Why hospitals should keep their friends close, and their ASCs closer


The shift toward value-based care models is changing how hospitals think about the business of surgery.

Kevin Kennedy, principal at ECG Management Consultants, and Naya Kehayes, founder and principal of Eveia Health, a division of ECG, discussed the changing ideology behind hospital surgical services during a presentation at Becker's Hospital Review 7th Annual Meeting in Chicago April 28.

"In progressive organizations that are serious about population health, the dialogue around surgical services has changed dramatically," said Mr. Kennedy. Operating rooms, traditionally the most profitable part of the hospital business, are now the greatest threat to an organization's success under risk-based contracts.

Mr. Kennedy pointed out several large health systems that have made significant investments in surgical centers. Sacramento-based Sutter Health owns six surgical centers spread throughout southern California. Dallas-based Tenet Healthcare partnered with Addison, Texas-based USPI in a joint venture under which the two parties will share ASC ownership.

And there are a number of reasons why surgical centers have recently become an appealing investment opportunity for hospitals and health systems, Ms. Keyhayes said. Hospitals are under increasing pressure from Medicare and commercial payers to move surgical services off-site, where care is significantly less costly. Due to advancing clinical technologies, a greater number of complex surgeries can be performed in an outpatient setting. Partnering with an ASC increases a hospital's number of available beds to accommodate more procedures and spur productivity. New device-intensive codes have also increased reimbursement levels to surgery centers.

Traditionally, physician-owned surgical centers staunchly guarded their independence, but changes in the healthcare environment are spurring ASCs to consider new business deals with hospitals, said Ms. Keyhayes. Entering into a joint venture with a hospital can enhance physician compensation by driving new business into the surgical center and providing its physicians with key support.

Commercial and government payers have already expressed interest in partnering with surgical centers. Because ASCs already know their exact costs for each medical procedure they perform, and their operations are significantly more cost-effective, ASCs offer a value-proposition under bundled payment schemes.

And some insurers have no qualms about adopting aggressive strategies to improve their own bottom line. "One health plan has agreed to pay an orthopedic physician group double-digit rate increases for a period of several years, contingent upon the group moving all total joint replacement surgeries out of hospital settings and into its ASC," said Mr. Kennedy. "Hospital leaders are not aware of this agreement. We expect anecdotes like these to become more common as payers push risk-based models."

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