Thomas K. Miller, MD, serves as the medical director and a physician owner of Roanoke Ambulatory Surgery Center. He weighs in on what the orthopedic market for ambulatory surgery centers will look like as it evolves over the next 12 months. Here are his expectations:
1. Narrower reimbursement rates. Dr. Miller expects orthopedics to remain profitable overall, but owners and operators should expect reimbursement rates to narrow overall. Instead of waiting for the rates to drop, he suggests anticipating tighter margins and looking for places to save money now.
Some procedures may have associated codes eliminated or have reimbursements cut to the point where ASCs cannot profitably perform them. "You may reach a point where you've crossed the line, where you can't make a profit or break even," he said.
To avoid this, know exactly what your costs are for every procedure before agreeing to perform it. "The old adage of profit by increased volume may not apply," he says. "If you're losing money on every case, it doesn't matter how many you do. “The margin on cases needs to be looked at a lot closer and reviewed on a regular basis.”
2. Tighter spending. ASCs will need to find other ways to cope with decreasing revenue from reimbursements. Administrators may not realize that supply costs can contain major waste. For example, if a surgery center is purchasing the same supplies from different vendors, they should decide if there is a clinical reason for the additional purchases and contracts.
"We use some implants out of habit," Dr. Miller says. “Is there a technical difference that accounts for physicians’ preferences? Unless there is a difference in clinical outcome as the reason, we’ve found there are places at the end of the day where implant choice may not make much difference and we can simplify and reduce costs.”
It's the small purchases that begin to add up, he says. If you can save $25,000 in several different areas, that adds up to significant savings.
Dr. Miller also recommends anticipating equipment repair and replacement costs and building those into a budget to avoid surprises or lost operating room time. "Days lost because of equipment issues are hard to get back," he says. “We’ve developed timing and scheduling to replace anesthesia machines and c-arms. We want the best and longest use of major dollar items but scheduled replacement means we won’t lose any cases to the hospital because we couldn’t accommodate a patient’s needs because of equipment down time.”
3. More negotiating. Administrators should reevaluate vendor contracts to see if there are additional opportunities to save money. Implant supply costs can often be lowered by picking a primary vendor and asking for a discount in exchange for a volume increase. Speak with your vendors to see if a mutually beneficial agreement can be reached.
Cutting down on the number of different vendors typically brings savings as well. There can be a surprising range of cost for similar items. No matter what, Dr. Miller says, don't be afraid to haggle with vendors, even if it means going outside of your comfort zone.
"It's not something that as orthopedists we are really good at, but as owners of a center it's something we need to be aware of," he says. "We need to know what our choices cost and how that compares to the financial bottom line."
4. Shifting fracture care. The drift in fracture care from the hospital to the surgery center will continue and strengthen in the next year. There are several reasons for the move but, largely, most fractures do not require immediate attention, and patients can wait to be scheduled at an ASC.
"Much of fracture management is viewed as reasonable to be staged," Dr. Miller says. "If it doesn't have to be done the next day or in the middle of the night, and splinting and scheduled operative intervention may improve outcomes."
Regional anesthesia and pain management has also improved in ASCs, and Dr. Miller credits this with accelerating the fracture shift. The non-immediacy of fracture care combined with improved anesthesia means people "won't think twice about doing it in an ASC," he says.
5. Shifting spinal care. Spinal procedures are on everyone's radar, Dr. Miller says. Though some spine surgery procedures have shifted to surgery centers, the transition is ongoing and not without challenges. More and more procedures will move from hospitals to surgery centers as ASC staff members get more comfortable with the center's ability to handle the cases. Single level spinal cases will be easier to transfer over.
"For us the transition has been for staff being comfortable with something they've never seen done in an ASC and arranging scheduling," he says of the shift. "Understanding perioperative risks and technical advances have gotten to the point where people know these can be safely done as outpatient procedures; you just have to pick the right people.
Dr. Miller says spine surgery is not much different from rotator cuff surgery in that high risk patients should be seen in a hospital but the majority of cases could reasonably be done in an ASC.
"For cases that are not high risk, we need to look at why are we doing it at a hospital? I would venture for a lot of cases, if you can do them in a non-hospital setting, then everyone is better off," he says.
6. More challenging payor negotiations. When orthopedic procedures first moved to surgery centers, they qualified for high reimbursements and were lucrative for centers. As governmental reimbursement rates drop, commercial payors may become more resistant to contracting with small centers. Dr. Miller has seen payors refuse to shift reimbursement rates regardless of cost of living, and he said the market in which you operate can play a large role.
"If you are in a market with one or two very dominant players, it's going to be very difficult to negotiate with them," he says. "Right now that is the one bargaining tool — it costs them more to send patients to a hospital setting — still gets attention."
In smaller markets, though, payors often see ASCs as crucial for keeping costs down. Dr. Miller suggests talking reasonably to payors and presenting a reason for your proposed rates other than wanting to make a profit.
"Trying to make a huge killing isn't going to happy anymore," he says. "But a cost-effective ASC going out of business isn't good for insurance." Say to payors, "We are the low cost alternative patients really want. Let's be realistic and not dig everyone into a hole. Let's figure out something we can live with."
7. Long-term profitability. When Dr. Miller started his ASC, he and his business partners sought to develop a long-term business plan. They strove to be cost-conscious from the start, rather than waiting until orthopedics became less profitable. Planning ahead helped them weather economic storms and keeps them flexible as the market changes, he says.
"The philosophy when we built the center was we want something that's efficient. We aggressively paid off loans and budgets equipment to the point where even in a very tight market we are profitable," he says. "Our goal wasn't to build profit in on the front end, it was to get efficient and see profit down the line."
Even as the market tightens, Dr. Miller says ASCs can still be profitable as long as owners and operators stay focused on keeping unnecessary costs down and being fiscally-minded. Don't be scared when profits aren't rolling in from the start if your vision is solid. Rather, make sure your staff is on the same page and aware of your business approach.
"We operate in a very tight reimbursement market," he says, "but we went into it knowing the market was very tight. Knowing that, we had certain components of the business plan in place. Everyone having an upfront, vested understanding of what goes on is central. Any decisions we make affect us from an economic standpoint."
8. Increasing patient preference. Dr. Miller says he used to have to convince patients that an ASC could be worthwhile for their procedures, but more and more often, those in his care actually prefer to been seen by a physician at a surgery center and are resistant to hospital care.
"We have a much harder sell to get people to the hospital," he says. "The patients who have the intent of being done in a freestanding ASC and find out for medical reasons they have to be done in a hospital are usually not really happy about it."
One of the reasons for the shift in preference is the growing negative stigma attached to hospitals. Patients often find hospitals frightening and unfriendly, he says, while ASCs appear less intimidating.
“ASCs are more efficient and infection rates are lower in an ASC,” he says. “We had to overcome the ‘is it safe to do this out of a hospital’ hurdle, but once we could show it’s safe, efficient, and cost effective to get taken care of in this environment, patients gravitate toward it.”
9. Know your “Yes" list. Although some procedures have seen diminishing reimbursement, others are now being approved for ASC settings.
"It’s essential that you keep track of not just what can technically and safely be done in an ASC, but what is newly approved and reimbursable.," Dr. Miller says.
Every new addition to the “yes" list should be evaluated for the fiscal possibility of being done in your facility. Provider education and awareness is key to shifting scheduling habits from non ASC to ASC as the preferred facility for new “yes” procedures, he says.
More Articles on Ambulatory Surgery Centers:
Ambulatory Surgery Centers — 12 Keys to Financial Success
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7 Ways for Surgery Centers to Make More Money Now
1. Narrower reimbursement rates. Dr. Miller expects orthopedics to remain profitable overall, but owners and operators should expect reimbursement rates to narrow overall. Instead of waiting for the rates to drop, he suggests anticipating tighter margins and looking for places to save money now.
Some procedures may have associated codes eliminated or have reimbursements cut to the point where ASCs cannot profitably perform them. "You may reach a point where you've crossed the line, where you can't make a profit or break even," he said.
To avoid this, know exactly what your costs are for every procedure before agreeing to perform it. "The old adage of profit by increased volume may not apply," he says. "If you're losing money on every case, it doesn't matter how many you do. “The margin on cases needs to be looked at a lot closer and reviewed on a regular basis.”
2. Tighter spending. ASCs will need to find other ways to cope with decreasing revenue from reimbursements. Administrators may not realize that supply costs can contain major waste. For example, if a surgery center is purchasing the same supplies from different vendors, they should decide if there is a clinical reason for the additional purchases and contracts.
"We use some implants out of habit," Dr. Miller says. “Is there a technical difference that accounts for physicians’ preferences? Unless there is a difference in clinical outcome as the reason, we’ve found there are places at the end of the day where implant choice may not make much difference and we can simplify and reduce costs.”
It's the small purchases that begin to add up, he says. If you can save $25,000 in several different areas, that adds up to significant savings.
Dr. Miller also recommends anticipating equipment repair and replacement costs and building those into a budget to avoid surprises or lost operating room time. "Days lost because of equipment issues are hard to get back," he says. “We’ve developed timing and scheduling to replace anesthesia machines and c-arms. We want the best and longest use of major dollar items but scheduled replacement means we won’t lose any cases to the hospital because we couldn’t accommodate a patient’s needs because of equipment down time.”
3. More negotiating. Administrators should reevaluate vendor contracts to see if there are additional opportunities to save money. Implant supply costs can often be lowered by picking a primary vendor and asking for a discount in exchange for a volume increase. Speak with your vendors to see if a mutually beneficial agreement can be reached.
Cutting down on the number of different vendors typically brings savings as well. There can be a surprising range of cost for similar items. No matter what, Dr. Miller says, don't be afraid to haggle with vendors, even if it means going outside of your comfort zone.
"It's not something that as orthopedists we are really good at, but as owners of a center it's something we need to be aware of," he says. "We need to know what our choices cost and how that compares to the financial bottom line."
4. Shifting fracture care. The drift in fracture care from the hospital to the surgery center will continue and strengthen in the next year. There are several reasons for the move but, largely, most fractures do not require immediate attention, and patients can wait to be scheduled at an ASC.
"Much of fracture management is viewed as reasonable to be staged," Dr. Miller says. "If it doesn't have to be done the next day or in the middle of the night, and splinting and scheduled operative intervention may improve outcomes."
Regional anesthesia and pain management has also improved in ASCs, and Dr. Miller credits this with accelerating the fracture shift. The non-immediacy of fracture care combined with improved anesthesia means people "won't think twice about doing it in an ASC," he says.
5. Shifting spinal care. Spinal procedures are on everyone's radar, Dr. Miller says. Though some spine surgery procedures have shifted to surgery centers, the transition is ongoing and not without challenges. More and more procedures will move from hospitals to surgery centers as ASC staff members get more comfortable with the center's ability to handle the cases. Single level spinal cases will be easier to transfer over.
"For us the transition has been for staff being comfortable with something they've never seen done in an ASC and arranging scheduling," he says of the shift. "Understanding perioperative risks and technical advances have gotten to the point where people know these can be safely done as outpatient procedures; you just have to pick the right people.
Dr. Miller says spine surgery is not much different from rotator cuff surgery in that high risk patients should be seen in a hospital but the majority of cases could reasonably be done in an ASC.
"For cases that are not high risk, we need to look at why are we doing it at a hospital? I would venture for a lot of cases, if you can do them in a non-hospital setting, then everyone is better off," he says.
6. More challenging payor negotiations. When orthopedic procedures first moved to surgery centers, they qualified for high reimbursements and were lucrative for centers. As governmental reimbursement rates drop, commercial payors may become more resistant to contracting with small centers. Dr. Miller has seen payors refuse to shift reimbursement rates regardless of cost of living, and he said the market in which you operate can play a large role.
"If you are in a market with one or two very dominant players, it's going to be very difficult to negotiate with them," he says. "Right now that is the one bargaining tool — it costs them more to send patients to a hospital setting — still gets attention."
In smaller markets, though, payors often see ASCs as crucial for keeping costs down. Dr. Miller suggests talking reasonably to payors and presenting a reason for your proposed rates other than wanting to make a profit.
"Trying to make a huge killing isn't going to happy anymore," he says. "But a cost-effective ASC going out of business isn't good for insurance." Say to payors, "We are the low cost alternative patients really want. Let's be realistic and not dig everyone into a hole. Let's figure out something we can live with."
7. Long-term profitability. When Dr. Miller started his ASC, he and his business partners sought to develop a long-term business plan. They strove to be cost-conscious from the start, rather than waiting until orthopedics became less profitable. Planning ahead helped them weather economic storms and keeps them flexible as the market changes, he says.
"The philosophy when we built the center was we want something that's efficient. We aggressively paid off loans and budgets equipment to the point where even in a very tight market we are profitable," he says. "Our goal wasn't to build profit in on the front end, it was to get efficient and see profit down the line."
Even as the market tightens, Dr. Miller says ASCs can still be profitable as long as owners and operators stay focused on keeping unnecessary costs down and being fiscally-minded. Don't be scared when profits aren't rolling in from the start if your vision is solid. Rather, make sure your staff is on the same page and aware of your business approach.
"We operate in a very tight reimbursement market," he says, "but we went into it knowing the market was very tight. Knowing that, we had certain components of the business plan in place. Everyone having an upfront, vested understanding of what goes on is central. Any decisions we make affect us from an economic standpoint."
8. Increasing patient preference. Dr. Miller says he used to have to convince patients that an ASC could be worthwhile for their procedures, but more and more often, those in his care actually prefer to been seen by a physician at a surgery center and are resistant to hospital care.
"We have a much harder sell to get people to the hospital," he says. "The patients who have the intent of being done in a freestanding ASC and find out for medical reasons they have to be done in a hospital are usually not really happy about it."
One of the reasons for the shift in preference is the growing negative stigma attached to hospitals. Patients often find hospitals frightening and unfriendly, he says, while ASCs appear less intimidating.
“ASCs are more efficient and infection rates are lower in an ASC,” he says. “We had to overcome the ‘is it safe to do this out of a hospital’ hurdle, but once we could show it’s safe, efficient, and cost effective to get taken care of in this environment, patients gravitate toward it.”
9. Know your “Yes" list. Although some procedures have seen diminishing reimbursement, others are now being approved for ASC settings.
"It’s essential that you keep track of not just what can technically and safely be done in an ASC, but what is newly approved and reimbursable.," Dr. Miller says.
Every new addition to the “yes" list should be evaluated for the fiscal possibility of being done in your facility. Provider education and awareness is key to shifting scheduling habits from non ASC to ASC as the preferred facility for new “yes” procedures, he says.
More Articles on Ambulatory Surgery Centers:
Ambulatory Surgery Centers — 12 Keys to Financial Success
11 Key Legal Risk Areas for Ambulatory Surgery Centers
7 Ways for Surgery Centers to Make More Money Now