same payment rate.  The annual updates for services paid under the Outpatient Prospective Payment System (OPPS) have been consistently higher than the updates to the ASC conversion factor, because of ASCs’ lower costs.  In 2003, Medicare paid hospitals only 16 percent more, on average, than it paid ASCs.  Today, hospitals receive 81 percent more than ASCs.  Under the proposed OPPS “rule” (regulation) for 2015, the OPPS update would be 2.1 percent and the ASC conversion factor would increase by only 1.2 percent, making the hospital OPPS advantage grow to 85 percent.   

Of perhaps even greater concern to hospitals than to ASCs, the Department of Health and Human Services’ Office of the Inspector General (OIG) issued a report earlier this year that recommended that a large number of OPPS rates be reduced to ASC rates because “Medicare could generate additional savings of as much as $15 billion if CMS reduces outpatient department payment rates for ASC-approved procedures to ASC payment levels for procedures performed on beneficiaries with low-risk and no-risk clinical needs.”  The hospital lobby is strongly resisting the OIG recommendations, and CMS did not concur with them either.  If the recommendations were to be adopted—which would require Congressional action—hospitals could have less incentive to acquire ASCs, which might in turn affect the marketplace value of ASCs.


Case Mix: A common response to lower revenues is to bring in higher-acuity cases that were previously performed on an inpatient basis.  Joint replacement and spinal fusion procedures are at the top of the list.  According to Laura Dyrda, writing in the July/August issue of Becker’s ASC Review (5 Most Pressing Financial Issues for ASCs),

But, financial success with these cases isn’t always guaranteed.

“ASCs would be wise to carefully conduct their due diligence into the new cases,” says Jessica Nantz, president of Outpatient Healthcare Strategies. “Ask the physicians to project their volume and then assume the figure will be at least 30 percent lower. Speak with payers to determine whether they will cover the cost of the cases. Speak with your suppliers and group purchasing organizations to determine exactly what supplies will cost. Make sure there’s a positive return-on-investment. If the numbers don’t add up favorably for the ASC, these cases could hurt the facility financially.”

Even if the ASC determines higher acuity cases will be profitable, these are riskier cases and require careful patient selection, surgical precision and staff education before making the transition. Higher acuity cases often take longer. . . .

Patient selection and optimization for procedures that have only recently begun to be performed in ASCs are activities in which, as we know, anesthesiologists can play a major role.  The profitability of such procedures also depends in part on the anesthesiologists’ proficiency with regional techniques to manage post-operative pain and nausea and thus reduce the amount of time spent in recovery at the ASC. While anesthesia groups are well aware of these opportunities to add value, what some may not realize is the extent to which the ASC industry, and surgeons, expect their anesthesia providers to be able and willing to add that value. 

As of 2010, orthopedic surgery accounted for only eight percent of Medicare case volume in ASCs.  That proportion has changed, and will continue to increase.  Both the challenge and the opportunity will grow in 2015, if the proposed rule is adopted, because of the addition of ten spine procedures to the list of procedures that are payable in the ASC setting:

22551      Neck spine fusion and removal, cervical below c2 
22554      Neck spine fusion    
22612      Lumbar spine fusion    
22614      Spine fusion extra segment    
63020      Neck spine disk surgery    
63030      Low back disk surgery    
63042      Laminotomy single lumbar    
63045      Removal of spinal lamina    
63047      Removal of spinal lamina    
63056      Decompress spinal cord

Physician Mix:   ASCs, like hospitals, need a solid and increasing base of referring surgeons and primary care physicians.  The competition for independent physicians continues to heat up as more and more doctors join larger groups with non-compete clauses in their hospital contracts, or accept hospital employment.  Many anesthesiologists, too, are being locked in by their hospital contracts and prevented from serving independent ASCs.  More than half of new physicians are taking jobs with hospitals rather than entering private practice.  Twenty-nine percent of physicians were working directly for a hospital or a practice partially owned by a hospital in 2012, according to an AMA survey.  The surgeons whom an ASC recruits must not only be able to bring more cases to the facility; they must also have aligned goals and incentives for future growth, particularly if they are investors.

Price Transparency:  CMS does not publish payments made to ASCs, although it has begun maintaining web sites with Medicare payment information for both hospitals and physicians.  A trend toward the voluntary online posting of prices is beginning to take root, however. 

We noted the transparent pricing strategy of the Surgery Center of Oklahoma in Oklahoma City in our Alert dated January 27, 2014 (Payments for Anesthesia Services in the Sunshine). The Surgery Center, founded and managed by two anesthesiologists, lists more than 100 procedures on its website, each with an all-inclusive price covering the facility fee, the surgeon’s fee and anesthesia (but not hardware and implants).   In another article in the July/August issue of Becker’s ASC Review (Price Transparency Will Save Healthcare $100B: How ASCs Are Taking Advantage), Laura Dyrda identifies several other organizations publishing ASC prices, including a new direct-to-consumer platform called “I Need a Surgery” designed specifically to deliver price transparency to surgery and ASCs, and a rapidly growing number of surgery centers across the country that list their prices with, a database that helps patients compare prices.

Price transparency attracts self-funded employers, patients without insurance, and international and national “medical tourists.” Package prices that bundle all normal charges for surgery, for anesthesia and for the facility—especially when accompanied by quality and satisfaction ratings—are going to mean the difference between success, survival and even failure in some markets in the not too distant future.


In the case of some of the challenges noted in this Alert, all that most anesthesiologists can do is understand and be sensitive to the pressures on their ASCs.  Anesthesiologists can exercise considerable control over the quality and cost-effectiveness of the care furnished to ASC patients, however.  It will benefit many anesthesiologists to go a step further and to align their goals with the strategic interests and activities of their ASC partners.

With best wishes,

Tony Mira
President & CEO