Hospitals must decide whether to maintain or pursue the HOPD or ASC model. There are significant differences between the business operations of these two models that hospitals should understand before making such decisions.
As the migration of procedures from inpatient to outpatient settings is increasing, hospitals are faced with determining how to keep as much of this volume as possible. One approach we are seeing more hospitals take is the acquisition of ambulatory surgery centers (ASCs). If a hospital can acquire 100 percent of the ASC, and it is able to meet other regulatory requirements, the hospital can elect to convert the ASC into a hospital outpatient department (HOPD).
Note: The "correct" term for this transition is that the ASC becomes a "provider-based department." For ease of understanding, we will reference provider-based entities as HOPDs in this article.
In markets where hospitals do not have the option to acquire an ASC, they are considering whether to build their own outpatient surgical facilities.
In either scenario, hospitals must decide whether to maintain or pursue the HOPD or ASC model. There are significant differences between the business operations of these two models that hospitals should understand before making such decisions.
Revenue cycle management
At EqualizeRCM Services, which provides revenue cycle management (RCM) services including medical coding, billing and analytics to providers including hospitals and ASCs, we have observed the following notable differences in RCM processes between HOPDs and ASCs.
1. Segmentation and prioritization of claims. One significant difference between hospitals and independent ASCs is the greater segmentation of claims in the hospital environment results in HOPD claims often receiving a lower priority assignment. Hospitals typically have a wide mix of claims, with claim charges ranging from a few hundred dollars for clinic cases to multi-millions of dollars for complex inpatient cases. As a result, hospitals inevitably segment the claims and assign varying priorities to filing and working them.
When this occurs, hospitals tend to deploy staff and resources based on claim size (or based on department as a proxy for claim size). This is often apparent when reviewing lists of the top claims, which are almost always based on charge value. Most hospital financial and RCM staff will review those top claims at least weekly to track progress against those claims.
Likewise, greater investment in RCM-related systems is often focused on the inpatient and surgical claims relative to clinic claims. When there are limited staff resources, priority inevitably goes toward higher dollar claims first, and often staff assigned to this work command higher compensation (although that is also a result of the higher skill levels often required). Inpatient claims typically move to the top of the priority ladder; thus ASCs operated as HOPDs are important, but their claims occupy a lower rung.
By contrast, the dollar value of ASC claims vary much less and, consequently, we see minimal segmentation in the independent ASC environment. We have adopted a top claims list in our work to ensure highest reimbursing claims receive additional attention. Otherwise, the same resources, tools and prioritization are generally applied to all claims. Moreover, in the independent ASC environment, the most important claims are, by default, the ASC claims.
With that said, both HOPDs and ASC are increasingly focused on understanding their claims data and equally interested in the analytics we perform to assess trends in procedure and payer mix, average payment amounts and timing, and other relevant RCM analyses, which are intended to help maximize reimbursement.
2. Approaches to outsourcing. Hospitals tend to outsource specific pieces of the RCM process according to a common playbook. For example, most hospitals routinely outsource self-pay patient collections and bad-debt collections. These are typically outsourced to two different firms, often via an alphabetical split. Hospitals often outsource aged third-party insurance claims less than a certain dollar threshold (e.g., all commercial claims less than $1,500 and more than 90 days old). In addition, hospitals tend to outsource coding overflow work.
By contrast, we find ASCs embrace a more varied approach. For instance, they might utilize outsourced benefits verification personnel in concert with their own in-house staff, splitting responsibilities depending on how far out the patient is scheduled. ASCs are more open to outsourcing the complete billing or coding (or both) function. On the other hand, ASCs historically do not employ or send significant volumes of patient claims to bad-debt collectors and tend to keep patient collection functions with in-house staff.
These differences often relate to the scale of operations and the prioritization of resources. Smaller ASC operations utilize outsourcing to gain access to skilled RCM personnel at a lower cost than their own scale can justify. Hospitals use outsourcing to focus on lower priority claims. In addition, the differences also relate to patient management philosophies. ASCs tend to employ a more customer-centric philosophy than do hospitals, particularly when it relates to collections, where ASCs often use "gentler" touch.
Staff, IT and physician involvement
At Avanza Healthcare Strategies, which provides healthcare organizations with strategic guidance, with a focus on outpatient services and population health management, we have observed the following three other prominent business operation differences between HOPDs and ASCs.
3. Staffing models. One of the biggest differences between ASCs and hospitals that we encounter centers around staffing issues. Unlike hospital ORs, ASCs do not need to be prepared to provide 24/7 care and for possible emergency cases. The cases that come to an ASC are predictable, elective and non-acute, allowing for more flexible staffing schedules. ASCs often have a minimal amount of full-time staff, instead using pro re nata (PRN) and part-time staff that can ebb and flow with the surgery schedules. A well-run ASC does not have extra staff in the facility and makes sure — to the best of its ability — that only those staff members needed to work the day's cases are in the building to keep staff costs as low as possible.
In addition, staff members in ASCs are often required to "wear multiple hats" — meaning they take on different job responsibilities that may not necessarily be commonly associated with their job title. This helps a surgery center ensure staff members remain busy and productive, and reduces the amount of inactive staff time.
In hospitals and HOPDs, you will often find unionized staff, which can complicate a facility's desire not to use full-time staff and have staff members multi-task and receive cross-training so they can perform other jobs. When cross-training is hampered, a facility will need to invest in bringing in more staff to tackle the work.
4. Investment in information technology. Another area where there are apparent differences between HOPD and ASC businesses concerns information technology (IT). Hospitals are used to investing in very robust and (often) complicated IT systems to handle all of the various data points they need to collect throughout the patient care continuum. Typical hospital IT systems are very expensive, require extensive training and must include ongoing support by teams of skilled staff.
Conversely, ASCs are often able to operate effectively and efficiently with web-based systems that provide all the functionality needed to handle non-complex elective surgeries. One concern typically heard when a hospital is purchasing an ASC with hopes of transitioning it to an HOPD is whether the ASC IT systems needs to be replaced by the hospital IT system. We often recommend the hospital try and avoid making a change and possibly "over ITing" the ASC in the transition.
A better option is to see about interfacing the two systems so the hospital can pull the information it requires from the ASC without impacting the efficiency of operations and adding extra underutilized overhead.
5. Physician involvement. When physicians are owners in ASCs, they have an incentive to keep costs down. When costs are lower, physicians can invest more in growing the ASC and receive higher distribution checks. With these incentives, physicians are typically more willing to take an active role in helping reduce costs, such as standardizing supplies used during cases, trying lower-cost devices and even becoming involved in contract negotiations.
In hospitals and HOPDs, physicians do not have these same incentives. They may not be as willing to try and use cheaper alternatives to the items they prefer. They are not likely to take on an active role in negotiations, and standardization becomes much more difficult with a larger medical staff comprised of physicians that may not know one another — and each other's surgical techniques — well. While it is not impossible for HOPDs to have engaged physicians, when there is less concern for the bottom line, changes that will reduce costs become more difficult and take longer to occur.
There are a few other notable differences between physician involvement in ASCs versus HOPDs that impact the bottom line. Physicians in ASCs are often willing to work with fewer staff members, and some physicians will even assist with tasks when staff is tight that help move cases along, such as transporting patients. ASC physicians also tend to show up on time for their first case and do not "disappear" between cases since the ASC has fewer distractions, therefore allowing cases to move quicker with shorter turnover and fewer delays. This helps support more efficient operations, which can be difficult to replicate in an HOPD.
Michael Hill is president of EqualizeRCM Services (www.equalizercm.com), which provides revenue cycle management services to healthcare providers. Joan Dentler is president and CEO of Avanza Healthcare Strategies (www.avanzastrategies.com), which provides healthcare organizations with strategic guidance, with a focus on outpatient services and population health management.