Healthcare stakeholders are deep in the trenches, trying to pave the best transitional path from volume- to value-based care, and have come to realize that an ambulatory network is key to lowering costs, improving outcomes and attracting and retaining the new patient consumer.
This content is sponsored by Regent Surgical Health.
In 2016, payers reported they were 58 percent along the continuum toward full value-based reimbursement, with hospitals noting they were 50 percent along the continuum, according to a 2016 ORC International study commissioned by McKesson Health Solutions of 465 payers and hospitals. Within the next five years, payers estimate 59 percent of all payment models will reflect a mix of capitation, pay-for-performance and episodic payments.
With the trend toward value-based care heating up, executive leaders are seeking innovative platforms to find success in this new value paradigm. Many are turning to ambulatory platforms to lower costs, boost quality of care, strengthen patient loyalty and increase physician satisfaction. While ambulatory platforms help hospitals improve patient outcomes, a hospital helps ASCs deal with market saturation and unfavorable reimbursements.
Chris Bishop, CEO of Regent Surgical Health, shared how optimizing ambulatory care platforms allows hospitals to execute a successful value-based care strategy during an executive workshop held at Becker's Hospital Review 8th Annual Meeting on April 18 in Chicago. During the presentation, "Double Your Ambulatory Platform by 2020," Mr. Bishop explained the sense of urgency around ambulatory platforms and why they are critical to remaining profitable while taking on more risk.
On the forefront of ambulatory strategy since 2001, Regent Surgical Health currently represents the largest private joint venture operator of surgery centers. The company boasts 23 U.S. surgical facilities, 18 hospital joint ventures and 9 total joint replacement centers. Regent offers ambulatory assessment expertise for potential acquisition targets; physician recruiting services; managed care analysis; cost to invest/revenue projections; and return-on-investment projections.
Building an ambulatory platform
The number of outpatient cases will skyrocket in the next decade, especially for total joint procedures. The number of hip and knee joint replacements performed in outpatient settings will increase from 15 percent in 2016 to 51 percent in 2026, according to consulting firm Sg2 Research. The number of cases performed in the inpatient setting, on the other hand, will decrease from 85 percent in 2016 to 49 percent in 2026.
As a result, hospitals are considering their outpatient strategy by pinpointing the prominent service lines and engaging physicians for partnership or employment opportunities. Mr. Bishop noted single-specialty orthopedic and cardiology surgery centers are opening in markets across the United States, which offers a growth opportunity for health systems to capture a larger share of these vital services in their communities.
In the past, some hospitals acquired surgery centers to keep the cases in-house instead of as a strategy to propel their institution into the future. This protective mentality can lead to failure.
"We used to joke how the hospital-surgery center strategy wasn't necessarily a progressive strategy; it was more of a defensive-progressive strategy," said Mr. Bishop. The traditional hub-and-spoke approach drives the urgent care and diagnostic imaging services back into the more expensive hospital setting at a time when providers, patients and insurers are more sensitive to price and cost.
Now hospital executives are taking a closer look at how ASC partnerships and joint ventures benefit their overall value-based care proposition.
Integrating ASCs as 'spokes' to the acute care hospital offers an accessible care setting for low-acuity patients. An optimal ambulatory platform empowers patients to exercise choice about where they receive care, whether at the hospital or from ambulatory settings in their communities for more convenient and routine care.
Thomas R. Lorish, MD, medical director for orthopedics, ambulatory services as well as chief executive of outreach at Providence St. Joseph Health - Oregon region in Portland, initially began constructing ASCs as a proactive-defensive strategy to retain market share. He was the architect of ambulatory strategy for Providence's Oregon and southwest Washington region, which now includes eight hospitals integrated with an expansive ambulatory network of outpatient surgery, immediate care, clinics and labs. Providence also includes a health plan that insures 600,000 lives.
For more than two decades, Dr. Lorish has employed a physician alignment strategy to expand into new markets by offering additional avenues for patient care. His leadership has proven instrumental in advancing Providence's orthopedics, rehabilitation and ambulatory services.
"The surgery center strategy allows us to engage physicians interested in value-based care," said Dr. Lorish. The joint venture ASC also offers physicians a hospital's operational and financial scale without taking away their autonomy, meaning physicians can leverage the hospital's managed care contracts and shared administrative functions.
Value drivers
Hospital executives often ask what a surgery center generates for the overall system or affiliated hospital in terms of revenue. Dr. Lorish outlined four ways an ambulatory platform can drive value, either through additional revenue or cost savings.
1. Physician engagement. When Providence St. Joseph Health considered a joint venture ASC, Dr. Lorish faced pushback from his CFO, who argued an ASC could not generate enough money to actually offset the cannibalization of cases. Dr. Lorish argued by engaging physicians through their independent practice associations or specialty groups, versus hospital employment, the surgery center could generate a large enough return so the health system's overall value more than offsets the inpatient revenue loss. "That, at least, is a sustainable model," said Dr. Lorish.
2. Local provider relationships. In value-based care contracts, health systems need to demonstrate superior clinical outcomes at lower costs to succeed. The ASC can help hospitals develop relationships with unaffiliated local providers as well as those outside of the core market since the ambulatory settings is a lower cost alternative.
A 2016 Journal of the American Academy of Orthopaedic Surgeons study investigated 1,021 surgical bone and joint procedures, comparing costs at a hospital-owned ASC to a university-based hospital. Researchers found 17 percent to 43 percent savings in direct costs at the ASC, depending on the procedure. The researchers concluded the ASC savings were a result of efficient use of time and resources.
"That gives [providers] a value proposition, and a way for me to highlight our best care," said Dr. Lorish. "And because patients are coming to our facility, we believe we can get anywhere from $2.5 million to $5 million dollars in net revenue margin from that activity."
3. Volume shift. Looking through Providence's health plan lens, moving volume out of the hospital into a surgery center yields a 15 percent to 75 percent cost savings depending on the number or type of patient cases that are reassigned to the ambulatory setting. "You're looking at a $20 million income stream flow from a $3 million investment in a surgery center," said Dr. Lorish of his hospital's savings.
4. Total joints. Many hospitals are experiencing an increase in the number of total joint procedures performed in their operating rooms. Since these procedures are appropriate for outpatient settings, due to advances in pain control and surgical techniques, a growing number of hospitals and surgeons see opportunity in transitioning total joints to the ambulatory network and leveraging the inpatient surgical units — which present high overhead costs — for other types of surgical procedures, said Dr. Lorish.
Last June, an Advisory Board Company analysis of 354 hospitals found 23 percent reported performing some outpatient knee replacements, while 7 percent performed some outpatient hip replacements. Providence anticipates shifting total hip volume from its inpatient facility into a surgery center will free up hospital capacity for higher acuity care.
Conclusion
Every market presents an environment of fierce competition, with hospitals racing to secure the prime locations and highest quality specialists. Equipped with a map of their current assets and knowledge of potential service areas to expand into the outpatient setting, hospitals should scope out their internal expertise for best-in-class partners. That way, hospitals can focus on delivering better care at a lower cost, neutralizing the competition.
"The trade winds from a very simple investment around physician engagement and provider engagement in a surgery center can have very substantial effects in a very positive way," said Dr. Lorish. "[The ambulatory strategy] seems to play out in a number of ways, and advantages your physician partners, communities you're interacting with and your facility itself."
With a properly structured ambulatory platform, physicians achieve interconnectivity within a health system. Physicians at the surgery center can then focus on outpatient cases while hospital-based care teams can focus on specialty, emergency and higher acuity care.
To learn how Regent Surgical Health helps hospitals embrace the risk and realize the opportunities robust ambulatory care platforms offer to lower costs, improve the quality of care, enhance patient loyalty and improve physician satisfaction, download their latest white paper, Double Your Ambulatory Platform by 2020.