Medicare and Medicaid are celebrating a 50th anniversary in the U.S. Health Care system. The revolutionary system created 50 years ago is responsible for assisting more than 100 million Americans who are unable to afford the costs of staying healthy. Ambulatory Surgery Centers have also had an important impact on health care since the first ASC was founded in 1970. The basic rationale behind an ASC is that patients can undergo surgery outside of the hospital setting and benefit from reduced costs while maintaining high quality.
The increasing number of baby boomer patients has driven a significant increase in the number of surgeries performed each year in the U.S. As of late 2010, more surgeries were performed in outpatient facilities than in hospitals. This increase in case volume combined with the dramatic increase in healthcare costs, has made the cost, convenience and quality of ASCs very appealing to patients and to third-party payers, including Medicare.
According to the data released by the Centers for Medicare and Medicaid Services (CMS) quoted in Anesthesiology News, in 2014, health spending in the United States is projected to have reached $3.1 trillion, or $9,695 per person, and to have increased by 5.5% from the previous year, as millions gained health insurance coverage and new expensive specialty drugs hit the market.
Today there are nearly 5,500 ASCs across the country that provide same day surgical care to patients, which amounts to nearly 23 million procedures performed in ASCs each year.
The Ambulatory Surgery Center Association reports that the Medicare program reimburses ASCs at 58% of hospital outpatient department rates. This is a critical difference in spending that has the potential to save Medicare $57.6 billion over the next decade. It is a fact that ASCs have been able to provide care at a significant cost savings to Medicare in procedures such as colonoscopies, which has contributed to increased screening and thus fewer deaths from colorectal cancer.
Convenience, quality, and low cost have made ASCs an entrepreneurial success for physicians across the country. That success has been noticed by hospitals as well.
In a Becker’s ASC Review article published last month, “14 Observation and Thoughts and Issues for ASCs 2015-2016,” Ambulatory Surgical Centers of America (ASCOA) CEO Luke Lambert says, "Hospitals now see ASCs as essential to a future where quality and cost effectiveness will be demanded. Regulators are beginning to appreciate how important ASCs are to access and controlling costs. Payers have become much more active in creating incentives for patients and physicians to make use of ASCs. With this growing level of recognition and appreciation, hospitals, payers and risk taking provider groups are buying and partnering with surgery centers like never before."
Driving this trend is the transition from a healthcare payment system in which providers are paid based on how many medical services they provide, toward one in which providers are paid based on patients’ positive health outcomes. This in turn is driving investment in technology that helps manage patients’ health and better coordinate patients’ care. However, ASCs have traditionally been too small to make these sizable investments. In addition, many centers focus on a single specialty, which does not give them a strong position from which to coordinate patient care. ASCs overall may be losing the small business feel enjoyed by many doctors who have had the experience of working without an overarching administration. Quoted in a NJ Spotlight article in June, “Chris A. Holden, president and CEO of Tennessee-based ASC operator AmSurg, said he’s concerned that the industry will be affected by a generational change he’s seeing among young doctors, who are less likely to be attracted to independent practices.”
Recent Medicare program reimbursements to ASCs were 58 percent of the HOPD rate, meaning that Medicare, and the taxpayers who fund it, realize savings every time a procedure is performed in an ASC instead of an HOPD. This gap in reimbursement rates has caused a number of ASCs to partner with hospitals to keep up with business costs. The Ambulatory Surgery Center Association has said, “If policymakers allow this gap in reimbursements to continue widening, the cost-saving advantage that ASCs offer could morph into a perverse market incentive that drives ASCs from the Medicare program.”
The ASC Quality and Access Act of 2015 questions the growing disparity of reimbursements. Currently ASC reimbursements are updated based on the Consumer Price Index for All Urban Consumers (CPI-U), which measures the rising cost of goods like milk and eggs. HOPD reimbursements are updated based on the Hospital market basket, which measures the rising cost of providing medical services.
The Ambulatory Surgical Center Quality & Access Act of 2015 would move the ASC reimbursement update from the CPI-U to the hospital market basket update.
The success of ASCs across the nation lies in the patients’ demand for receiving quality care with reduced costs, and physicians’ demand for autonomy.
Will Medicare costs continue to be the driving factor behind ASC mergers with hospitals? Will the continuing independence of ASCs slow the rising costs of Medicare as surgery volume increases? ASCs were born of the desire by doctors to be independent, but will that independence continue to be sustainable?
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