Hospitals and health systems continuously look at strategies for ambulatory surgery centers, including joint ventures and acquiring ownership.
In fact, HealthCare Appraisers' 2017 ASC survey found 50 percent of respondents have sold a controlling ASC interest to a hospital or health system.
Not all hospitals and health systems are participating in this trend because of their desire to preserve certain in-house surgical revenue streams and maintain control of outpatient business joint ventures. But Todd Mello, senior vice president with The Bloom Organization's consulting services division, sees it as a good idea as healthcare moves outside the hospital, where treatment is generally less expensive for patients.
Here, Mr. Mello offers five thoughts on why hospitals and health systems should pursue an ASC strategy if they haven't done so already.
1. Changing healthcare environment. Hospitals and health systems face increased pressures to reduce costs amid the industry's shift to value-based care. To achieve success in this area, Mr. Mello believes it is crucial to have ASCs as part of an organization's continuum of surgery. He argues hospitals and health systems that don't have ASCs will continue to see "leakage" of "ASC-eligible" cases away from the hospital to community-based ASCs. "If you continue to put your head in the sand and try to basically hoard cases in the hospital to maximize revenue today, in the long term you will be mistaken because you will lose market share to competitors who have embraced the philosophy," says Mr. Mello. "Competitors are wooing all these doctors, and you will lose them unless you're willing to do that [surgical] work in an ASC as well. Payers will continue to redirect patients away from those hospitals who do not have ASCs, and, with a significant increase in high-deductible plans, patients will continue to shop for surgical alternatives with lower out-of-pocket costs."
2. Physician relationships. Mr. Mello has seen that physicians are able to run efficient, high-quality ASCs with good return on investment for hospitals. He believes hospitals that have successful joint ventures with physicians see various benefits, including improved physician relationships. "Further, identifying a reputable, knowledgeable, third-party manager (as opposed to the hospital itself) increases the odds for a successful joint venture and creates necessary 'separation' to buffer [the] hospital from potential surgeon criticism and potential relationship strain should management issues arise," says Mr. Mello.
3. Payer contracts. Hospitals and health systems that are big players in their market generally have good leverage when negotiating payer contracts. Mr. Mello says hospitals that have successful ASC joint ventures can bring that leverage to an ASC if they are a majority owner of that center. This means the ASC may receive higher reimbursement than it would have as a non-hospital affiliated freestanding facility. "So, physicians can sell an interest in the ASC to the hospital of at least 50.1 percent, and distributions may not change much because hospitals' contracts are much better such that the center is more profitable," he says. That is why ASCs benefit from the joint venture relationship. He says payers also like the idea because they're negotiating to take certain surgical procedures out of the more costly hospital setting.
4. Service/capacity issues in hospital operating rooms. Hospitals that lack ASCs or dedicated outpatient ORs try to fit outpatient elective cases in their main inpatient ORs. Mr. Mello says this is inefficient because often outpatient elective surgeries are delayed when emergent cases come about. Patients and physicians are both unhappy when that occurs because they have set aside a specific timeframe out of their day for the procedure. Mr. Mello says hospitals with ASCs are able to save the main ORs for emergent and/or more intensive inpatient cases and leave the outpatient ASC-eligible cases to be performed in a lower-cost setting.
5. Physician and patient satisfaction. Hospitals depend on physicians to refer cases to make their hospitals viable. Therefore, physician satisfaction is important. Mr. Mello says physicians are not pleased when OR turnover time between outpatient cases is long in hospitals. ASCs generally are more efficient and have faster turnover times with these cases since they are not also balancing inpatient surgeries. That "makes for happy surgeons who are able to perform their designated cases in a shorter time period, freeing them up for more time to see patients in the office or other duties," says Mr. Mello. "Similarly, patients experience less delays and a better, more cost-effective overall experience."
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