Brisk increase in numbers of Ambulatory Surgical Centers (ASCs) is a known and accepted fact in the United States Healthcare industry today. Also known and accepted are the reasons attributed to it, that is to say, advancement in safety of surgery, negative acute care reimbursement as well as positive ASC reimbursement trends.


Impact of ASCs on physicians, quality of healthcare and the patient

ASCs are designed for increasing physician efficiency. They have multiple processes that enable faster patient throughput. For instance, the time for admission and discharge is significantly lower. Also, they typically undertake non-critical procedures, which have relatively shorter, fixed durations, helping physicians plan their time better. This might even help them increase their incomes through higher case loads, taking their motivation higher.

Further, physicians associated with ASCs have a better say (than in the hospital administration scrimmage) in maneuvering their work environments and accessing the latest that medical technology has on offer, for instance.

Success rate of surgeries is also higher not only because they typically focus on a single specialty, but also because the business model itself is built around having the latest in high technology equipment and systems. Besides, these are usually located in areas with otherwise less easy-access to the large hospitals, which typified acute care in the United States until not long ago.

The ultimate benefit is to the patient, whether it is convenient locations, shorter waiting periods, or access to the best treatment available.


Last among equals?

Despite these ‘contributions’ to the healthcare system, ASCs have been facing apartheid-like policies. In the first instance, a significant proportion is said not to receive Medicare payments for quite a few of the procedures conducted.

At the outset, there are only nine payment groups ranging from $333 to $1,339 for ASCs compared to the 100s that hospital outpatient departments have. The alleged higher payments to ASCs partially arise due to these limited definitions.

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) eliminated the payment updates for ASCs from 2005 to 2009 and changed the update cycle to one year instead of the earlier five. The annual 2 percent increase for 2004 was also reversed, effectively taking the rates to the 2003 levels.

Further, ASCs do not have access to the ‘pass through’ policies that hospital payments have when using a new technology. In fact, The Office of the Inspector General (OIG) of Health and Human Services Department (HHS) has been suggesting that hospital and ASC payments be made at par with the lower of the two, with complete disregard to the difference in operation and hence, operating costs. In fact the Medicare Payment Advisory Commission (MedPAC) had an apparently better suggestion recently for the secretary, HHS. They recommended that relative weights and procedure groups be aligned with those in the Hospital Outpatient Prospective Payment System (HOPPS) developed by the Centre for Medicare and Medicaid Services (CMS), and be based on recent ASC cost data. The current data used is from a survey conducted in 1986. The latter methodology was something that the ASC lobby has been aiming for.


Different means to similar ends

Even the leading ASC lobbyists – Federated Ambulatory Surgery Association (FASA) and American Association of Ambulatory Surgery Centers (AAASC) are taking slightly different routes for reaching the same end. Both wish lists hope for the elimination of Medicare’s ASC procedures list, the rebasing of ASC facility fees, the matching of ASC reimbursement rates to those paid to hospital outpatient departments (HOPDs) and the annual updating of those rates. However, FASA says ASCs are cheaper than HOPDs, but AAASC says they are the same and should be treated similarly.


Legislative attack

Many industry observers group ASCs and specialty hospitals. This may be because of the odd-incident of an ASC adding a few beds, ostensibly to allow for post-op recovery, but in reality, to qualify as a hospital, and get higher reimbursements. This complication also arises because of the preponderance of physician ownership in both entities. However, as per a report submitted by the General Accounting Office (GAO) to the Senate, there were only 90 specialty hospitals in the United States in 2003, which is nowhere near the estimated 3800 number of ASCs for the year 2004 by Frost & Sullivan. The recent moratorium on specialty hospitals has hence given the anti-ASC lobby a shot in the arm. More controversial legislation like the proposed “The Hospital Fair Competition Act of 2005” has been introduced in the Senate, which will stop physicians from referring to facilities in which they have an ownership interest.

One of the chief allegation being leveled against ASCs are that they are taking highly profitable business away from hospitals, which, supported the less profitable, or even unprofitable business. In fact, at the state level, there is noticeable legal activity in an attempt to stunt ASC growth. For instance, New Jersey's legislature has already enacted a tax provision, which will use ASC revenue to subsidize charity care at hospitals. South Carolina is also considering a yearlong moratorium on development of more ASCs.


Now what?

To stop ASCs from finding loopholes in laws to get higher reimbursements, CMS needs to rationalize the payment system at the earliest, and make it dynamic so that it can keep up with changing ASC costs. And the first step toward it is to monitor ASC costs regularly and using scrupulous benchmarks to do it. This might just help achieve the target of reducing the burden on the exchequer. Simultaneously, regulatory agencies and the various stakeholders need to avoid digging their heels and take the most optimal decisions in the interest of the patient.

For further information please contact:

Katja Feick
Corporate Communications
+44 (0) 207 915 7856
Katja.Feick@frost.com

www.medicaldevices.frost.com