Ambulatory surgery centers, since their inception, have touted their lower-cost services as competitive advantage, and rightfully so. According to the Ambulatory Surgery Center Association, ASCs are currently paid less than 60 percent of what hospital outpatient departments receive for the same procedures — which results in savings to both the insurer and patient.
While ASCs never have expected their reimbursements to rival those of hospitals’, the strongest among them enter managed care negotiations very carefully, armed with arguments to justify higher reimbursements year after year. In-network ASCs accept contracted rates and strive to achieve case volumes that will keep them afloat; out-of-network ASCs balance higher reimbursements and lower case volumes; and some ASCs do a little bit of both. In any case, arriving at appropriate rates — high enough to support a center, but low enough to attract patients — is a delicate art.
Reimbursement, narrow networks and price transparency
Recently, physicians in select markets have voiced somewhat of an unexpected concern, namely that reimbursement rate increases — which in the past would have been highly sought after by ASC owners — could deter patients from seeking care at ASCs, either directly or through exclusion from providers’ narrow networks.
“I’ve been developing ASCs for 14 years. Typically one of our sales points is higher reimbursements; it’s one of our value-added propositions we bring to a partnership,” says Robert DiDomizio, vice president of development at United Surgical Partners International. Independent ASCs that join larger chains or partner with health systems often experience a reimbursement “bump” as a result of the greater negotiating clout of that organization with a payer. “From a market standpoint, we [at USPI] justify what we charge based on the quality of care we provide,” adds Mr. DiDomizio.
He’s surprised at how seriously some providers are considering being a low-cost, or even the lowest-cost, as part of how they brand in the era of reform: “The discussion [of lower reimbursements] was interesting coming from physicians instead of a health system. Health systems could be creating narrow networks and wanting to have a certain ASC as a preferred provider, while keeping cost at a certain amount. [Having the discussion of lower prices] coming purely from the providers was a change,” he notes.
The desire to balance increases in reimbursement with competitive pricing doesn’t appear to be isolated; several ASC-based physicians have approached Mr. DiDomizio recently, expressing concerns about raising prices. “I think part of that thought process is related to more talk about price transparency. The thought process is ‘if we raise our prices, we price ourselves out of the market,'” he says.
The concern isn’t necessarily invalid, influenced also by insurance companies. One physician mentioned feeling an enormous amount of pressure from payers to keep rates low, including a letter from a payer, which put the physician’s agreement with the payer at stake if she refused to comply with the payer’s demands.
What if HOPDs are forced into ASC rates?
Further complicating the matter, the government has recently shone a spotlight on what ASCs have long prided themselves — cost-savings. A recent report from the Office of the Inspector General determined that not only do ASCs save billions every year, but that by reducing HOPD rates to ASC rates, the government could create even more significant savings.
On one hand, the report is positive press for the ASC industry and a public confirmation of what ASCs themselves have known for years: They are leaders in value-based care. On the other hand, the report’s content signals uncertain times ahead. While CMS has not yet supported changing HOPD reimbursement rates, citing incompatibility with the President’s budget, the report could potentially have far-reaching implications for the ASC industry. ASCs’ days of markedly lower reimbursements than HOPDs may be numbered.
Should HOPD rates be lowered to ASC rates, consumers’ price sensitivities in regard to the choice between ASCs and HOPDs, and indeed among various ASCs, may increase dramatically. The price of an ASC’s services may then take on extra importance to the consumer, especially without an uptick in education on ASC patient safety and clinical quality. Indeed, if HOPD rates cease to be the ones by which ASCs negotiate, what exactly ASCs should be paid becomes an open question.
While these changes are still part of a theoretical future, they aren’t out of the question. Mr. DiDomizio’s conversations about reimbursements with physicians are, importantly, in markets with progressive payers and lower Medicare reimbursement rates, so barring any definitive statements from CMS, predicting the desire for lower reimbursements among ASC physicians remains to be seen. However, a major payment reform may take the concern from cutting-edge and niche to necessary survival tactic in no time at all.