Archives for December, 2014

Challenges, Opportunities in Store for ASCs in 2015

Ambulatory Surgery Centers (ASCs) face unique opportunities and challenges among healthcare providers in the coming year. For a healthcare system focused on controlling costs and improving quality, ASCs offer a high-quality, cost-effective alternative to surgical procedures conducted in the hospital. However, ASCs face significant challenges – including a maturing market, reimbursement issues and evolving regulatory policies – that can impact their bottom lines and continue to force them to play on an uneven competitive field.

On The Bright Side
The good news for ASCs is that volume growth is expected to continue as Medicare and private payers favor the lower costs of ASCs when compared to hospitals. In an investment report issued this month by Standard & Poor’s on AmSurg Corporation, a large, publicly held operator of ASCs, S&P cited strong demand stemming from an aging population and increasing use of outpatient services. This growth outlook was echoed in a report on ASCs by Moody’s Investor Services.

ASCs face challenges and opportunities

ASCs face challenges and opportunities in 2015.

Medicare and Medicare beneficiaries currently share in more than $2.6 billion in annual savings for procedures performed at ASCs when compared to what those procedures would cost in the hospital outpatient department (HOPD), reports the Ambulatory Surgery Center Association (ASCA). These savings are realized in what Medicare pays for a procedure and also in lower co-pays by the beneficiaries. The ASCA notes that if just half of the eligible procedures were moved from hospital outpatient departments to ASCs, an additional $2.5 billion dollars could be saved annually.

New payment models may also come to benefit ASCs. While Moody’s expressed concern that the shift to bundled payments may not be positive for ASCs, Jameson Pearlman, VP of Managed Care at Meridian Surgical Partners, says ASCs are well positioned to participate in accountable care organizations, patient-centered medical homes and population management initiatives.

“Payers are moving more and more towards shared savings models, which are ideal for ASCs because we can better control anesthesia, implant, supply, and labor costs and still deliver high quality within a single episode of care,” says Pearlman in an interview with Becker’s ASC Review. “Bundled payments are a great opportunity for ASCs to align incentives with payers to ensure greater patient access and participation within evolving narrow networks focused on greater efficiency and accountability.”

Maturing ASC Market Means Changes
Many ASCs, especially independent ASCs, face challenges as the ASC market matures, competition increases in their market area and more hospitals open or purchase ASCs. Moody’s points out that larger players, with economies of scale and joint ventures with hospitals and physician groups, are best positioned to benefit. High performing ASCs will also be those that concentrate on procedures that generate higher revenues per treatment, such as pain management and orthopedics, according to Moody’s.

Pearlman reports excessive competition for procedure volume is depressing private reimbursement rates. “There are some ASCs in saturated markets that are accepting rates well below market and in turn payers use those lower rates as a baseline when comparing other ASCs,” says Mr. Pearlman. “Then our rates are undercut and it’s difficult to show payers why we need the higher fees to cover our expenses.”

Low reimbursement rates from Medicare are also a major issue for ASCs, even with the increase contained in Medicare’s final 2015 ASC payment rule, issued on October 31, 2014. CMS adopted an overall payment rate adjustment of 1.4 percent for ambulatory surgical centers, up from the proposed increase of 1.2 percent. But HOPDs received a larger increase, widening the gap between what Medicare pays ASCs versus HOPDs for the same procedure.

According to the ASCA, Medicare pays hospitals 81 percent more than ASCs for the same procedure. As recently as 2003 Medicare paid hospitals about 16 percent more. As a result, says the ASCA, hospitals are purchasing ASCs, converting them to hospital outpatient facilities and charging the higher outpatient rates.

On the plus side, the final rule adds 10 spine codes to the ASC-payable list and defines ASC device-intensive procedures in a way that makes it more economically feasible for ASC to offer more procedures with high device costs. However, ASCA CEO Bill Prentice notes that despite the gains there are still numerous procedures that ASCs are permitted to perform but cannot because of inadequate Medicare reimbursement for the device.

The Misfit of Meaningful Use
Another challenge for ASCs is the “50-percent rule” contained in the Meaningful Use (MU) regulations. The Health Information Technology for Economic and Clinical Health (HITECH) Act, passed as part of the American Recovery and Reinvestment Act of 2009 (PL 211-5), authorized incentive payments to eligible professionals (EP) and eligible hospitals to promote the “adoption and meaningful use of certified electronic health record technology (CEHRT).” The 50-percent rule requires that for EPs to qualify for EHR incentives, at least half of their patient encounters must be documented in a certified EHR. For ASCs, this creates a challenge since their doctors often practice at multiple locations and need to ensure that reports are sent to the location with the CEHRT.

ASCs were not included in HITECH, so many do not have certified EHRs in place because HITECH has not subsidized their purchases of EHRs as it has for physician’s offices and hospitals. This creates a potential disincentive for surgeons to bring patients to an ASC. It also seems to run counter to the stated goals of the CMS EHR Incentive Program to “improve quality, safety, efficiency, and reduce health disparities” and “to improve care coordination, and population and public health.”

ASCA is working with CMS and Congress on immediate and long-term solutions to this issue. In the meantime, since ASCs already receive lower reimbursements than hospitals for most procedures, it is very important for them to improve clinical documentation and embrace automated coding in order to receive the appropriate reimbursement. Our next ASC blog post will take a closer look at reimbursement issues specific to ASCs.
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(This post was authored by Snow for the ProVation Medical blog.)