The next-generation ASC: The hybrid!
Stephen W. Earnhart, MS
President
Earnhart and Associates
Dallas
It was destined to happen eventually. And it has started already in some locations. The process and progress is somewhat insidious, but it's here. The next-generation ambulatory surgery center (ASC) has arrived.
Reimbursement is soon going to be tied to ambulatory procedures being performed in a freestanding ASC. It's going to happen with speed -- within the next 24 to 36 months. Patients and physicians will be financially penalized with out-of-plan charges and decreased professional fees for having or performing an ambulatory surgery procedure in any facility not licensed as freestanding.
The implications are staggering. Assuming your hospital does not have a dedicated, freestanding ASC, there is a very strong risk that your cases will be diverted to another part of town or to another town altogether where such a center exists. The bottom line is clear: Hospitals have to get back into the act!
Avoid silly pricing war
Obviously, I am not the only person out there who sees this occurring. A number of hospitals already are responding to what they also believe to be the inevitable.
The reasons, of course, are clear. Hospitals cannot compete, price-wise, with a freestanding ASC. Their overhead is just too high, and they have too many other lines of business. They cannot afford, financially or politically, to get into some silly pricing war. And the managed care players are weary and frustrated with paying for the overhead of an intensive care unit or emergency department via a herniorrhaphy. How many questionnaires has your hospital received in the last six months from your insurance or managed care provider asking if you have or are performing certain procedures in a freestanding unit. Think it can't happen? Think again.
So, hospitals are in the process of reclaiming what the corporate chains and expatriate physicians took away from them years ago: ambulatory surgery patients. The method and solution is remarkably clear and the template brilliantly simple: Hospitals are joint venturing ASCs with physicians. Think about it. Hospitals control, for the most part, the primary care physicians' network -- the referral base. If those primary care physicians have to refer 60% to 80% of ambulatory surgery to another hospital that has a freestanding center or to a private ASC, the hospital is essentially out of business down the road. The hospital cannot allow that to occur. Three years ago, the majority of my clients were physician groups who wished to develop an ASC. Today, 100% of my ASC development and management work is with hospitals.
Hospitals certainly have not stood by idly over the last decade. Many responded to the outpatient exodus by developing their own in-house outpatient surgery centers; however, they are using the same provider number as the hospital. To maximize their position, they should joint venture their center with the physicians; however, Stark II will not allow a not-for-profit hospital to share its business line with physician investors. While there are certain ways around that issue, the cleanest option is to develop a new freestanding, for-profit center with physician investors/partners. But do it within the network -- not the hospital.
Seeking equity in existing ASCs
What about the existing ASCs owned by physicians? Actually, hospitals are selectively buying equity in those centers as we speak. Many of the hospitals are targeting existing ASCs in their area to joint venture with the current physician owners. Even ophthalmology and gastrointestinal centers are being targeted again by large, prestigious hospitals for joint ventures.
While the hospitals may control many of the referrals and have the ability to garner managed care contracts, the existing ASCs have the efficiencies and lower costs in their camp.
Both hospitals and physicians need each other in today's evolving health care environment. Hospitals recognize that many of them do not have the management expertise to run these new ventures, and physicians are aware of the fact that they need a strong venture partner. However, the wheel already has been invented. Even those issues have not proven to be an obstacle in moving forward.
Shared resources save money
By joining forces, the issue of duplication of equipment, services, and staffing also goes away. Existing services and equipment can be purchased or leased from the hospital and used in the center. The shared resources make this just another reason why it is a good idea for all involved.
The implications of this trend is staggering, to say the least. And while it won't work for everyone right away, eventually I believe we will see a stronger, more responsive, and cohesive health care organization as a result of it.
[Editor's note: To offer feedback or column suggestions, contact Stephen W. Earnhart, Earnhart and Associates, 5905 Tree Shadow Place, Dallas, TX 75252-5101. Telephone: (972) 713-6626. E-mail: [email protected].] *
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