Site of Service Shift Has Arrived-Are You Ready?
In the ever-evolving healthcare landscape, site of service has emerged as a leading strategic focus for many health systems, ambulatory surgery center (ASC) management companies, and surgical physician practice managements (PPMs). Although MedPac and the Site Neutral Payment reform group have been ringing the alarm bells for decades, and we are seeing traction in Congress with the latest site of service reform bills, the real reason for the strategic focus on site of service is coming from the private sector. ASC management companies and PPMs are creating physician alignment models that bring physicians to the business table and potentially threaten core health system service lines. This is forcing health systems to think about how to compete or partner with these disruptors. There are pros and cons of hospital-based outpatient departments (HOPDs) versus ASCs, which we go into detail below, but the real opportunity is around creating better alignment with physicians, bringing them back into the business of healthcare, improved consumer experience and outcomes, improving access to care, and finally growing into new markets “asset light.” We explore these dynamics below, along with how to lean into this change to grow your market share and create a stronger bond with physician leaders.
Although there is overlap in the procedures performed in ASCs and HOPDs, there are key differences between the two. HOPDs remain inextricably linked to their hospital counterparts both physically (or within close proximity) and in ownership, increasing the cost of care at an HOPD when compared to other outpatient sites of care. ASCs don’t have to be directly tied to a hospital and therefore can expand access and improve convenience for patients. While the two are held to different regulatory standards, patient outcomes in ASCs meet and, in some cases, exceed what is seen in the HOPD setting1. Ownership is another key difference. Many ASCs bring physicians to the business table via ownership opportunities. These factors have contributed to the continued rise in ASCs as a popular offering for outpatient care.
Given the increase in ASC locations and utilization, there is a projected shift of procedures out of HOPDs into an ASC setting across many service lines2, with the biggest migration in orthopedics, cardiology, and radiology. This shift is influenced by the convergence of many large market factors that favor ASCs over HOPDs as outpatient sites of care.
What is influencing this shift?
The continued push to value-based care is playing a major role in this shift. ASCs offer a much more cost-effective site of care to both the patient and the payer, where on average, procedures are reimbursed 53% of the HOPD rate3. These cost savings provide financial incentives for providers to seek out ASCs as a preferred site of care, especially for those patients who are part of a value-based or capitated arrangement.
Financial savings aside, patient preference and convenience are influencing this shift. ASCs don’t have the geographic constraints that apply to HOPDs, allowing them to be placed where the demand exists and serve patients in their communities. Additionally, most ASCs are free-standing facilities where patients can pull up, park, and quickly enter to receive care. Compare that to the experience at an HOPD where patients are likely to park in crowded garages and navigate through halls of the hospital to receive care. It’s no wonder patients rate their experiences at ASCs more favorably when compared to experiences within HOPDs4.
Current and future regulatory changes look to favor ASCs as well. CMS introduced ASC PRIME to expand the list of procedures available in ASC settings, increase collaboration between hospitals and ASCs, align reimbursement, and increase quality reporting from ASCs. In 2019 we saw average reimbursement per procedure increase 2.1% for ASCs and 1.35% for HOPDs5. Certificate of need (CON) programs have given opponents of ASCs a platform to combat their development in certain service areas. However, these programs are a topic of discussion among many state legislatures. South Carolina recently repealed their ASC program6, and North Carolina is exploring removing the need to obtain a CON to convert a single specialty ASC to multispecialty7. Currently, just over half of states either have no CON program or have a CON program that does not regulate ASCs (see map below). These factors, paired with continuous advances in technology and care, allow more and more procedures to be completed in the ASC setting with similar, if not better, outcomes1.
What does this all mean?
The shift of cases out of HOPDs and into ASCs is coming and will certainly be met with mixed reactions across the industry. If you are an ASC management company or private equity firm, this site of service shift represents a significant growth opportunity. If you are a health system, this shift is likely to be met with a fair amount of caution. The significant drop in reimbursement alone is daunting, not to mention the operational complexities of building out an ASC and the impact on staffing, physician compensation, and incentive alignment. However, maintaining status quo and not developing a strategy for this shift will put health systems behind the eight ball. Waiting until regulation changes force your organization to make this shift will be too late. Now is the time to start developing an ambulatory strategy that involves ASCs and strengthening alignment with your physicians through governance, equity, and physician compensation or some combination thereof.
In developing this strategy, it is critical to have the physicians’ voices at the table. As mentioned above, ASC management and PPM companies do a good job of this by ensuring physicians have an equity stake in the ASC. Contrast that to health systems, many who have eliminated physicians’ equity potential and pay them on survey based wRVUs, further removing them from the economics of the practice… you can see how the ASC management and PPM alignment models may appear more attractive and engaging to physicians. Health systems can embrace this change through partnership with ASC management companies, like Surgery Partners and Intermountain8 and strategically adding ASCs provides an avenue to strengthen and expand your geographic footprint, improve patient access, bolster physician alignment through joint venture and ownership opportunities, and improve patient satisfaction and quality of care.
Curious what this site of service shift looks like in your market and how to strengthen physician alignment in the process? Get in touch with us.