Ambulatory surgery centers out in front as procedures keep migrating from acute care.
September 2024 – The Journal of Healthcare Contracting
With few exceptions, the race of procedures to the lowest-acuity setting shows no signs of letting up. Statistics indicate the ambulatory surgery market is big and getting bigger. But reimbursement issues, legislation and shifting ownership patterns will no doubt shape the outcome.
“We anticipate a variety of increasing surgical procedures to shift to outpatient,” says Jason Grzyb, vice president, non-acute sales for Cardinal Health’s U.S. Medical Products and Distribution business. “As ASCs continue to be met with complexities like evolving regulatory compliance, new technology advancements, supply chain management and more, we’re still seeing significant growth and expansion within the industry. ASCs are providing a convenient, cost-effective alternative for surgical procedures – while still delivering safe, quality care in a highly competitive market.”
According to Fortune Business Insights, the U.S. ambulatory surgical center market size was valued at $43.70 billion in 2022 and is projected to grow to $75.20 billion by 2030. In terms of ownership, the physician-owned segment accounted for the largest market share in 2022, while the corporate-owned segment was anticipated to record the highest compound annual growth rate (CAGR) during the forecast period of 2023-2030.
Complex procedures, complex technology
Improvements in medical technology continue to facilitate the migration of medical and surgical procedures to outpatient settings. Cardiovascular and orthopedics are often cited as two specialties likely to see the greatest growth in the near future.
“Historically, there has not been a consistent and transparent process regarding the approval of procedures for reimbursement in the ambulatory surgical centers,” says Andy Poole, FACHE, MSHA, MSPT, associate director, strategy and innovation, for healthcare technology and safety company ECRI. That makes it a challenge to predict what procedures are most likely to shift to the outpatient setting in the next six or seven years. “However, following recent trends, I would expect a continued focus on growth in the cardiovascular segment. As this is limited in many states by regulatory and reimbursement barriers, a growth opportunity for diagnostic and interventional procedures remains as these restrictions are reduced and safe outcomes are established.
“Another area of expected growth would be where there is already a history of success,” he says. “I think we can look to orthopedics to be a leader there. Given the success of total knee and total hip arthroplasties, I would expect total shoulder replacements to be next. Additionally, as more spine cases are demonstrated to be safe in the outpatient setting, there are opportunities to add additional types of procedures.”
As more procedures move to outpatient settings, new technology may need to be incorporated to ensure there is adequate monitoring of the patient, depending on the type of procedure, says Poole. “For example, with spine cases, you may need additional neurophysiological monitoring capabilities. Additional technologies that limit the risk of blood loss are also important to outpatient centers, so additional technology to aid in visualization may be useful. With all new technologies and instrumentation, there will need to be a continued investment in equipment to properly clean and sterilize to protect against infection risk.
“One of the challenges providers may face in this process is a longstanding struggle across all care settings – lack of adequately trained staff and physicians,” he continues. “It could be especially difficult to secure appropriate staffing levels of anesthesia providers. The other big challenge is reimbursement. It will need to make sense financially to add new procedures and support any new equipment, training, medication and other resources and infrastructure.”
“The shift from inpatient (IP) to outpatient (OP) is a story we’ve been seeing for the past 5 to 10 years and, while this trend will continue, it is already quite mature,” says David Levine, M.D., chief medical officer, Vizient. “Simply put, there are only so many more knee replacements we can shift out of the IP setting. That said, the Vizient Sg2 2023 Impact of Change forecast projects OP surgical volumes will grow 18% over the next ten years. Much of this growth will be organic – think increasing demand as the population continues to age and the emergence of noninvasive and less resource-intensive procedures. Procedures we see with highest move to OP include primary shoulder replacement, lumbar-thoracic fusion and knee replacements.”
Pharmaceuticals will continue to enable medical management of select patient populations, which will increasingly shift case volumes to the outpatient setting over the next decade, according to Sg2. This will drive growth in outpatient infusion therapy for several service lines, including rheumatology, with a 48% growth rate; gastroenterology, 37%; endocrine, 23%; and dermatology, 18%.
The outpatient shuffle
“The bigger shift story is what we call the ‘OP shuffle,’” says Dr. Levine, referring to the movement of procedures from hospital-based outpatient settings to non-hospital-based settings, including ambulatory surgery centers and physicians offices. Insurance, availability of appointments, ease of parking and proximity to the patient’s home are factors in the shuffle.
“With many knee replacements having already moved to OP, we anticipate some movement to ASCs. Technological advancements – a main driver in moving shoulder replacements to OP – and pharmaceutical advancements will shift some procedures, such as appendectomies, to medical treatment. Treatments that can be addressed with advances in interventional radiology will also help continue the shift for some procedures.”
The Ambulatory Surgery Center Association foresees growing numbers of cardiology procedures moving into ASCs, says association CEO Bill Prentice. In 2019, CMS added 17 cardiac catheterization procedures to the ASC Covered Procedures List, and in 2020, it added six codes related to percutaneous coronary intervention, he points out. “Since then, ASCA has supported efforts to ensure that the payment rates for these procedures are sufficient to cover the costs of the medical devices they require. More work is needed before Medicare beneficiaries will have full access to the same range of cardiovascular services in ASCs that privately insured patients enjoy and the cost savings ASCs offer,” he says.
A few procedures may reverse course and move from the outpatient setting to the acute care hospital, says Dr. Levine. Those procedures could include diagnostic catheterization, which will see a net drop in outpatient volumes due to emerging use of CT fractional flow reserve as an alternative diagnostic. In addition, novel approaches requiring inpatient care as well as increasing acceptance of earlier surgical intervention will dampen outpatient growth in neurostimulation for epilepsy.
What’s next? Physician offices?
How many surgical procedures will ultimately find their way into the physician’s office?
“We expect the cases that will move into the in-office procedural space will be those with a longer history of safe and effective outcomes,” says Poole. “Some of the greatest areas of risk include selecting a patient with an underlying issue, and the use of anesthesia/sedation.”
Says Dr. Levine, “In recent years, ophthalmology (e.g., cataract surgery, retinal repair) and gynecology procedures (e.g., LEEP procedures, hysteroscopies) are increasingly performed in the proceduralist office. We also see wound debridement, endovascular peripheral procedures, endoscopic procedures, and low acuity orthopedic procedures like manipulation and fracture repair occur in the office setting.”
Jeff Kremer, senior director of business development for Henry Schein Medical’s ASC Division, believes the shift from surgery center to physician office “will likely mirror in some ways the transition of procedures from the hospital to the ASC. There are certain procedures, such as plastics, vascular and ophthalmology that are generally recognized as being safe, affordable, and convenient to be performed in-office.”
CME Corp. Chief Strategy Officer Cindy Juhas says, “I haven’t seen massive movement in that direction, but it makes sense that it will happen. Any procedure that does not require general anesthesia would probably be the ones to move, such as many kinds of plastic surgery, colonoscopy, carpal tunnel surgery, finger/thumb surgeries, among others.”
Ambulatory surgery centers: Ownership trends
Ownership trends are shifting in the ambulatory surgery center market. While physicians continue to own some part or all of more than 90% of ambulatory surgery centers, per the Ambulatory Surgery Center Association, corporate ownership is growing, whether in the form of ASC management companies, health systems or joint ventures with private equity.
“That percentage has increased every year recently and I personally do not anticipate the trend reversing,” says Jeff Kremer, senior director of business development for Henry Schein Medical’s ASC Division. “The corporate groups provide business and financial expertise to allow the physician to focus solely on patient care, so these types of partnerships are appealing to a physician that wants to grow their market presence, revenue and profits.”
Jason Grzyb, vice president, non-acute sales for Cardinal Health’s U.S. Medical Products and Distribution business, says, “Based on our customer and industry relationships, we’re continuing to see larger organizations acquire more physician-owned and regional surgery centers. As the ASC landscape experiences more consolidation, it’s likely the larger companies will invest in building new ASCs or expanding existing facilities, while integrating new technologies to further advance procedures and drive efficiencies across their operations.”
The corporate-owned segment is anticipated to record the highest compound annual growth rate (CAGR) during the forecast period of 2023-2030, according to Fortune Business Insights. Some of the biggest players are AMSURG, with roughly 250 surgery centers; United Surgical Partners International (part of Tenet Health), with about 480 ambulatory surgery centers and surgical hospitals; Surgery Partners, with more than 180 locations; SCA Health, with 320 surgical facilities; and HCA Healthcare, 124 surgery centers.
Hospitals and health systems remain strong players in the market.
“Many of our larger healthcare systems are building or planning new ASCs,” says Cindy Juhas, chief strategy officer, CME Corp. “I think that the medical technologies required will be significant. Most hospital systems are inclined to spend more money on equipment and technology, wanting their ASCs to reflect their brand.” Commercial insurers are another entrant into the market, she adds.
Private equity is making its presence felt as well.
“Transition toward the ambulatory surgery center market has long been a priority for private equity (PE), especially in the areas of orthopedics, plastics, gastrointestinal, etc.,” says David Levine, M.D., chief medical officer, Vizient. “PE will continue to look for new ways to drive procedures away from the acute care setting, and they have their sights set on cardiovascular as the next big service line to conquer.
“Similarly, large payers like UnitedHealth Group and Humana are working diligently to expand their provider footprints and care management capabilities to hold onto more of the premium dollar and decrease patient utilization of higher cost services,” he adds. “This is especially true for private equity, venture capital and payers as it relates to mergers and acquisitions.”
Bill Prentice, CEO of the Ambulatory Surgery Center Association, says that “while we are seeing an increase in the number of ASCs partnering with management companies, we are not seeing much change in the procedures they provide or the patient populations they serve when those partnerships are created. In addition, recent data shows that physicians continue to own some part or all of more than 90% of ASCs.”
Site-neutral payment: An issue that could shape the future of ambulatory surgery
Should Medicare continue to pay more for services provided in hospital outpatient departments than it does for similar services performed at independent ambulatory surgery centers or even physicians offices? Hospitals say yes. Payers don’t agree. How this issue – called “site-neutral payment” – is resolved could shape the future of ambulatory surgery.
Here’s what insurers are saying.
Medicare patients are being overcharged for healthcare services, like routine office visits and lab work, at certain practices owned by hospitals labeled as hospital outpatient departments (HOPDs), said the Blue Cross and Blue Shield Association in a February 2023 press release. “These services cost patients less when provided in a doctor’s office or another setting outside of the hospital. Hundreds of millions of dollars are spent on those services with little evidence of improvement in the quality of care.”
In fact, in a cost analysis of six common outpatient procedures delivered to 133 million Blue Cross and Blue Shield members between 2017 and 2022, Blue Cross and Blue Shield Association reported:
- Mammograms cost 32% more in an HOPD than in a doctor’s office.
- Colonoscopy screenings cost 32% more in an HOPD than in an ASC and double the cost compared to those performed in a doctor’s office.
- Diagnostic colonoscopies cost 58% more in an HOPD than in an ASC and more than double the cost when performed in a doctor’s office.
- Cataract surgery costs 56% more in an HOPD than in an ASC.
- Ear tympanostomies cost 52% more in an HOPD than an ASC.
- Clinical visits cost 31% more in an HOPD setting than in a doctor’s office.
Implementing site-neutral payment policies can curb rising costs, making healthcare more affordable and accessible for everyone, the company concluded.
Even the legislative and regulatory branches of the federal government have questioned the wisdom of reimbursing hospital outpatient departments at higher rates than independent ambulatory surgery centers. In its report to Congress in June 2023, the Medicare Payment Advisory Commission (MedPAC) – an independent legislative branch agency that provides the U.S. Congress with analysis and policy – said that because of payment rate differences across clinician offices, HOPDs, and ASCs, hospitals have an incentive to acquire physician practices and then bill for the same services under the Hospital Outpatient Prospective Payment System (OPPS).
Not surprisingly, the hospital industry opposes attempts to expand site-neutral payment policies, saying they could significantly impact the financial sustainability of hospitals and health systems.
“The cost of care delivered in hospitals and health systems takes into account the unique benefits that they provide to their communities,” said the American Hospital Association in a May 2023 fact sheet. “This includes the investments made to maintain standby capacity for natural and man-made disasters, public health emergencies and other unexpected traumatic events, as well as deliver 24/7 emergency care to all who come to the hospital, regardless of ability to pay or insurance status. Hospital facilities also must comply with a much more comprehensive scope of licensing, accreditation and other regulatory requirements compared to other sites of care.”
David Levine, M.D., chief medical officer for Vizient, agrees with the AHA. “So long as hospitals have different requirements than other care settings, it is critical that they receive appropriate reimbursement.”