Bud­get deal could de­ter hos­pi­tals from buy­ing surgery cen­ters

Modern Healthcare - - NEWS - By Beth Kutscher

A pro­posed change to how hospi­tal-owned am­bu­la­tory surgery cen­ters are paid could fur­ther sup­press the ap­petite of hos­pi­tals to own th­ese cap­i­tal-in­ten­sive out­pa­tient fa­cil­i­ties.

Spe­cial­ties like or­tho­pe­dics and plas­tic surgery once rep­re­sented high­mar­gin ser­vice lines for hos­pi­tals. But chang­ing pay­ment mod­els have been slowly chip­ping away at some of that re­turn.

The lat­est fed­eral bud­get bill, passed by Congress last week, re­duces Medi­care rates for off-cam­pus out­pa­tient cen­ters owned by hos­pi­tals. The mea­sure elim­i­nates hos­pi­tals’ abil­ity to charge a fa­cil­ity fee and cre­ates more par­ity in pay­ment be­tween hospi­tal-owned and free-stand­ing out­pa­tient cen­ters.

The cut would only ap­ply to new of­f­cam­pus out­pa­tient cen­ters, not those cur­rently owned and op­er­ated by hos­pi­tals. It also ex­cludes stand-alone emer­gency de­part­ments.

As a re­sult, looser al­liances be­tween health sys­tems and am­bu­la­tory surgery cen­ters will look more ap­peal­ing. “It makes you look more closely at what are the ben­e­fits of own­ing” an ASC, said Joan Dentler, CEO of Avanza Health­care Strate­gies, a con­sult­ing firm on out­pa­tient and pop­u­la­tion-health strate­gies. “The hospi­tal doesn’t even care about hav­ing own­er­ship, but (about) hav­ing the am­bu­la­tory surgery cen­ter in their net­work.” Be­fore the rule change, pay­ers and pa­tients, es­pe­cially those in high de­ductible plans, paid more af­ter hos­pi­tals pur­chased an ASC. “Noth­ing changed but the name on the door,” said Greg Mad­drey, ac­count­able care so­lu­tions di­rec­tor at the Char­tis Group, a con­sult­ing firm.

The higher fa­cil­ity fee al­lowed a hospi­tal to earn an im­me­di­ate re­turn on its in­vest­ment in an out­pa­tient cen­ter by charg­ing higher rates. The new pay­ment model, how­ever, takes away that ben­e­fit.

More­over, fa­cil­ity fees are be­ing de-em­pha­sized un­der the CMS’ bun­dled-pay­ment ini­tia­tive. The CMS in July pro­posed rolling out a manda­tory Medi­care bun­dled pay­ment for hip and knee re­place­ments in 75 mar­kets, which will hold hos­pi­tals ac­count­able for out­comes up to 90 days post-dis­charge.

“The land­scape is go­ing to change very dra­mat­i­cally,” said Dr. Tom Graf, na­tional leader for pop­u­la­tion health man­age­ment at the Char­tis Group. “The only thing that’s re­ally rel­e­vant is how much it costs you to pro­vide the ser­vice.” The bun­dled-pay­ment pro­gram also sets ex­plicit le­gal pro­tec­tions al­low­ing doc­tors and hos­pi­tals to share sav­ings, Graf noted. “That re­ally changes the dy­namic,” he said. “The fo­cus is on the care rather than the site of care.”

Health sys­tems, of course, still need to have an am­bu­la­tory surgery strat­egy as more pro­ce­dures are per­formed on an out- pa­tient ba­sis. And they still must align their cost struc­ture with pay­ment mod­els.

Elim­i­nat­ing the fa­cil­ity fee may en­cour­age more hos­pi­tals to de­velop ASCs as joint ven­tures with one of the many in­vestor-owned com­pa­nies in the sec­tor, such as AmSurg, Sur­gi­cal Care Af­fil­i­ates and United Sur­gi­cal Part­ners In­ter­na­tional, now owned by Tenet Health­care Corp.

Those joint-ven­ture ASCs are al­ready paid at stand-alone rates, which are about 55% of what hospi­tal-owned ASCs re­ceive. So the new bud­get pro­posal shouldn’t af­fect them and may even bring new busi­ness, wrote Jefferies an­a­lyst Brian Tan­quilut in a note to clients.

But the shift to non-own­er­ship agree­ments could put the most pres­sure on in­de­pen­dent, physi­cian-owned am­bu­la­tory surgery cen­ters. Hos­pi­tals and sys­tems are in­creas­ingly be­ing ap­proached by in­ter­ested sell­ers across the coun­try, said Jeff Hoff­man, a se­nior part­ner at con­sult­ing firm Kurt Salmon.

The trends are mag­ni­fied for imag­ing cen­ters, which could see as much as a 30% drop in uti­liza­tion un­der value-based pay­ment mod­els, he added. “As those surgery cen­ters and imag­ing cen­ters age, they need cap­i­tal in­fu­sions,” Hoff­man said. “A lot of those physi­cians are ner­vous about mak­ing those in­vest­ments. You’re go­ing to in­vest mil­lions of dol­lars in a non­growth mar­ket.”

Physi­cians also are con­cerned about be­ing left out of the nar­row net­works that health in­sur­ers are de­vel­op­ing to con­trol their costs, he said.

Hos­pi­tals used to be more will­ing to bail out a strug­gling am­bu­la­tory surgery or imag­ing cen­ter, but now they’re more care­fully weigh­ing the pros and cons of own­er­ship ver­sus part­ner­ship, Mad­drey said. “With any cap­i­tal-in­ten­sive modal­ity, you have to be very thought­ful on how you man­age cap­i­tal spend,” he said. “You can see the sands shift very quickly.”

“The land­scape is go­ing to change very dra­mat­i­cally.” DR TOM GRAF Na­tional leader for pop­u­la­tion health, Char­tis Group

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