Sindhu Reddy 1

Factors of Ambulatory Surgical Centers on the Shift to Outpatient Care

Sindhu Reddy

November 14, 2016

Professor Fleming

HMGT 6320.0W1
 Sindhu Reddy 2

The shift from inpatient to outpatient care has been especially

significant in the last decade. Several factors are causing this shift, but a

major one includes ambulatory surgical centers. Ambulatory surgical centers

essentially provide surgical procedures in which the patient may go home

once their treatment is complete. Recovering from surgery at home is often a

more attractive option than recovering in a hospital. Consequently, patient

satisfaction is typically higher at these centers. In addition, these centers are

able to provide services without incurring the costs associate with overnight

patients. Because of these centers, healthcare costs are decreasing for all

stakeholders of the American healthcare system including consumers.

These facilities have become a new trend, with hundreds opening up around

the country. In addition to a decrease in healthcare costs, the rise of

ambulatory surgical centers increases physician autonomy. Outpatient care is

vital to the growth and development of a modern healthcare system.

Ambulatory surgical centers have a strong financial, economic, structural,

technological, and legislative effect on the shift to outpatient care.

Ambulatory surgical care centers encourage the shift of inpatient to

outpatient care. These centers allow surgeons to provide procedures in which

the patient is able to recover at home. In addition, the cost of providing

inpatient care is severely lessened when the patient is able to go home

directly after the procedure. The lack of costs allows the care to become

more affordable for consumers. However, Medicare does not provide

significant reimbursement to these centers in comparison with hospitals.

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Medicare pays hospitals 82% more than ASCs for outpatient surgery,

(Ambulatory Surgical Center Association). Hospitals get paid more in order to

incentivize them to allocate more time and resources towards outpatient

care. Ambulatory surgical centers are designed to provide as many

procedures as possible in order to maximize revenue form the fee for service

Medicare reimbursement. In addition, patients pay less coinsurance for

procedures performed in the ASC than for comparable procedures in a

hospital setting (Ambulatory Surgical Center Association). Because these

centers do not have to cover as many costs as hospitals, they are not likely

to charge as much as hospitals do. Some costs that are saved include

salaries/wages and overhead charges.

Insurance companies are not asked for as much reimbursement.

Therefore, consumers are not required to pay as much. Physicians who work

in ASCs are getting reimbursed more from Medicare if they recommend,

prescribe, or perform outpatient rather than inpatient procedures (Kutscher).

The Medicare Payment Advisory Commission is a legislative entity that

advises Congress on Medicare policy (MedPAC). MedPAC has recommended

revisions for Medicare to ensure that all outpatient surgical services qualify

for full reimbursement (MedPAC Databank). The number of Medicare-eligible

ambulatory surgical centers has almost doubled between 1999 and 2005. An

example of an ambulatory care procedure would be cataract surgery. This

procedure at a hospital would typically cost a Medicare beneficiary about

$496, whereas in an ambulatory surgical center, the beneficiary would have

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to pay up to $195 (Ambulatory Surgical Center Association). Hospitals must

pay for nurses and doctors on call to monitor patients after they have been

through major surgery. In addition, the hospitals must pay for any

medications the patient needs, supplies for surgery, and operational costs

i.e. electricity. However, for minor surgeries there is no need to use these

resources when the patient can recover in his or her own home. Ambulatory

surgical centers forego these costs because the only services provided are

related to the surgery only. Although these centers offer patients the ability

to reach the physician whenever they want, patients are cared for by loved

ones rather than a trained, professional staff. The cost of training physicians

will not be as significant due to the techniques and equipment being virtually

the same. One of the largest causes of concern of the American healthcare

system is drastically rising healthcare costs. Ambulatory surgical centers are

able to cut some of the costs by carrying out ambulatory surgical procedures.

Another financial aspect of ambulatory surgical centers is the ability to

advertise prices of services provided. Transparency of prices is a huge issue

in the American healthcare system. Consumers are unable to research which

facility they can afford to get treated in until they visit with the physician.

However, because ambulatory surgical centers have a general idea of

provider costs, they are able to determine a general idea of the price to

provide services. These facilities need quality data to ensure the accuracy of

the determined price. According to the Healthcare Financial Staff at the

Healthcare Financial News Report, ambulatory surgical centers typically

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perform surgeries like orthopedic replacements at prices around 20% less

than hospitals. Providers are starting to open up about prices and, in some

situations, are willing to discuss them with the patients. Hospitals typically do

not publicly publish costs of services, even outpatient services. Because

healthcare consumers are able to understand and compare prices given

between several ambulatory surgical centers, they are more likely to go to

these centers to get treatment. Price transparency will also create an

open market... and the facilities that are the most expensive (dont)

mean (they) have the best quality, (Dydra). Also, physicians who work these

facilities are able to avoid any large hospital overhead costs (Dydra). Private

insurance holders are paying high premiums for plans with deductibles that

are difficult to meet (Dydra). When ambulatory surgical centers publish their

prices, potential consumers are able to determine which would be most

affordable with their current health insurance plan. In addition, employers

are having to deal with rising premiums and healthcare costs. They are

constantly searching for cheaper alternatives to satisfy the insurance needs

of their employees. Ambulatory surgical centers are these cost-effective

alternatives. Employers would want to have an insurance that is accepted at

these facilities because they are not as expensive at hospitals.

In general, if an ambulatory surgical center decided to increase its

prices to the level of hospital prices, consumers may as well be treated at a

hospital where there is a full range of services. However, there is no need.

The specific treatment provided by the physician, and the limited costs that
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these facilities incur, allow employers to avoid unnecessary expenses when

providing health insurance for their employees. In addition to attracting a

larger potential consumer base, ASC staff and administration want to

promote direct communication about the procedures and prices with

consumers, thus a benefit to the increase in price transparency. Price

transparency is useful for all the stakeholders in the healthcare industry.

Because ambulatory surgical centers are mostly facilitated by themselves,

they are able to determine the prices required to cover all of the expenses

the centers will need such as physician and staff salary, supplies costs,

overhead costs, etc. The healthcare system will be affected greatly by the

example of ambulatory surgical centers in their pursuit to publicly announce

their prices of providing treatment.

Along with the financial factors of the rise in ambulatory surgical

centers, there are economic effects as well. ASCs contribute considerably to

the United States economy. During the early 2000s, the United States

suffered the Great Recession (Investopedia). Ambulatory Surgical Centers

contributed to the economy with a 2009 total nationwide impact of $90

billion, including more than $5.8 billion in tax payments, (ASCA). Because of

the low economic activity in America at the time, any economic stimulation

was beneficial. The reason for the increased interest in ambulatory surgical

care is because of the lower cost they provide per procedure. Another benefit

is the $5.8 billion in tax revenue for the federal government. The federal

government can use the money to stimulate the economy and create jobs in
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areas that need help. The unemployment rate at one point during the

recession reached 25%, (Investopedia). Consumers have a decreasing

buying power as the national GDP decreases. In general, people in dire need

of surgical care cannot afford to get treatment unless provided in an

outpatient setting. The price is lower, making the service more affordable,

and the recovery time is shorter, allowing the patient to get back to daily

activities faster. Also, ASCs employ the equivalent of approximately 117,700

full-time workers, (ASCA). In a time of economic despair, ambulatory

surgical centers are financially able to provide services and employ workers

to keep facilities running. Full-time workers are eligible for benefits in

addition to a salary, another factor that increases these consumers buying

power.

The economic impact of ambulatory surgical centers is overall

considerably beneficial to the United States economy. A long-term effect of

ambulatory surgical effects on the economy is a steady tax revenue from the

facilities. The cost of care is highly sought after to the point in which

Medicare incentivizes hospitals to provide outpatient services like these

centers do. As mentioned before, the reimbursement rates for these centers

are lower, contributing a lower cost to the federal government in Medicare

funding.

In addition to significant economic causes, ambulatory surgical care

also affects the structure of the current American healthcare system. There

are three potential effects of the rise in ambulatory surgical centers. First off,
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ASCs have the potential to complement outpatient departments and

promote utilization across all settings, (Hollenbeck). Hospitals are

encouraged to have an asset mix of more outpatient than inpatient settings

in order to reduce costs and make a margin. Inpatient care typically adds

costs such as salaries/wages and overhead. However, outpatient

departments are a steady source of income for hospitals. Outpatient settings

do not have the extra salaries/wages or overhead costs like inpatient ones

do. This allows hospital finances to rely on these departments to increase

overall revenue. Ambulatory surgical centers work as independent outpatient

centers, allowing them to gain revenue but avoid the costs that a hospital

incurs.

Because ASCs are able to mock the layout of outpatient centers in

hospitals, they are a competitive entity in the surgical care market. Another

structural effect that ambulatory care centers have on the American

healthcare system is the ability to take outpatient procedures from hospitals

and produce them in said facility (Hollenbeck). Although physicians in the

same field of specialty are typically trained to perform generic procedures,

not all create the opportunity for the patient to go home directly after the

procedure. Therefore, physicians in ambulatory surgical centers are taught to

provide outpatient services. This phenomenon allows more patients to

receive effective ambulatory surgical services. Also, the volume of patients

cared for increases as more ambulatory surgical centers are built around the

nation. The third potential effect of the rise in ASCs is that they may not have
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an effect on hospital outpatient surgical rates at all (Hollenbeck). This may

be true for voluntary surgeries such as Lasik eye surgery or un-prescribed

plastic surgery. However, in the case of cataract extraction or wisdom teeth

removals, ASCs are just as capable as hospitals in providing these services.

Also, the competition between physicians in urban areas is much higher than

in less-densely physician populated regions. Physicians are more likely to

open up their own practices in suburban areas to minimize competition and

maximize the potential consumers in need of outpatient treatment.

A major structural factor of the success of ambulatory surgical centers

is the fact that they are predominantly physician-owned. Because physicians

are the ones investing their person finances into these facilities, physicians

will be active in ensuring the financial stability of them. Physicians in

hospitals tend to be more apathetic about the financial success of the

business because they are not personally invested in them (ASCA). In a

smaller outpatient facility, management can focus on the set services

provided whereas in hospital environments, there would need to be a large

management staff to ensure every process is overseen and maintained

properly. In addition, patients are able to get direct attention from the

physician on their case rather than the physician on call in a hospital setting.

The services provided by the physician(s) who own the facility tend to

provide services in which they are most skilled at and believe are most

successful. The equipment and tools used by physicians during outpatient

surgical care are chosen and funded by the physician. Physician autonomy is
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more prevalent in these ambulatory settings (ASCA). In hospitals, physicians

would be encouraged to use techniques and tools that are approved by

hospital administration to stay within the hospitals budget. The procedures

that physicians choose to offer are more likely to allow a patient minimal

recovery time. Physician-owned ASCs drive up the quality of outpatient

services without driving up the costs as well, incentivizing consumers to

choose these entities over hospitals.

Physicians have several incentives in participating in an ambulatory

surgical center. In hospitals, scheduled surgeries can be moved for more

emergent cases. Although the process is fair, physicians prefer the

predictability of ASCs (Koenig). Physicians are also able to hire nurses that

are clinically focused to the care they provide rather than the ones hired by

hospital administration. Medicare-eligible physicians have pressure to

provide quality services in a hospital or ASC setting. However, in hospitals

physicians do not have much control over the surgery schedule or the

number of patients scheduled. In ambulatory care settings, physicians are

able to schedule as many patients as they need in order to make their

desired Medicare reimbursement. Physicians are incentivized to increase

efficiency when providing services (Koenig). Because the techniques and

procedures are autonomously chosen by the physician, he/she has full

discretion in the changes made in order to increase efficacy. The choices are

usually made through the staff the physician hires and the familiarity he/she

has with the procedures performed for patients. A factor that can be
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manipulated to help increase efficiency is turnaround time. For scheduled

patients, the most commonly seen patient at ASCs, the staff at the facility

can have the paperwork ready to sign and the materials needed during the

surgery prepped so that admitting the patient will be a smooth process. The

administration at the ambulatory surgical center can work to find

unnecessarily time-consuming tasks, whereas this process in a hospital

would be hard to implement with the complex structure most hospitals have.

Physicians tend to prefer more clinical independence, and ambulatory

surgical centers allow them to do so.

A major cause of the shift to outpatient care, especially in an

ambulatory surgical care setting, is technological advancement. Invasive

procedures that require heavy anesthetics tend to encourage more inpatient

procedures (Ambulatory Surgical Care Association). However, with new

technology that is less invasive, patients can go home under the care of a

loved one. Patient satisfaction is at a high when procedures leave the patient

with a minimal recovery period. Introduction of new practices, such as

laparoscopic procedures over the past decades has resulted in surgeries

taking significantly less time with lower infection rates and less need wound

management (Koenig). They have significant use in hysterectomies and

appendectomies as well. Inpatient procedures have come a long way.

Another prime example includes gallbladder procedures. These would

typically result in significant scarring and a lengthy recovery period

(Koenig). However, nowadays the same health issue can be treated and the
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patient can return to their usual activities in the next few days. Another

significant improvement has been in the quality of the actual tools used

during surgery such as fusion screws, better plates, and other equipment

(Koenig). Because of all of these new tools, this has allowed hip

replacements to be performed on an outpatient basis in carefully selected

patients (Koenig). Spine surgeries have also been impacted by surgical

improvements. The main reasons being the introduction of micro-

instrumentation, minimally invasive procedures, and improvements in

anesthesia (Koenig). Because of these advancements and many more, there

has been a large improvement in quality of life for the patients that utilize

the outpatient surgical centers.

In addition, the aversion of surgery that came from patients has

decreased because of these improvements. A prime example being the

advent of laser surgery and new technology for cataracts has cut down the

surgical and recovery time (Koenig). The number of patients who are now

considered decent candidates for surgery has increased due to the increase

in quality of surgical procedures (Koenig). The increase allows for a larger

potential base of ambulatory surgical center consumers.

The risk of patient infection from hospitals after a surgery is high in

comparison to patient recovery at home. In ambulatory surgical centers, the

risk is practically inexistent. According to the CDC, about one in 25 hospital

patients has at least one hospital-associated infection. Patients are only

seen by physicians in an outpatient setting by appointment whereas in a

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hospital they need to wait in a waiting room, a situation that risks infection

or another source of illness. Any sort of hospital mistake on a case will most

likely not be reimbursed by the payer. Therefore, hospitals are forced to

handle any costs incurred from patient infection. The quality of care provided

by ASCs in this manner is significantly higher than hospitals. Advanced

procedures allow patients to avoid staying at hospitals and risking infection.

The patients who receive an infection will return to the hospital, increasing

healthcare costs for both the payer and provider. Hospitals are unable to

keep up with the competition that ASCs pose due to the burden of offered

inpatient care (Kutscher). As mentioned before, the need for higher volumes

of outpatient care is dire. Inpatient care creates burdening costs for not only

the consumer but also the provider. The federal government is recognizing

the need for investment in new technological innovation to increase the shift

to outpatient care. Medicare-eligible providers are starting to be reimbursed

more for using technology to improve and update procedures so that they

can be performed in an outpatient setting.

In addition to technological causes, there are several legislative causes

of the shift to outpatient care. Once Medicare and Medicaid were enacted,

the incentive to decrease costs was paramount. A prevalent outcome of

these incentives is outpatient care. According to the CDC, the number of

outpatient procedures increased from 3 million to 31.5 million during the

years of 1980-1996. Although technological innovation is a strong factor in

the shift, the idea to save costs was incentivized through the CMS programs.
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Once the Affordable Care Act was passed, many providers were incentivized

to increase their quality of care in order to decrease healthcare costs. The

program is attempting to rid the traditional fee-for-service payment system

that is dominant among payers. Instead, the program entails pay for

performance, a payment system that is designed to reimburse providers

when they demonstrate quality of care (OR Manager Inc.). In addition,

Medicare patients will no longer have to pay deductible or co-pay amounts

for colorectal cancer screening (OR Manager Inc.). Preventative care is one

of the leading goals of the American healthcare system as it encourages

consumers to play a part in their own care while decreasing costs for the

system overall. The provision will increase the number of patients who are

willing to have screening, which will decrease colorectal cancer costs in the

future due to preventative care. Medicare is able to offer this due to the low

cost of providing this procedure in an outpatient setting. The Affordable Care

Act also forms an Independent Payment Advisory Board which essentially

advises Medicare officials on how to save money to obtain set goals.

Ambulatory Surgical Centers are likely to be included in any setbacks (OR

Manager Inc.). Surgical procedures are especially important for those under a

Medicare payment plan, and Medicare officials want to take advantage of the

decreasing costs coming from ambulatory surgical care.

The shift to outpatient care has been significantly impacted by the rise

in ambulatory surgical centers. The increasing costs of the healthcare system

has become a significant issue that ASCs have the ability to mend. There are
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several financial, economic, structural, technological, and legislative causes

and effects of the rise in ASCs. Medicare beneficiaries are able to receive the

same clinical treatment for a lower rate through these outpatient surgical

centers. In addition, the outpatient centers have the ability to provide

accurate price estimations for the services they provide. Some facilities have

been able to publicly post them. The centers also are impacted by economic

factors such as a recession. The Great Recession increased the

unemployment rate, making it hard for many American citizens to afford

quality medical services. ASCs are a cost-effective alternative to hospital

care. In addition, many physicians have been incentivized to establish their

own centers with the independence of how they conduct their clinical

services. New technology and equipment have allowed physicians to

increase efficiency and reduce turnaround time, allowing more patients to

benefit from the procedures in a minimal amount of time. Patients can

receive the same care with a lower price and lower recovery time. The

federal government also has a vested interest in the success of ambulatory

medical centers due to their ability to reduce healthcare costs. CMS

programs incentivize physicians to increase quality of care through a pay for

performance system rather than the traditional fee-for-service payment

system. Ambulatory surgical centers are a beneficial alternative to hospital

outpatient centers because the costs of overhead in the hospital are much

higher than the costs of overhead in these facilities. These centers allow for

higher satisfaction for any stakeholder of outpatient care in the healthcare

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system. The factors of ambulatory surgical centers shift patients towards

outpatient care.

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