Prospects for ASC ownership still good as procedure volume increases

However, old issues and new problems continue to plague what can be a profitable business option.

Issue: May 15, 2005

ByR. Bruce Wallace III, MD, FACS

OSN Section Editor Summit [logo] As a result of evolving trends in ophthalmic surgery, procedures performed in ambulatory surgery centers will continue to increase in the foreseeable future.

A number of procedures that are routinely performed in the ASC setting are sure to increase in volume in the coming years. As the population ages, we will see a significant increase in the number of cataract procedures performed in the United States. The number of lens-based refractive surgery procedures will also continue to grow as the baby boomer population gets older. With these two trends, we can also expect that more Nd:YAG capsulotomies will be performed, despite our attempts to reduce YAG rates. Also, cosmetic procedures will continue to be sought out by this same population. Finally, some of the newer glaucoma procedures may be done in ASC settings.

Overall, this means we will see an increase in the number of procedures performed in an ASC. With everything that is coming, it will be valuable to have an ASC in your practice. It can be very profitable. But there are some issues emerging that may be stumbling blocks to your success, as well as others that have been around for some time.

Reimbursement

Regarding reimbursement, the Medicare ASC rates are frozen until 2008. There are studies now to determine what is the right price to pay in the ASC setting for a number of ophthalmic procedures. The hospital rates are significantly higher today than ASC rates.

R. Bruce Wallace III, MD [photo]
R. Bruce Wallace III

A study done by the Rand Corp., requested and released by the Medicare Payment Advisory Commission, showed that hospitals should not be paid higher than ASCs. This study showed that by 17 measures cataract surgery outcomes were worse when performed in hospitals compared to ASCs.

ASCs are gaining ground, and hospitals are noticing this. Hospitals already have been able to get a moratorium passed on specialty hospitals, and they are looking at ASCs critically. And hospitals are saying that communities can’t afford new ASCs because money is going to the ASCs and not to the hospitals.

They are also looking at ways to increase certificate-of-need legislation. Some states do not require it, some do, and in those that do, they are looking to make it even harder to develop new ASCs.

There is also something else creeping in called “economic credentialing.”

Hospitals are saying, essentially, that if a surgeon is not bringing enough money into the hospital they may not need you on staff, and if you are not on staff at the hospital you may not be able to be credentialed at the ASC.

Another issue is the cost of new-technology IOLs (NTIOLs). Several IOLs have received the NTIOL designation and can be reimbursed at a slightly higher rate through Medicare. However, for IOLs that are priced above the $250 NTIOL rate, currently you cannot charge the patient the additional cost of that higher-technology IOL. This encourages another option – to use these IOLs off-label in patients who are not yet covered by Medicare.

Several companies are working with the Centers for Medicare and Medicaid Services to find a solution to this, such as patient-share billing. We will continue to watch this evolve in Washington.

Insurance

There are now professional liability insurance requirements for ASCs.

The Ophthalmic Mutual Insurance Co. does not allow the performance of non-ophthalmic procedures in an ASC that it insures. Surgeons who are covered by other carriers should check with them to review their policy in this regard.

Other overhead costs

Forces outside ophthalmology are also increasing our overhead costs. Guidelines put out by anesthesia organizations now require an increased size for new OR suites. New guidelines from the Occupational Safety and Health Administration require the use of more expensive items such as capped syringes, which drive up the cost of patient care.

But despite these changes, you cannot charge more; you get the same finite amount of money per case.

Building a profitable ASC

Now is the right time to build an ASC, as the “future trends” I have mentioned are not far off. Among the many factors you must consider before building is your percentage of ownership. This is a component that you cannot easily change later.

There are currently 500 to 600 ophthalmic ASCs in the United States. As the trend continues of moving care from the hospital setting to the ASC setting, a surgeon will make more money by owning an ASC, as long as it is run efficiently. The Medicare Modernization Act has mandated the update of the ASC payment system, but that has yet to be implemented.

It is still relatively early in the transition from hospital to ASCs, and thus not too late to consider opening an ASC.

For Your Information:

R. Bruce Wallace III, MD, can be reached at 4110 Parliament Drive, Alexandria, LA 71303; 318-448-4488; fax: 318-448-9731. Dr. Wallace has no financial interest in the products mentioned in this article, nor is he a paid consultant for any companies mentioned.