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Trading (Surgical) Spaces: Image-Guided Procedures Migrate to ASCs

By Matt Skoufalos

Among the multiplicity of impacts of the novel coronavirus (COVID-19) pandemic on the U.S. health care system was the deferral of elective surgery procedures by patients either unable or unwilling to risk an encounter with COVID patients by coming into a hospital. Eventually, state-issued bans on elective surgeries relaxed, but the swath the virus continued to cut across the country did not. For many physicians and the patients in their care, the option of choice became a change of venue, transitioning cases to ambulatory surgery centers (ASCs) or office-based laboratories (OBLs) rather than hospitals that, in many instances, overflowed with COVID-19 patients.

Whether they realized it or not at the time, those patients and practitioners were part of a broader trend in health care whereby surgical cases of lesser intensity are being safely migrated to those non-hospital environments, saving on expenses and delivering the same level of care.

As defined by the U.S. Centers for Medicare and Medicaid Services (CMS), an ASC is described as “a freestanding facility, other than a physician’s office, where surgical and diagnostic services are provided on an ambulatory basis.” An “office” is “a location, other than a hospital, skilled nursing facility (SNF), military treatment facility, community health center, state or local public health clinic, or intermediate care facility (ICF), where the health professional routinely provides health examinations, diagnosis and treatment of illness or injury on an ambulatory basis.”

Those definitions matter because, under the Medicare Physician Fee Schedule (MPFS), some physician services are reimbursed at different rates when provided in facility (mostly hospital inpatient) and non-facility (including ASC and OBL) settings. According to CMS, “the rate, facility or non-facility, which a physician service is paid under the MPFS is determined by the place of service (POS) code that is used to identify the setting where the beneficiary received the face-to-face encounter with the physician, non-physician practitioner (NPP) or other supplier.”

“When a physician performs in a facility like an ASC, Medicare pays the facility, not the physician, for the facility’s overhead expense,” wrote Kent Moore, senior strategist for physician payment for the American Academy of Family Physicians (AAFP) in a June 2015 blog post. “In turn, Medicare pays the physician less under the physician fee schedule because the physician did not have the overhead and much of the other practice expenses of the facility’s location of service,” including those non-surgical supplies and staffing that contribute to hospital costs.

But as more and more procedures are qualifying for that non-facility reimbursement rate, including interventional radiology and image-guided procedures, physicians and hospital systems alike are retooling their business models to capture a greater share of the money that remains on the table.

John Geer, director of OBL and ASC solutions at Siemens Healthineers North America sees the migration of image-guided surgical procedures from hospitals to ambulatory clinics as disrupting ongoing consolidation efforts among health systems nationwide.

Geer stopped short of describing the procedural out-migration as an outright cannibalization of hospital revenues, instead noting that growth in the ASC/OBL sector is inextricably linked to questions of capacity utilization across a variety of environments. Many image-guided procedures are already cases for hospital outpatient departments, but as more increasingly complex (and higher-reimbursement) cases work their way into the procedural pipeline, these can fill in some of the schedule gaps created by the movement of less complex, lower-reimbursement procedures to ASCs.

“Legacy managed-care contracts used to be primarily between hospitals and referring clinics,” Geer said. “In today’s landscape, the patients, providers and payers all have varying incentives to look outside the hospital to have the work done. Hospitals can either continue to lose these cases and this revenue, or they can add an ASC to their ambulatory strategy: make their own, build one, buy one.”

“A hospital can’t just go out and buy an OBL, but as these [CPT] codes continue to go out, you will continue to see that consolidation of ASCs being sold back to hospitals,” he said. “These folks, to supplement their top-line needs, either have to do more cases or get reimbursed more per case; even though we’re moving cases outside of the hospital, that doesn’t mean they aren’t also subject to rate cuts.”

Geer’s colleague Joseph Riley, vice president of cardiology and interventional radiology for the advanced therapies business of Siemens Healthineers, foresees that the movement of image-guided procedures to ASCs won’t necessarily create new procedure volume for practitioners, but it can lead to better health outcomes for patients and at lower costs. This shift in where care is reimbursed is tantalizing enough for new money to enter the picture from private equity firms and hospitals, to expand the number of these centers.

“Several models can work to grow access with these centers,” Riley said. “From entrepreneurial physicians to hospitals to joint ventures, there will be different ways to make these centers work. Studying the expansion of ambulatory surgery centers, the joint-venture model played a big role bringing together the hospital partners, physicians and management companies.”

Further complicating the picture for health systems is the fact that non-hospital surgical settings are governed by state-specific rules, in addition to CMS requirements, contributing to limited outright hospital ownership of ASCs (about 3 percent of the national market, Geer said); by comparison, 60 percent of ASCs are physician-owned. Whereas there wasn’t the incentive for a hospital to own one previously, now they are beginning to entertain the notion, particularly amid CMS’s incentivization of procedures conducted in settings with lower operational costs.

“Medicare/Medicaid in the U.S. is a zero-sum game,” Geer said. “Rate increases in one code set are typically offset by rate reductions in another. There are alternative places of service where these cases can be done safely, which will gladly take a lower reimbursement rate because their overhead is lower.”

“The train started rolling in the 1970s and ’80s, and as time moves along, more cars, in the form of procedures, are added to that train,” he said.

Rebecca Craig is CEO of the Harmony Surgery Center, which has operated in Ft. Collins, Colorado, for the past 20 years. A JCAHO-accredited joint venture with UCHealth, the center is 50-percent physician-owned, but functions and operates independently from the health system. Throughout its four operating rooms and five procedure rooms, the facility manages a variety of cases that are appropriate for an ASC environment – GI, pain management, and surgeries such as hernia repair, sinus surgery, total joint replacements, gastric bypasses, back hardware placement – for which the facility is reimbursed at ambulatory surgery center rates.

In addition to dealing with private payers, Craig said about 39 percent of its volume is reimbursable by Medicare and 8 percent by Medicaid but acknowledges that the cost of setup – technology, equipment and supplies – and opportunity for reimbursement “is a limiting factor” in determining which cases its surgeons will handle there.

“We have a lot of volume, but for the more complex procedures, whether we can do it really just depends on where Medicare has placed the reimbursement,” Craig said.

Taken together with prospective patient volumes and scheduling availability, those reimbursement rates also inform capital equipment purchases, which are another component of which lines of business the surgery center offers. Harmony Surgery Center has five mobile C-arms that are frequently relied upon for completing a variety of procedures – and at an average cost of $165,000 apiece, they need to be in service frequently to justify the cost of those investments. Although vascular procedures are trending more and more in ASC environments, Craig says her center won’t seek to add the radiology equipment they require until it can also find cardiologists to perform them.

“If you get your OR set up with that kind of equipment, you want to make sure you have the reimbursement to pay that equipment off,” she said. “We couldn’t add that specialty unless we had a set of committed cardiologists to bring their patients here; in our community, the cardiologists are employed by the health system, so they’re doing those procedures at the hospital.”

In addition to certifying the availability of physicians, equipment, and patient volumes sufficient to offer a new line of service at a surgery center, Craig said that ASCs also take very seriously the quality of patient experience in their facilities. Without having to manage the multiple lines of service that a hospital does, ASCs can focus exclusively on surgical procedures and their outcomes.

“Our specific focus on the customer is one of the hallmarks of our industry,” she said. “The hospital is for sick folks, and anything that can be transitioned to the surgery center will continue to be, which is why hospitals are opening surgery centers. The key is to pick the right site of service for the patients instead of funneling them into one place.”

Moreover, Craig said, the health care landscape needs a cost-effective alternative to hospital-based care, and ASCs can provide that. When patients have a 20-percent copay for surgical procedures that can run into the tens of thousands of dollars, consumerism is another contributing factor to the growth in ASC business.

“In the United States, we have been looking for ways to reduce the cost of health care for a long time,” she said. “When elective surgeries can be done in an ASC and we can reduce the cost of that care for patients, private insurers or Medicare, and employers, we all win.”

Dr. Fadi A. Saab is the COO and director of cardiology and vascular medicine at Advanced Cardiac & Vascular Centers for Amputation Prevention. Saab co-founded the practice in Grand Rapids, Michigan, with his uncle, Dr. Jihad A. Mustapha, a fellow interventional cardiologist. They opened that site in 2018 together with an advanced-practice provider and a support staff of 10; as demand for their services increased, they launched a second center just 70 miles away, in Lansing, and a third in Las Vegas, Nevada in June 2021.

Primarily, the facilities focus on limb salvage, but Saab said they perform all types of procedures necessary to treat advanced peripheral vascular disease.

“Many patients come to ACV as their last hope when they have been told by others that amputation is their only option,” he said. “Because of the advanced imaging modalities that we have at ACV, we are able to successfully treat these very challenging cases.

“In the outpatient setting physicians can choose the proper products for patients because of no institutional limitations,” Saab said.

Saab also believes there’s a broader push to perform ever more procedures in an outpatient surgery setting, not only for the “significant cost savings to the health care system and patients,” but also given safety and efficacy metrics that are “comparable, if not even better, than in the hospital settings.”

“In my experience, patients love the convenience of undergoing procedures in a smaller, more focused care center,” he said.

In addition to patient convenience, Saab said he’s seeing more and more physicians “moving away from hospital employment to open their own independent, patient-centered outpatient facilities.”

“I see these physicians wanting to move back to delivering personalized patient care,” he said; “I see these centers as allowing physicians to achieve independence and personalized patient care.”

To what degree those independent practices may come online varies regionally, Saab said; however, he added that those hospitals “that propagate a culture of cooperation and incorporation will be able to partner with independent and employed physicians alike.”

For many physicians, the opportunity either to achieve that career independence that Saab described, or to clarify the terms of partnerships with their hospitals of choice, will only increase as CMS clears the migration of additional, typically inpatient procedures to ASCs.

Catherine Ruppe, a nurse and consultant in the ASC space, has seen an “across-the-board” migration of surgical specialties from hospitals to ASCs, which has given rise to more physicians considering the flexibility that might come with participating in an ASC, either as an owner or a part-time member of the team. A Certified Administrator Surgery Center (CASC) and the interim director of the Alaska Heart and Vascular Institute in Anchorage, Alaska, Ruppe oversees its operations as a hybrid space on the campus of Providence Medical Center through ECG Management Consultants. Four days out of the week, the institute operates as a catheterization lab, and on the fifth, it’s a surgery center that performs medical device implants.

The United States is home to some 6,000 freestanding, Medicare-certified ASCs in the United States, Ruppe said, many in specialties that are often privately owned by physicians, including orthopedics, otolaryngology, gastroenterology and ophthalmology. She recommends that any physicians considering striking out on their own contemplate several factors that can play into the decision to do so, including patient volume, potential for future growth and available regional resources. Investors – be they hospitals, physician-entrepreneurs or venture capitalists – must project factors like market conditions, hospital support/partnerships and patient selection criteria.

The final piece of the puzzle may be working to educate patients about the options available to them in ambulatory settings and the potential for reduced out-of-pocket costs as well as greater creature comforts. Ruppe points out that those conversations, like many around the ASC model, will vary regionally.

“It’s starting to happen at the payer level,” she said; “they’re driving patients to lower-cost of care sites, such as ASCs. There are incentives to do that, and hopefully you’ll be able to explain to your patient if they’re not savvy enough.”

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