Key trends in ambulatory strategy: When an HOPD to ASC conversion makes sense

The healthcare system is transitioning toward value-based care, which includes a movement to perform surgical procedures in the most appropriate clinical and economic setting. Due to several innovations in the healthcare space, surgeons are able to perform higher acuity procedures, such as total joint and spine surgery in outpatient surgery centers. As a result, hospitals are refining their ambulatory strategy.

At the Becker's Hospital Review 9th Annual Meeting in Chicago, April 11, Regent Surgical Health Chief Development Officer Thomas Crossen and President of National Medical Billing Services Lisa Rock participated in a panel discussion moderated by Becker's Healthcare Assistant Managing Editor Megan Wood on joint venture ASCs.

Hospitals have the opportunity to partner with independent surgeons in the community to form joint venture surgery centers, or acquire ownership in existing ASCs. In some markets, hospitals are converting outpatient departments into ASCs. While HOPDs have been a popular strategy in the past because they command a higher reimbursement rate, payers are demanding a low-cost setting and physician groups are looking for hospital partnerships. If the hospitals don't take the opportunity now to form a joint venture ASC today, these physicians could partner with a competing hospital system or open the ASC themselves.

"I think many hospitals are going through the decision tree, so in a few years they stand to lose some revenue, but over five years or a decade they would stand to lose all these physicians all together and they are choosing to bite the bullet today rather than in the future," said Mr. Crossen. Regent is working with two systems in the Midwest to convert HOPDs to ASCs as they move toward value-based care.

"These systems think HOPDs are dying on the vine so to speak; they don't think they'll be viable in the next five years so they're choosing to convert their HOPDs to ASCs for that reason," Mr. Crossen said.

He recommended ASCs do their due diligence before partnering with a hospital to ensure the hospital can execute this joint venture and the individuals they're working with can move forward with the deal. Hospitals should also expect a drop in reimbursement rates after converting an HOPD to an ASC.

"Once there is a change in ownership those contracts are at risk. If you have a regional or national footprint, you can't just assume you'll achieve those rates across the board or that the HOPD rates will translate to the ASC. At a minimum you're probably looking at about a 20 to 40 percent drop from HOPD to ASC realistically," said Lisa Rock.

There are benefits for hospitals despite the rate decrease for outpatient procedures. With many deals, Regent aims to bring in physicians that aren't currently performing cases at the hospital for an incremental volume increase. As a result of stronger alignment with these physicians, they may also begin bringing inpatient cases to the hospital. The ASC can also be attractive to self-insured employer groups, which make up 65 percent of the market today and demand value-based care.

"When you are talking about employer groups, or when third-party administrators are talking to employer groups, they want surgery centers and lower cost setting choices available for their employees and we're even seeing incentives by employers to use lower cost settings such as waiving copays and waiving deductibles to go to a preferred payer for a particular surgery. That is also an advantage that the ASC brings to the table," said Ms. Rock.

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