eAlerts For Your Strategic Planning Ambulatory Surgery Center and Hospital Trend Data

FOR YOUR STRATEGIC PLANNING: AMBULATORY SURGERY CENTER AND HOSPITAL TREND DATA

June 22, 2009

One thing that anesthesia practices can do to prepare for next year and the year beyond, while watching the convolutions of healthcare reform, is to keep up with information on the changing marketplace.

Shift to Ambulatory Surgical Centers

A recent 78-page study commissioned by the ASC Coalition, an organization of ASC associations and companies, contains a wealth of Medicare data and statistical analyses on the shift of surgical cases to outpatient facilities. (The qualitative analyses covered private-pay as well as Medicare patients; the quantitative analyses were primarily limited to Medicare data.) Like most commissioned studies, the Analysis of Recent Growth of Ambulatory Surgical Centers: Final Report serves an advocacy purpose. Healthcare reform, it argues, will benefit from the continuing growth of ASCs because ASCs offer excellent and cost-effective patient care.

The major objective of the study was to examine policymakers’ concerns about the potential overuse of ASCs. Medicare-certified ASCs grew at an average annual rate of 7.3 percent from 2000 through 2007. The number of Medicare certified ASCs itself has been expanding (4,964 in 2007) while the number of hospitals participating in Medicare (4,643 in 2007) has contracted, according to MedPAC (the Medicare Payment Advisory Commission). Less than eight years ago hospitals outnumbered ASCs.

The ASC Coalition’s study shows that Medicare payments to ASCs grew much more rapidly than Medicare payments to hospital outpatient departments: an average of 11.4 percent per year vs. 6.9 percent. MedPAC projected in 2008 that Medicare spending on ASC services would grow from $2.9 billion in 2007 to $3.9 billion this year alone. The Coalition study reports that that almost all of the growth in Medicare spending for ASC services is due to the growth in the number of services per beneficiary, which rose 10.7 percent between 2002-2006. Seventy percent of the increase in ASC service volume per Medicare beneficiary results from a shift in site of service away from hospital outpatient departments. Far from being driven simply by the increase in ambulatory facilities, the Coalition argues, the shift is attributable to:

Technological improvements that have allowed for faster patient recovery times. These advances include improved surgical techniques, anesthesia, and pharmaceuticals to better manage post-operative pain.
Changes in population health guidelines for disease screening (e.g., colorectal cancer screening. Colonoscopy and upper gastrointestinal endoscopic (GI) procedures accounted for almost a third of Medicare ASC spending growth between 2000 and 2007.).
Payer incentives to pay for care in the most cost-effective setting.
Physicians preferring to treat patients in an ASC because it provides an opportunity to better control staffing decisions, equipment selection decisions and process and scheduling decisions. The ability to manage their work environment, along with short turnaround times and specialized focus by nurses and other support staff at ASCs may permit increased physician productivity and hence professional incomes.
Possible patient preference for ASCs because they offer lower copayments, more convenient locations, shorter waiting times, and easier scheduling.

The strong growth in the number of ASCs has slowed recently, however, and there are reasons not to expect new growth spurts in the next few years. According to MedPAC, Medicare facility payments to ASCs have been decreasing and are expected to average just 59 percent of hospital outpatient department payments in 2009, down from 86.5 percent in 2003. That differential may help to alter the incentives for developing ASCs. If the changing economic landscape is making developing new ASCs less desirable from the point of view of investors, however, the price differential between hospital outpatient and ASC facility services should continue to drive a shift to ASC settings.

Greater Pressure on Hospitals

What does this evolution mean for anesthesia practices? ASCs are very likely going to become even more attractive. Lawyers and consultants report that hospitals are less willing to provide compensation packages to supplement income from professional services. Hospitals are under serious financial pressure. In an April 27, 2009 press release, the American Hospital Association announced the results of a recent survey showing that:

Forty percent of hospitals expected losses in the first quarter of 2009
Nine out of ten hospitals are making cutbacks because of the economic downturn;
Nearly half of all surveyed hospitals have cut staff;
Fewer patients are seeking inpatient and elective services, and
The relative volume of Medicaid and other public payment programs is growing.

Although hospitals’ ability and/or willingness to compensate anesthesiologists for providing coverage are diminishing, hospitals’ need to keep their referring surgeons loyal is stronger than ever – which typically means requiring operating rooms and other “anesthetizing locations” to be fully staffed and ready for cases that may be scheduled, or taken off the schedule, at the last minute. Such scheduling costs both the hospitals and the anesthesia groups money.

If the hospitals cannot compensate the anesthesiologists for the forced inefficiency of hospital practice, ASCs may be an appealing alternative. ASC cases are typically less acute and are shorter than inpatient cases. Although these cases may average seven to eight total units per case, or about four units fewer than cases done in the hospital, anesthesiologists as well as surgeons can perform more cases in eight hours in an ASC day and thus maximize their revenue. Working in an ASC will usually also offer the advantage of little or no call and no weekend coverage.

The reasons that led to the shift of ophthalmologic services and gastroenterology screening procedures have not changed, although their growth rates have stabilized. They will in all likelihood continue to be the two most frequently-performed categories of ASC cases going forward.

There is still ample room for growth in pain medicine – in all ambulatory settings. In ASCs alone, pain management services explain 17 percent of the growth in Medicare allowed charges since 2000, although they account for just 10 percent of total Medicare ASC spending. Some of the increased spending on pain services is attributable to new technologies, and some of it may reflect “induced demand.” The expansion of pain medicine is likely to continue because of strong interest in improving the treatment of pain.

The surveys and studies consulted for this article point toward the greatest opportunity for anesthesiologists and for nurse anesthetists in ASCs, certainly relative to hospital outpatient departments and probably as compared to inpatient surgery as well. We caution that the data discussed here are national, and remind everyone that local practice conditions and markets vary a great deal. Your own group’s data are at least as important as the general marketplace information noted above. ABC is constantly strengthening our report system and we encourage clients to contact their account managers with any questions.

That said, we would like to point out one other national statistic that is highly relevant to every anesthesiology group’s planning: the median starting salary for anesthesiologists has increased by 13.64 percent, from $275,000 to $312,500, according to the MGMA’s Physician Placement Starting Salary Survey: 2009 Report Based on 2008 Data. We caution, as does the MGMA, that the spread in the salary data makes medians more dependable than means, and also that the survey may not be representative of the entire field. Nevertheless, it is useful to us all to know that the demand for anesthesiologists, as reflected in starting salaries, remains high even in the current economy.

Sincerely,

Tony Mira
President and CEO

P.S. CMS warned of a serious scam directed at physician offices in an e-mail message sent out on June 18. The e-mail was forwarded extensively through distribution lists and newsletters. For the few readers who may not have seen copies elsewhere, because of the catastrophic effect that the scam could have on readers’ practices, we are republishing the CMS warning here:

The Centers for Medicare & Medicaid Services (CMS) has become aware of a scam where perpetrators are sending faxes to physician offices posing as the Medicare carrier or Medicare Administrative Contractor (MAC). The fax instructs physician staff to respond to a questionnaire to provide an account information update within 48 hours in order to prevent a gap in Medicare payments. The fax may have the CMS logo and/or the contractor logo to enhance the appearance of authenticity.

Medicare FFS providers, including physicians, non-physician practitioners, should be wary of this type of request. If you receive a request for information in the manner described above, please check with your contractor before submitting any information. Medicare providers should only send information to a Medicare contractor using the address found in the download section of the CMS.gov website found at http://www.cms.hhs.gov/MLNGenInfo/ or http://www.cms.hhs.gov/MedicareProviderSupEnroll .